A buy-side Quality of Earnings review tests the seller's numbers before you remove conditions: normalized EBITDA, revenue quality, working capital and debt-like items.
Choose the depth the deal deserves. Start with a rapid Pre-QoE Deal Risk Scan, or scope a partner-led buy-side QoE for a larger or more complex acquisition.
A buy-side QoE does not just recalculate EBITDA. It asks whether the earnings are real, whether they repeat, and what the business needs to keep producing them.
Owner compensation, one-time items, related-party rent and expenses, and accounting choices. Each add-back is supported or flagged as unsupported.
Recurring versus one-time revenue, customer concentration, churn and pricing, and whether historical growth is likely to repeat.
Gross margin by line or customer, cost creep, and signs of underinvestment or deferred maintenance that flatter today's profit.
Trailing-twelve-month averages and seasonality, so the working capital peg is set to deliver a normal business, not one you must fund at close.
Deferred revenue, customer deposits, accrued liabilities, shareholder loans, AR quality and how much profit converts to cash.
What the findings mean for price, holdbacks, representations and warranties, an earn-out, or walking away.
Screen quickly and cheaply first. Commission the deeper review only for targets that earn it.
A rapid preliminary screen of a target's earnings quality before you spend on full diligence: revenue trend, normalized EBITDA and add-backs, concentration, working capital and debt-like flags, cash conversion and AR quality. You receive a plain-English go, dig deeper or walk summary. A diligence screen, not an audit.
Order: $3,950 (under ~$5M revenue)Order: $6,500 (~$5M–$15M revenue)For larger or more complex targets, typically after a signed LOI. Scoped to the size and complexity of the business and quoted before work begins. Findings feed directly into price, the working capital peg, holdbacks and lender conversations.
Request a Scope →Before you spend on lawyers or a full QoE, a scan tells you whether a target's numbers hold up well enough to keep going.
During exclusivity and before conditions are removed, test the numbers in depth while you still have leverage.
Turn adjustments into price, working capital peg, holdback or earn-out terms, and give lenders numbers they can underwrite.
Hypothetical figures. Purchase prices are commonly set as a multiple of EBITDA, so every adjustment is multiplied.
| Line | Amount | Why it moves |
|---|---|---|
| Seller-presented EBITDA | $1,500,000 | The starting point in the CIM or teaser. |
| Less: undocumented owner add-backs | ($150,000) | Personal expenses claimed as add-backs with nothing to support them. |
| Less: one-time revenue treated as recurring | ($80,000) | A single large project that is not expected to repeat. |
| Verified EBITDA | $1,270,000 | The earnings a buyer or lender can underwrite. |
| Price at 4.0x seller EBITDA | $6,000,000 | What the seller's numbers imply. |
| Price at 4.0x verified EBITDA | $5,080,000 | What the verified numbers support. |
| Difference | $920,000 | Negotiating room, or a reason to walk. |
Swipe sideways to see all columns.
A buy-side review works from the information the seller provides. We send a prioritized request so the seller's team answers the questions that matter first, not everything at once.
If a seller will not share basic financial information, that is itself something worth knowing before you go further.
Scope a Buy-Side QoENo. An audit is a historical compliance exercise that provides formal assurance. A QoE is diligence-grade financial analysis built for a transaction: it tests whether reported earnings are sustainable. Our work does not provide an audit, review or assurance opinion. See the QoE guide for the full explanation.
The scan is a fixed-price, rapid screen of seller-provided data that tells you whether a deal deserves further investigation. A full buy-side QoE is scoped to the target, goes deeper into each area, and is typically commissioned once you have a signed LOI. Traditional institutional QoE engagements commonly run $25,000 to $100,000 or more.
Run a scan early, before you commit to legal and other diligence spend. Commission the deeper review during exclusivity and before you remove conditions, while you can still reprice, restructure or walk.
Lenders and investors underwrite to normalized cash flow, so a well-supported QoE is a useful input. Whether a particular lender relies on it, or requires its own review, varies by lender.
We work with whatever the seller makes available and flag the gaps. A seller who resists sharing basic financials is a risk signal in itself, and worth knowing before you spend further.
Scans depend on how quickly the seller provides documents. For scoped reviews, the timeline is set out in the proposal based on the size of the business and the quality of its records.
Yes. All submissions are covered by our Mutual NDA and handled under strict confidentiality protocols. See our Privacy Policy. Confidentiality matters even more on the buy side, where early disclosure of your interest can change how a seller or their employees behave.
Xito Capital Partners is an advisory firm. We are not a law firm, an accounting firm or a lender, and nothing on this page is legal, tax or accounting advice. Have a qualified lawyer and accountant in your province review any agreement or structure before you rely on it. Quality of Earnings and Deal Risk Scan work is financial diligence analysis, not an audit, review engagement or assurance opinion.
Tell us about the target and where you are in the deal. A managing partner will reply within one business day with questions or a proposed scope.
Prefer to talk first? Call our Calgary desk directly.
403-827-1014
Buying something under $2M? The Buyer's Acquisition Pack and the Pre-QoE Deal Risk Scan are usually the better fit, and you can start either one today.
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