What a Buyer Actually Opens First — and Why Your Add-Backs Won't Survive It
Due diligence is not an assessment of your story. It is a test of your ledger, and the gap between the two gets priced as a discount on the whole multiple.
Cyril BelloirFinancial StrategistThe document that sets the price
The Quality of Earnings report re-derives EBITDA from source data and rejects anything undocumented. It, not your information memorandum, determines the final number.
The typical pattern: an owner presents €800k of add-backs — personal vehicles, family salaries, "one-off" legal fees, an office move, three consecutive years of exceptional items. The QoE accepts €300k. At seven times, that single spreadsheet removes €3.5M from the price.
What else gets tested
Customer concentration above 30–40% in the top ten accounts triggers a price reduction, an escrow, or an earnout tied to those specific clients renewing. Recurring versus one-off revenue split. Gross margin by contract rather than blended. Change-of-control and assignability clauses. Related-party transactions. Deferred and unbilled revenue accuracy. Contractor classification, which is acute in the UAE and across several European jurisdictions. Working capital normalised against a twelve-month average.
A cost that appears three years running is not one-off. Neither is the €120k of consulting from a company owned by a relative.
The second-order damage
Every rejected add-back costs you that amount multiplied by the exit multiple. It also costs credibility, and that is the expensive part. Once a buyer decides your numbers run optimistic, they re-price the whole deal rather than the disputed line.
Build the add-back schedule today: one row per item, one supporting document per row. Anything you cannot evidence, delete from your own valuation now rather than in a data room.
Former CFO of Europe's fastest-growing facility management group, with more than 60 due diligence processes completed.
Meet the team →Questions we get asked
What is a Quality of Earnings report?
An independent re-derivation of your EBITDA from source data, commissioned by the buyer. It rejects anything undocumented and it, not your information memorandum, sets the final price.
Why do add-backs get rejected?
Because they are undocumented, or recurring. A cost appearing three years running is not one-off. In a typical case €800k of presented add-backs was reduced to €300k — €3.5M off the price at seven times.
What level of customer concentration worries a buyer?
Top ten accounts above 30–40% of revenue typically triggers a price reduction, an escrow, or an earnout tied to those specific clients renewing.
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