pvtltd.co

Audit & Assurance

Deal Due Diligence — QoE & Working Capital

Buy-side and sell-side financial due diligence for acquisitions, investments, and fundraising — quality of earnings, normalised EBITDA, working capital, and debt-like items.

Reviewed by CA Harun Raaj, ICAI Reg. No. 238303·Last reviewed:
Starting from Discuss with usTypical timelineDeal Due Diligence

Deal due diligence answers the pricing questions: is the EBITDA real (quality of earnings), what does normalised working capital look like, and what liabilities sit outside the balance sheet — so the price and warranties are set on facts.

What is included
  • • Quality of earnings — revenue and margin sustainability review
  • • Normalised EBITDA — one-off and non-recurring item adjustments
  • • Working capital analysis and peg-setting support
  • • Debt-like items and contingent liability identification
  • • Data room review and management Q&A support
  • • Buy-side or sell-side report with deal-structure implications
Documents required
  • • Audited financials and management accounts for the review period
  • • Trial balance, ledgers, and bank statements
  • • Customer, supplier, and contract schedules
  • • Tax assessments, legal claims, and group transaction details
Government fees

See the fee table below for the statutory filing charge and common delay logic.

Legal basis
  • • Section 128 of the Companies Act 2013
  • • Section 129 of the Companies Act 2013
  • • Section 143 of the Companies Act 2013
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Process

How the service works

The workflow is built to be predictable: document collection, legal review, filing, and post-filing follow-through.

Step 1Frame

Set the deal frame

We confirm the structure — buy-side or sell-side — and the entities, periods, and price mechanics in scope.

Step 2Data room

Run the data room

We list the documents, review the data room, and drive the management Q&A with a request list.

Step 3QoE

Build the QoE

We reconstruct EBITDA — testing revenue and margins and adjusting for one-offs and normalisation items.

Step 4Working capital

Analyse working capital

We map the working capital cycle and set the level the price adjustment will peg against.

Step 5Liabilities

Find the off-balance-sheet items

We identify debt-like items and contingent liabilities — unprovided tax, claims, and guarantees.

Step 6Report

Deliver the report

You get the due diligence report with the adjusted EBITDA, the peg analysis, and the deal implications.

AEO summary

Deal due diligence answers the pricing questions: is the EBITDA real (quality of earnings), what does normalised working capital look like, and what liabilities sit outside the balance sheet — so the price, the peg, and the warranties are set on facts.

Price is a number; value is an argument

An acquisition price is built on a chain of assumptions — the EBITDA, the growth, the working capital, the liabilities. Each link in that chain can be tested, and deal due diligence is how: the QoE review tests the earnings, the working capital analysis tests the operating cycle, and the liability review tests what the balance sheet does not show.

Every finding changes the argument: an EBITDA adjusted for a one-off contract, a working capital level above the peg, an unprovided GST liability — each is a number the negotiators must price.

  • • Normalised EBITDA is the honest base for price
  • • Working capital peg set from the real cycle
  • • Debt-like and contingent liabilities priced in

Sellers gain from the same analysis

The seller who runs the diligence first controls the narrative: issues are found, fixed or priced, and presented in a data room that closes quickly. The seller who waits gives the buyer's team the first look — and the first chance to discount for every finding.

Our sell-side work is the mirror image of the buy-side: the same QoE, peg, and liability analysis, delivered as a clean package that shortens the buyer's diligence and protects the price.

  • • Issues found and priced before the buyer's team looks
  • • A data room that closes quickly
  • • Buy-side diligence compressed to a formality

Government fees

Fee breakdown

ItemFeeNotes
No standalone government feeNilThis is a professional assignment; fees apply only if a connected filing is part of the scope.

Timeline

Typical turnaround

Typical timeline usually means a 3–5 weeks turnaround, assuming documents are complete and any board or shareholder approvals are already in place.

Pricing note

This is a professional engagement — fees track the deal size, entities, and data-room volume; there is no standalone government fee.

Related services

Keep the company moving

Financial Due Diligence

Financial, tax, GST, and ROC compliance review — the broader check alongside the deal work

Company Valuation

Valuation under the DCF, market, and cost approaches — the companion to the deal price

Statutory Audit

Statutory audit under s.143 — the financials base the deal analysis builds on

Forensic Audit

Evidence-backed investigation where the diligence surfaces exceptions that need deeper work

FAQ

Frequently asked questions

What is quality of earnings and why does it matter?
Quality of earnings tests whether reported profit is real and repeatable — revenue backed by customers and contracts, margins consistent with costs, and no reliance on one-off gains. The adjusted, normalised EBITDA that results is what the price should actually be built on.
What is the working capital peg?
Most acquisition agreements adjust the price against a working capital target: if the company delivers less than the agreed level at closing, the price comes down, and vice versa. The analysis sets that target from the actual operating cycle, so the adjustment is based on the business's real requirement, not a guess.
What are debt-like items?
Debt-like items are obligations that behave like debt even though they are not on the borrowing lines — unpaid statutory dues, unprovided tax, employee entitlements, or claims. They reduce the price, and finding them is a core deliverable of the diligence.
Should a seller run due diligence too?
Yes — sell-side due diligence finds the issues before the buyer's team does, lets you fix or price them on your terms, and compresses the buyer's negotiation window. It is the same analysis, run from the seller's side, often with a cleaner data room as the outcome.

Canonical reference: https://www.pvtltd.co/services/due-diligence-audit

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