Quality of Earnings Analysis

A fundamental aspect of the valuation process is obtaining a clear understanding of a target's quality of earnings. An analysis of the quality and sustainability of earnings should be conducted early on. Doing so enables a faster go or no-go decision and ensures that baseline valuation measures are reasonable and defensible in the determination of pricing and other deal terms. Understanding the sustainability of earnings and how that impacts transaction value and forecast modeling is key to navigating the unique aspects of any deal.

Why MorganFranklin?

MorganFranklin provides accounting and operations analysis services to help buyers evaluate the quality of earnings of potential acquisitions. Our technical transaction professionals move fast to evaluate targets' historical results, accounting assumptions, and methodologies. We are also skilled at identifying opportunities for improved operational performance and potential post-closing cost savings.

Capabilities

Historical results sustainability evaluation
Non-recurring and one-time items
Run-rate impact of significant revenue and expense changes
Prospective changes in post-acquisition costs (i.e., executive and employee salary and benefits, transition agreements, etc.)
Stand-alone cost issues
Trends and true-up of reserve, allowance, and provision accounts
Interim vs. year-end accounting treatment
Discontinued operations or product lines
Private and/or public company expenses and related parties
Appropriate application of U.S. GAAP and IFRS