Diligence, before the
number becomes a negotiation.

Deals rarely die on price. They die on what turns up in the third week.

A buyer’s quality of earnings analysis will find the owner’s personal expenses running through the profit and loss, the revenue recognized a quarter early, the related-party lease priced below market, and the customer concentration nobody mentioned in the teaser. Each of those is survivable when disclosed early and corrosive when discovered late.

On the sell side, we run the analysis before the process starts. You then negotiate from a normalized number you can support, rather than defending a number the buyer has already reduced twice. Sell-side diligence is the single highest-return spend in most owner-led transactions.

On the buy side, we work out what you are actually acquiring: sustainable earnings rather than reported earnings, the real working capital requirement across a full cycle, and the costs that arrive the day after closing and were never in the model.

Working capital is where more lower-middle-market deals stall than any other single term. The peg, the definition of what is included, and the true-up mechanic are worth getting precisely right in the letter of intent instead of arguing about them ninety days after close.