Transaction advisory and due diligence
Know what you are buying before the price is fixed
We run the diligence behind a transaction and hold the whole process together: quality of earnings, working capital, net debt and tax, with legal, intellectual property, secretarial and compliance workstreams coordinated through a single point of contact.
The findings that change the price, and one person accountable for the whole process.
One process, one owner.
Diligence → findings → price and structure
The problem
What derails transactions
- Reported profit includes items that will not recur, and the multiple is applied to all of it.
- Working capital is negotiated from a closing balance rather than a normalised level.
- Debt-like items — unpaid statutory dues, deferred consideration, customer advances — surface after signing.
- Four advisers run four workstreams and nobody owns the question of what the findings mean together.
- Diligence begins before the seller's records can support it, and the timetable slips from there.
Quality of earnings
- Reported earnings bridged to a sustainable, recurring run rate.
- One-off, non-recurring and out-of-period items identified and quantified.
- Owner and related-party costs normalised to a market basis.
- Revenue tested for recognition, concentration and durability.
- Accounting policy choices and any changes in them made visible.
- Margin walked from prior period to current, with each movement explained.
Working capital and net debt
- A normalised working capital level derived from the actual cycle, not a single date.
- Seasonality and month-end effects separated from the underlying position.
- The peg proposed with the working shown, so it can be negotiated on evidence.
- Net debt built up item by item, including debt-like items that are not borrowings.
- Unrecorded liabilities, statutory arrears and off-balance-sheet commitments surfaced.
- Cash quality assessed: what is genuinely free, and what is restricted or trapped.
Tax due diligence
- Historical direct and indirect tax positions reviewed for exposure.
- Open assessments, notices, appeals and disputes identified and sized.
- Positions taken on uncertain matters examined, with the basis recorded.
- Withholding and statutory payment compliance tested.
- Transaction structure considered for its tax consequence before it is fixed.
Valuation modelling
- Financial models built from the diligence findings, not from the seller's projections.
- Scenario and sensitivity analysis around the assumptions that actually move the answer.
- Enterprise-to-equity bridge shown in full, so the price is traceable.
- Earn-out and deferred-consideration structures modelled before they are agreed.
- Post-deal integration and funding requirement modelled alongside the price.
Deal management, single point of contact
- One accountable owner across every workstream, rather than four advisers reporting separately.
- Legal, intellectual property, secretarial and compliance diligence coordinated and chased.
- A single issues log, so findings from one stream are read against the others.
- Information requests consolidated, so the target answers once rather than four times.
- Data room structured and managed, with access controlled and logged.
- One timetable, with the critical path visible to everyone on it.
5th Quadrant performs financial and tax due diligence, quality of earnings analysis, valuation modelling and deal coordination. Statutory audit, prescribed certification, statutory valuation reports and legal opinion are performed and signed by an independently engaged licensed professional — a Registered Valuer, practising Chartered Accountant, Company Secretary or advocate as the matter requires — coordinated through 5th Quadrant.
Practical outputs
What you receive
- Quality of earnings report with the adjusted earnings bridge.
- Normalised working capital analysis and a proposed peg, with workings.
- Net debt schedule, including debt-like items.
- Tax due diligence report with exposures quantified.
- Valuation model, with scenarios and the equity bridge.
- A consolidated issues log with the price and structure implications drawn out.
- Input to the sale and purchase agreement on the financial and tax terms.
Ask us for our Transaction Readiness Checklist when you get in touch.
Evidence
Evidence, not assertion
Anonymised sample deliverables and case studies for this service are in preparation. Ask us for examples relevant to your industry, and we will take you through our review controls, reporting frequency and the roles accountable for each.
Frequently asked questions
What is a quality of earnings review, and how is it different from an audit?
An audit expresses an opinion on whether historical financial statements are true and fair. A quality of earnings review asks a different question: how much of the reported profit is sustainable and will recur under new ownership. It is forward-looking, it is not an opinion, and it is commissioned by a party to the transaction rather than by the company.
Do you sign a valuation report?
No. We build the valuation model and the analysis behind it. Where a statutory or prescribed valuation report is required — for a regulatory filing, a share issue or a similar purpose — it is issued by an independently engaged Registered Valuer or other licensed professional, and we coordinate that engagement.
What does single-point deal management actually mean?
One person accountable for the whole process rather than one per workstream. We coordinate the legal, intellectual property, secretarial and compliance diligence alongside our own financial and tax work, run a single issues log and a single timetable, and consolidate information requests so the target is not answering the same question four times.
Can you act for a seller rather than a buyer?
Yes. Sell-side preparation is often the better-value engagement: the findings a buyer would raise are identified and addressed while there is still time, rather than being used to reprice the deal late.
How early should we involve you?
Before the letter of intent if possible. Working capital mechanics, the net debt definition and the earn-out structure are far easier to shape at that point than after the commercial terms have been agreed in principle.
Do you provide legal advice on the transaction documents?
No. We advise on the financial and tax terms and how the diligence findings should be reflected in them. Legal drafting and opinion are provided by an independently engaged advocate, coordinated through us as part of the deal management.
The connected picture