Sell-Side Quality of Earnings

Also known as: Sell-Side QoE, Vendor Due Diligence

A sell-side quality of earnings is a QoE analysis a company commissions on itself before going to market, to anticipate buyer questions and defend its value.

A sell-side quality of earnings, sometimes called vendor due diligence, is a QoE a seller commissions on its own business before launching a sale process. Rather than waiting for the buyer’s diligence to surface issues, the seller gets ahead of them.

Why sellers do it

It identifies and documents add-backs and pro forma adjustments so the seller can defend a higher adjusted EBITDA.
It surfaces problems early, when there is time to fix or explain them, rather than mid-deal.
It speeds the process and reduces the risk of a buyer re-trading the price.

For lower middle market companies, a credible sell-side QoE can be the difference between a smooth process and a deal that stalls under buyer scrutiny.

Related terms

Quality of Earnings

A Quality of Earnings (QoE) analysis assesses how sustainable and accurate a company’s reported earnings are, separating durable operating profit from one-time or accounting-driven boosts.

EBITDA Add-Backs

EBITDA add-backs are one-time, non-recurring, or owner-specific expenses added back to reported EBITDA to show the company’s true ongoing earning power.

Pro Forma Adjustments

Pro forma adjustments restate historical results to reflect the business as it will operate going forward, covering run-rate changes, acquisitions, and other standard normalizations.

Data Room

A data room is the secure repository where a seller shares financial, legal, and operational documents with prospective buyers during due diligence.

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