Transaction Advisory

Quality of Earnings

Mercer Capital assists all types of clients with customized due diligence on potential acquisitions

Our focused approach to traditional quality of earnings analysis generates insights that matter to potential acquirers.

Leveraging our valuation experience, our quality of earnings analyses identify and focus on the cash flow, growth, and risk factors that impact value.

Collaborating with clients, our senior staff identifies the most important areas for analysis, allowing us to provide cost-effective support and deliver qualified, objective, and supportable findings. Our goal is to understand the drivers of historical performance and the key risk and growth factors supporting future expectations. Our methods and experience provide our clients with a fresh and independent perspective on the quality, stability, and predictability of future cash flows.

Our methodologies and procedures are standard practices executed by some of the most experienced analysts in the industry. Our desire is to provide clients with timely and actionable information to assist in capital budgeting decisions. Combined with our industry expertise, risk assessment, and balanced return focus, our due diligence services are uniquely positioned to provide focused, value targeted information.

Analysis Performed

  1. Profitability Procedures.Investigating historical performance for impact on prospective cash flows. EBITDA Analysis from: (1) Management add-back; (2) Non-recurring items; (3) Pro-forma adjustments; and (4) EBITDA bridge visuals
  2. Customer Analysis.Investigating revenue relationships and agreements to understand the impact on prospective cash flows. Procedures include: (1) Identifying significant customer relationships; (2) Gross margin analysis; and (3) Lifing analysis
  3. Business and Pricing Analysis.Investigating the Target entities positioning in the market and understanding the competitive advantages from a product and operations perspective. This involves: (1) Interviews with key members of management; (2) Financial analysis and benchmarking; (3) Industry analysis; (4) Fair market value assessments and (5) structuring

The areas above are broad and may include a wide array of sub-areas to investigate. Sub-areas include:

  • Workforce / employee analysis
  • Intangible asset analysis
  • Location analysis
  • Segment analysis
  • Margin and expense analysis
  • Working capital analysis
  • A/R and A/P analysis
  • A/R aging and inventory analysis
  • Billing and collection policies
  • Proof of cash and revenue analysis
  • Capital structure analysis