The clean-looking deal with a 22% problem.
How a buy-side Quality of Earnings kept a searcher from overpaying, without killing the deal.
Illustrative sample.
Built on a fictional composite (Hoosier Supply Co.) to show the format and the kind of read we deliver. Real, named, client-approved case studies replace this as engagements close. We never manufacture proof.
+83%
Reported to adjusted EBITDA, all documented
22%
Revenue in a single customer, undisclosed pre-review
~3 wks
From complete data to the findings readout
The situation
A self-funded searcher was under LOI on a distribution business doing about $10.4M in revenue. The broker's book showed roughly $1.1M in adjusted EBITDA and read clean. With an SBA loan and a personal guarantee on the line, the buyer wanted to know the number was real before wiring the deposit.
What we did
A full buy-side QoE: we tied reported revenue to the cash in the bank (proof of cash), tested every add-back against source documents, built the working-capital peg, and ran the customer and margin analysis. A management interview filled in the story behind the numbers.
What we found
The earnings held up. Reported EBITDA of $610K normalized to about $1,115K, up 83%, and every add-back had a document behind it, owner compensation to market, a one-time legal matter, related-party rent at above-market terms. We rejected a $35K "rebrand" the seller wanted to add back, because it was a real, recurring cost of running the business. That rejection is the point: the rest of the schedule holds precisely because we did not stretch.
The catch surfaced in the concentration work: the single largest customer was 22% of revenue, and the top five were roughly 48%, a fact the broker's summary did not lead with. If that one account left after close, the buyer would have owned a materially different business than the one on the page.
The outcome
The buyer did not walk, and did not overpay. They used the finding to restructure the deal: the seller agreed to rebate part of the price if the top accounts left, a rebate that pays down principal on an SBA loan; the working-capital peg was set so they were not short of cash on day one; and the concentration risk was covered in the reps and the rebate terms. The deal closed with both sides working from the same numbers.
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