Sell-side QofE

searcher profile

February 11, 2023

by a searcher from University of Colorado at Boulder in Los Angeles, CA, USA

Typically for an unaudited company, who pays for the QofE? Buyer or seller? How big is the advantage of being the one who’s paying for it? What’s an appropriate price range for sell-side QofE? $8mm company, relatively simple financials.

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Reply by a professional
from Harvard University in Atlanta, GA, USA
^redacted‌ I'm assuming you mean $8mm purchase price & a Barclay's client (client used to investment bank level service). QoEs given these conditions range from $15-$35k. The advantage of a buyside QoE is well known so I won't spend much time there. Sellside QoE is for piece of mind for the Seller so that when difficult buyers with fancy/tough QoE teams come in - the Seller already knows their EBITDA and working capital and doesn't have to argue about it. The buyers QoE is now just confirmatory. For instance, did 5 sellside QoEs for owners of HVAC and Plumbing companies b/c the owners - blue collar guys who weren't used to the scrutiny of financial buyers. Each one would have been dragged over the coals had they waited for buyside QoE teams to come in. Instead, they paid, we did a 4 week QoE, they had their numbers. we defended the QoEs against the large firms (Ernst & Young and Alvarez & Marsal) so that the sellers didn't have to and those deals closed quickly and without the same turmoil of arguing over EBITDA/price/etc. I said a lot here. If you'd like me to expand on anything, let me know. I'd never sell Guardian without paying another QoE firm for a sellside QoE. I know how nasty PE / sophisticated buyers can be.
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Reply by an intermediary
from The University of Michigan in Bonita Springs, FL, USA
Thank you ^redacted‌. Having just gone through a deal with a very frustrating QOE process, I'll just state that every buyer risking a substantial sum of money on a deal should execute their own buy-side QOE. QOE's have a large human element as you are relying on CPAs and their knowledge base to execute the QOE. During the process I am referencing, we found numerous errors made by the sell-side CPAs on their QOE due to just wanting to expedite the process and likely save their client some money. There were assumptions made that didn't hold up on the buy-side QOE. And then there was the buy-side QOE performed by a big four firm. Their lack of knowledge of common things such as retirement programs, etc., was astounding. Their inability to pull and analyze the data from the accounting system to answer their own questions was incredibly frustrating for everyone involved. Their willingness to dismiss what I thought were important questions and focus on minutia was mind boggling. So, in summary, trust, but verify. But, don't assume your buy-side QOE is going to be perfectly executed. There are always areas of grey in the analysis.
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