QofE VS Financial Due Diligence

searcher profile

April 27, 2022

by a searcher from Florida International University - College of Business in Miami, FL, USA

I was in a meeting with a provider and he Insisted that the QofE is the same as the FInancial Due Diligence. I thought they were different. Are they both (QofE and DD) the same, if not what are the differences?

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commentor profile
Reply by a professional
from James Madison University in Washington, DC, USA
I suppose you could argue they may be different but in reality they’re interchangeable words. It’s more important to understand what “analysis” the service provider you go with is going to perform in their work.

Common analysis are: Normalize earnings (think arriving at an adjusted EBITDA), customer analysis, cost of sales and operating expense analysis, balance sheet analysis, net working capital analysis, proof of revenue, net debt analysis, and many more. You can dm me if you have further questions but researching the above terms will at least give you the tools in the “diligence toolbox”
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Reply by a professional
from Georgia Southern University in Atlanta, GA, USA
You may hear the language used interchangeably, but the QofE is really just a piece of the overall financial due diligence workstream. A few examples of other items that may be performed by a third-party as part of financial due diligence would be the proof of cash, working capital analysis, revenue/customer/vendor analytics, etc. All of these may drive an impact to the QofE, which is why one may argue that they are one in the same. But in reality the QofE is a single schedule (or group of schedules) that is included in the broader financial due diligence report. The scope can be tailored on a deal-by-deal basis.
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