Quality of Earnings Analysis
At Sentient Partners, we provide rigorous Quality of Earnings (QoE) analysis to give you a clear, accurate picture of a company’s true profitability. Whether you’re preparing to sell or evaluating an acquisition, our QoE reports deliver the financial clarity you need to make informed decisions. On the sell side, a well-prepared QoE accelerates the buyer’s due diligence process, instills confidence, and increases the likelihood of receiving the best possible offer. On the buy side, our analysis uncovers hidden risks, normalizes earnings, and ensures you’re paying the right price for the right asset—reducing surprises and strengthening your negotiating position.
What Is a Quality of Earnings (QoE) Analysis?
A Quality of Earnings analysis goes far beyond the income statement. It’s a deep dive into the true financial performance of a business—adjusting for noise, normalizing earnings, and identifying the sustainability of profitability. At its core, a QoE answers this question:
“How much money is this business really making—and how reliable is that number?”
While traditional financial statements tell part of the story, they can be distorted by one-time events, aggressive accounting practices, or inconsistent revenue recognition. A QoE analysis cuts through the noise to provide a clear, investor-ready view of earnings.
For buyers, it helps you avoid surprises, bid intelligently, and uncover risks early.
For sellers, it builds buyer confidence and accelerates the due diligence process.
It’s not just about numbers—it’s about context, consistency, and confidence. As part of our QoE analysis, we analyze:
Revenue quality and concentration
EBITDA normalization (removing non-recurring, discretionary, or poorly classified items)
Working capital and cash flow trends
Accounting policy red flags
Key operational drivers and KPIs
Our goal? To make sure that what’s on the books matches the reality of the business. That’s how smart deals get done.
Why It Matters
Whether you're preparing for a transaction or evaluating one, the Quality of Earnings is often the difference between a great deal and a costly mistake. Too often, reported EBITDA doesn’t tell the whole story. It may include non-recurring income, exclude hidden expenses, or mask unsustainable performance. That’s where a rigorous QoE comes in—it reveals the real financial engine of the business and equips you to act with confidence.
For Sellers:
A professionally prepared QoE package signals that you’re organized, credible, and transaction-ready. It:
Accelerates the buyer’s due diligence process
Reduces the number of deal surprises
Instills confidence in your numbers
Makes it easier for the buyer to justify a premium valuation
The result? Better offers, faster closings, and fewer headaches.
For Buyers:
A QoE gives you the power to validate assumptions, avoid overpaying, and uncover hidden risks before they become expensive problems. It helps you:
Understand how sustainable EBITDA really is
Identify red flags in accounting or revenue recognition
Adjust the purchase price based on normalized performance
Strengthen your negotiating position
Because in every transaction, what you don’t know can cost you.
The Bottom Line:
Whether you’re on the buy-side or the sell-side, a Quality of Earnings analysis isn’t optional—it’s essential. It protects your investment, sharpens your strategy, and increases the odds of a successful outcome.
What’s Included in Our Quality of Earnings Analysis
We don’t just hand you a report—we give you clarity, context, and confidence. Our QoE process is rigorous, fast-moving, and tailored to private equity transactions. Each engagement is designed to uncover what really matters for valuation, negotiation, and execution. Here’s what you can expect:
📊 Revenue Quality & Concentration
We assess how consistent and sustainable revenue streams are, identify customer concentration risks, and flag any aggressive recognition practices that could inflate top-line results.
💰 EBITDA Normalization & Bridge
We build a clean bridge from reported to adjusted EBITDA—removing non-recurring items, discretionary expenses, and accounting noise to reveal true earning power.
🔄 Working Capital & Cash Flow Trends
We evaluate working capital requirements, seasonal fluctuations, and cash conversion efficiency—so you understand what it really takes to operate the business.
🧾 Accounting Policy Review
We examine accounting methods and classifications to ensure alignment with GAAP and consistency across periods. If something’s being pushed to the gray areas, we’ll find it.
📉 Debt-Like Items & Off-Balance-Sheet Risks
From customer prepayments to underfunded obligations, we help you identify liabilities that may not show up on the surface but materially impact value.
📌 Operational KPI Insights
We connect financial findings with relevant operational drivers—providing context that matters to investors, not just accountants.
🚩 Red Flags, Value Levers & Recommendations
You’ll receive a clear summary of key issues, hidden risks, and potential value creation opportunities, all prioritized for deal relevance.
Who It’s For
Whether you’re preparing to sell, evaluating an acquisition, or supporting a portfolio company through a major transition, our Quality of Earnings analysis gives you the financial clarity and strategic insight to move forward with confidence. We’re built for:
💼 Private Equity Deal Teams
Gain a trusted partner for buy-side diligence. We move fast, dig deep, and deliver actionable insights that help you bid smart, structure better deals, and avoid post-close surprises.
🤝 Strategic Buyers & Corporate Development Teams
Whether it’s your first acquisition or your fifteenth, we help validate what you're buying—and what you're not—so you can allocate capital with confidence.
📈 Founders & Management Teams Preparing for Exit
A professionally prepared QoE package makes your business easier to buy—and easier to value. We help you get ahead of questions, defend your EBITDA, and instill buyer confidence.
Why Sentient Partners?
Quality of Earnings is about more than crunching numbers—it's about understanding the business behind the numbers. At Sentient Partners, we bring a unique blend of financial rigor, operational insight, and deal-side experience to every engagement. Here’s what sets us apart:
🧠 We Know the Numbers—and the Story Behind Them
We don’t just flag adjustments—we explain why they matter, how they’ll be perceived by buyers or lenders, and what you can do about them. Our work blends forensic accounting with investor-level judgment.
🛠 We’re Operators, Not Just Analysts
Our team has sat in the CFO seat and worked inside portfolio companies. We understand the pressure, the systems, and the real-world decisions behind financial results—and we speak your language.
⚡️ We Move Fast Without Sacrificing Depth
Deals don’t wait, and neither do we. Our agile process is built to deliver thorough, audit-caliber insights on aggressive timelines, without getting lost in irrelevant details.
🎯 We Go Beyond the Report
Need help positioning EBITDA to a buyer? Justifying adjustments to a lender? Cleaning up numbers pre-market? We’re with you before, during, and after the analysis—because we’re in this for outcomes, not just outputs.
If you’re looking for a partner who delivers clarity, speed, and strategic insight—not just spreadsheets—you’re in the right place.
Ready to see the real story behind the numbers?
Let’s talk about how a Quality of Earnings analysis can help you move forward with clarity and confidence. Whether you’re preparing to sell, evaluating a deal, or supporting a portfolio company, we’re here to help.