Sell-side QoE to validate carve-out financials

searcher profile

December 17, 2025

by a searcher from The University of Chicago - Booth School of Business in California, USA

I'm working on a carve-out deal where the viability depends on the validity of the management prepared carve-out financials. It's modest sized and self-funded, and lenders so far have indicated that QoE would be required on their end (and not CPA review) and of course I would want QoE for my own peace of mind. I wish they would have had an accountant prepare this before bringing to market, but here we are. The current negotiated deal is on the edge of lending standards, so if there is an issue that causes a need to renegotiate or halt, I'd like to uncover that now. To that end, I am thinking of splitting this up into two phases: (1) request a seller-paid deliverable which is focused on the carve out income statement to get to a viable restatement based on standalone economics; followed by (2) a buyer-paid portion with balance of deliverables that would be expected regardless of being a carve-out. To be clear- I understand that a buyer-paid QoE is absolutely key to protecting my interests, and have no intent to trust sell-side QoE. I have decent financial acumen and have reasonable confidence I could identify major anomalies if the QoE was biased. Has anyone done something similar? Is this a viable construct? The seller via the broker has expressed willingness to co-invest in a single vendor of my selection, though I'm not sure if that creates any conflicts of interest or other issues? Thank you!
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Reply by a searcher
from Stanford University in Healdsburg, CA 95448, USA
For carve outs, it's common to have some substantiation of the financials and structure of the assets and business operations being divested. I think you're well within your rights to ask them to produce a professionally prepared scenario of what they're trying to sell to you. As you mention above, you need to confirm for your own purposes, but part of selling a business is presenting what is being sold in a reliable and rational way. If they push back you can always remind them that the reps and warranties of the definitive agreement will require them to stand by what they're presenting, so they should be interested in their own analysis for their own purposes. Thanks for the tag, ^redacted‌.
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Reply by a professional
from Seton Hall University in Morristown, NJ 07960, USA
Good afternoon. I was involved a few years ago in a sell-side QofE project that was of a bit larger scale. Investment bank brokered the deal of a privately held company and the QofE was used to validate the numbers for both sides, and in my case, paid for by the seller. Happy to discuss your project with you and it already sounds to me like we could help. Just DM me and we'll set up a call.
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