Customized Focus Areas
Our experience spans a broad range of transaction sizes, with a strong concentration in transactions under $20 million and experience supporting transactions exceeding $50 million. Recognizing that the lower middle market is often underserved, we have developed a streamlined, user-friendly due diligence approach tailored to founder-led acquisitions and private business transactions. Our flexible, à la carte service model allows clients to obtain the level of support they need without the complexity and cost often associated with larger advisory firms.
What is a Quality of Earnings Analysis?
A Quality of Earnings (QoE) analysis helps buyers and investors understand the true economic performance of a business beyond the numbers reported in the financial statements. Through reported-to-normalized EBITDA analysis, identification of non-recurring items, revenue and margin trends, net working capital considerations, and other transaction-focused procedures, we deliver actionable insights that help buyers and sellers evaluate risk, assess value, and support informed negotiations.
This analysis provides valuable context around the sustainability of historical performance and helps identify areas that may require further discussion before deal terms are established. While a Quality of Earnings review is an important component of financial due diligence, it represents only one aspect of the broader transaction process. We also assist with transaction structuring, purchase agreement considerations, and strategic planning, helping clients navigate acquisitions through informed decision-making.
Our Financial Due Diligence Process
Detailed Analysis and Evaluation
Our team deepens the traditional verification process by looking past top-line summaries. We review financial records to evaluate whether reported data aligns with seller disclosures, using targeted testing to identify trends or anomalies.
- Cash Proof & Revenue Validation: Tie reported revenues back to independent bank deposits and merchant statements, assessing whether reported cash flow appears consistent with customer activity.Normalized EBITDA Calculation: Review historical accounting periods to identify non-recurring events, personal expenses run through the business, or unusual overhead variances. This step is a key part of our quality-of-earnings services, providing a clear view of actual cash flows and normalized EBITDA profitability. Review owner compensation, related-party transactions, and other discretionary expenditures to determine sustainable earnings and establish a normalized EBITDA baseline.
- Search for Unrecorded Liabilities: Analyze the periods between financial reporting cycles to help identify potential unrecorded liabilities, unaccrued payroll obligations, or lingering tax exposures before a deal closes. We evaluate debt-like items, accrued expenses, sales and use tax exposures, payroll-related liabilities, and other obligations that may not be readily apparent from the financial statements.
- Formulate Follow-Up Questions: Generate targeted questions for the target company to help clarify uncertainties and assess the consistency of disclosed financial information.
Collaborative & Cost-Effective Transaction Support
Our transaction support uses a collaborative, cost-conscious workflow. Your team pays only for targeted reviews of high-risk areas, not broad audits. We maintain close communication with your attorneys, aligning our findings with contract terms so your deal stays on track.
- Net Working Capital Peg: Help determine the Net Working Capital Peg and coordinate integration within the Asset Purchase Agreement (APA). A well-supported baseline can help reduce the risk of Net Working Capital adjustments.
- Tax Structuring Evaluation: Examine transaction structures to identify tax advantages through mechanisms such as F Reorganizations, Section 336(e), or Section 338(h)(10) elections.
- Financial Red Flags: Review the underlying books to help identify systemic accounting adjustments or hidden operational due diligence exposure before final settlement agreements are reached. Identify operational, accounting, and working capital trends that could impact valuation, deal structure, financing, or post-closing performance.
- Purchase Price Allocations/Form 8594: Support purchase price allocations and Form 8594 reporting considerations, helping buyers understand the tax implications associated with various allocation methodologies.
Data Verification and Structure Review
We review historical information to assess the consistency of representations made to a prospective buyer. Our team also checks internal reporting systems to highlight risks and protections before terms are final.
- Information Accuracy & Representation: Assess consistency of the target company’s presented information and help identify inconsistencies in representations made to the prospective purchaser.
- Corporate and Financial Structure: Examine relevant documents and information related to corporate structure, financial structure, in-force contracts, assets, and pending litigation.
- Strengths and Weaknesses Analysis: Assess the target business’s strengths and weaknesses, including less familiar and higher-risk aspects.
Negotiation Support and Entity Advisory
Our team translates financial risks into clear data points, helping you support your position during negotiations. We are by your side through closing, supporting a seamless transition to the new business structure.
- Reduce the Risk of Post-Settlement Surprises: Address potential issues proactively to help reduce post-settlement surprises.
- Key Issue Breakdown: Identify and address critical issues influencing the final terms and conditions, including price and indemnities, while assisting buyers in understanding reported versus normalized EBITDA, the sustainability of earnings, and the key drivers impacting valuation and purchase price negotiations.
- New Entity Formation & Market Data: Provide recommendations and assistance with new entity formation, offering perspectives on the reasonableness of the purchase price, and reviewing market data and multiples relative to the industry.
- Purchase Agreement Alignment: Coordinate closely with legal counsel to review the Asset Purchase Agreement (APA) or Stock Purchase Agreement (SPA), working to assist counsel in reflecting financial diligence findings, working capital provisions, debt-like items, purchase price adjustment mechanisms, and accounting definitions within the transaction documents.
Why Choose Newburg | CPA?
Private companies looking for M&A advisory firms to handle transactions in this price range need direct, partner-level attention. Newburg | CPA serves as a dedicated due diligence accounting partner, offering practical financial insights and transaction-focused guidance
Choosing the right M&A partner comes down to more than credentials. You want a firm that responds directly, understands mid-market deal sizes, and provides support without the overhead of a large national practice. At Newburg | CPA, our transaction partners provide consistent responsiveness while aligning our verification focus directly with your specific priorities. Our streamlined, à la carte approach is designed specifically for private company transactions, helping clients obtain meaningful transaction support without unnecessary complexity or cost.
“As our Company continues to expand throughout the country, their planning and expertise has aided our continued growth. Their tax team has the bandwidth to help us with all our domestic income tax filings as well as all the US requisite foreign disclosures.”
“Their process and approach has been a refreshing change. It’s comforting to know they are attentive throughout the year in helping us minimize tax exposure and avoid surprises.”
“Our goal was to select a firm with top-notch accountants, high integrity and ones that specialized in pro-active business tax planning. We found our fit with the Newburg team…..it just makes the journey of growing a business more enjoyable. We are so appreciative of their support in helping us be a success!”
“We have been using Newburg | CPA for over 15 years, for virtually all our accounting needs. As venture capitalists our needs are complex and Newburg | CPA has assisted us with our annual financial statement audits, quarterly financial reporting, and tax planning and compliance. Their team has been instrumental in taking care of our needs so that our investors are informed, and we can stay focused on managing our portfolios.”
Accounting and advisory services that add value and build trust.
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