The quality of earnings (QoE) review is the central analytical procedure in financial due diligence, evaluating how accurately reported accounting results reflect the company's true recurring economic performance. It constructs a normalised EBITDA — restating non-recurring items, above-market related party transactions, accounting policy anomalies and working capital distortions — and produces a normalised margin, normalised working capital and adjusted net debt. QoE conclusions directly condition the acquisition price and the warranty scope negotiated in the SPA.

‍

Example: QoE on a Swiss SME reveals: accounting EBITDA CHF 2.7 million → restatement of above-market owner remuneration (+CHF 200,000) + exclusion of non-recurring restructuring charges (+CHF 180,000) - below-market intragroup rent (-CHF 120,000) = normalised EBITDA CHF 2.96 million. At an 8x multiple, this CHF 260,000 normalisation gap represents CHF 2.1 million of additional acquisition value — illustrating the direct economic stakes of QoE in every transaction.

‍

At Hectelion, quality of earnings is the foundation of every financial due diligence mandate — every restatement is documented, defensible and quantified in its impact on acquisition value.