Mergers and acquisitionsQuality of earnings in Toronto
Buy-side and sell-side quality of earnings reviews for transactions in Toronto and the Greater Toronto Area: whether EBITDA is real, recurring and worth the price on the table. Every adjustment is shown in a bridge from reported to normalized earnings, ready for the negotiation.
What the review answers
Owner-run companies rarely keep their books with a sale in mind. The review rebuilds earnings to show the business as a buyer would own it.
Earnings rebuilt from the ledger, with owner compensation, related-party charges, one-time items and discretionary spending adjusted.
Revenue and gross margin by customer, product line and channel, to show whether results are broad-based or concentrated.
Earnings reconciled to cash flow, to catch revenue booked before it is collected and costs carried on the balance sheet.
Receivables, payables and inventory over time, to set a defensible working capital target at closing.
Liabilities and commitments that do not stand out in the financial statements but will matter to a buyer.
A normalization bridge and direct input into price, structure and representations, so the findings are used at the table.
How we help
Quality of earnings reviews for buyers, sellers, private equity firms, search funds and lenders in Toronto and the Greater Toronto Area. We apply the rigour a buyer’s lender or investment committee will, scoped to the risks of your transaction rather than a standard checklist.
We test the earnings and cash flow behind an offer before it is final: normalized EBITDA, customer and margin concentration, and what a first read of the financials would miss.
We run the review a buyer will, before you go to market, so the number you present is one you can defend and diligence moves faster once it starts.
EBITDA rebuilt from the ground up: owner compensation, related-party charges, one-time items and discretionary spending, so the earnings reflect the business as a going concern.
Historical working capital, receivables, payables and inventory trends, a defensible closing target, and liabilities that are not obvious on the surface.
Sales and gross margin by customer, product line and channel, to test whether performance is broad-based or concentrated in ways that may not survive a change of ownership.
Findings built for the negotiating table: a clear normalization bridge and direct input into price, structure and representations, not just a diligence binder.
Quality of earnings in Toronto
Toronto’s buyers are experienced. Private equity firms, search funds, strategic acquirers and their lenders apply the same rigour whether a target earns $5 million or $50 million of EBITDA, and they will rebuild the earnings themselves if the seller has not.
We scope each review to how the business operates and write the report for the people who will rely on it, from the investment committee to the lender sizing the acquisition loan.
Owner-led companies often pay the founder and family members amounts that differ from the market cost of the roles. We restate compensation at what a buyer would actually pay for the team.
Many GTA owners hold the property through a related company and set the rent to suit their planning. If the building is not part of the deal, earnings need to reflect a market rent, which can move EBITDA significantly.
Ontario companies selling into the U.S. report results that move with the exchange rate. We separate currency effects from underlying performance, so the trend a buyer pays for is the real one.
Sellers often present add-backs for new contracts, price increases or cost savings. We test which are supported by evidence and which are projections, so the earnings in the bridge can be defended.
Our view
A quality of earnings report is only useful if its findings reach the negotiation. A long diligence binder rarely changes a price. A clear bridge from reported to normalized EBITDA, with each adjustment explained and supported, does.
We build that bridge from the general ledger up, test it against cash, and write it so the buyer, the seller, the lender and their advisers can each follow how the number was reached.
Watch: The Right Deal, Done the Right Way
How a review works
The timetable depends on the size of the business and the quality of its records, and is agreed around your deal deadlines. You receive a written proposal with the scope, timing and fee before any work begins.
On the sell side, we run the same review a buyer will, before you go to market, so diligence moves faster once it starts.
Buying or selling a business?
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Frequently asked questions
An analysis of whether a company’s reported earnings, usually EBITDA, reflect its real and recurring performance. It adjusts for one-time items, owner expenses and accounting choices, and supports the price and financing of a transaction.
No. An audit gives an opinion on the financial statements as a whole. A quality of earnings review focuses on the earnings a buyer is paying for and how sustainable they are.
Either. Buyers commission one to test a target before final terms. Sellers commission one before going to market, so the earnings they present have already been tested.
It depends on the size of the business and the quality of its records. The proposal sets out a timetable agreed around your deal deadlines.
The general ledger, monthly financial statements, tax returns, payroll records, and revenue by customer and product for the period under review.
A quality of earnings review is the core of financial due diligence. Full diligence also covers debt, tax exposure and the forecast. See our financial due diligence service.
Lenders financing an acquisition often ask for a quality of earnings review before they commit, because the loan is sized on earnings. We write the report so a lender can follow every adjustment.
Yes. Our office is in Vancouver, and we review earnings for buyers, sellers and lenders on transactions in Toronto, across the GTA and elsewhere in Ontario, working through a shared data room and scheduled calls.
Have a question that isn’t covered here? Ask us directly.
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Tell us about the transaction and your timing. We will come back with the questions that matter for your situation.
What happens next
Office
Alphabridge Group Inc.555 Burrard StreetVancouver, BC V7X 1M8
We use your details only to respond to your inquiry.
Whether it is a deal, a raise, a valuation or the way the business is run, we are glad to talk it through.
vasant@alphabridge.co
+1 778 903 4883
Five practices, organized around the decisions our clients face.
Sector depth across the businesses we advise, from early-stage ventures to established operators.
Perspectives on transactions, valuation, capital, performance and strategy.
An independent strategic finance firm, founded in 2016 and led by its principal on every engagement.
