B2B Services Quality of Earnings: An Independent Sponsor's Counsel
Securities and M&A counsel for independent sponsors coordinating B2B services transactions, from LOI to close to the capital markets that open up afterward.
Quality of Earnings on B2B services deals is one of those workstreams that looks routine on a checklist and decides outcomes in practice.
The typical B2B services platform sits at $8M to $90M EV with EBITDA in the $2M to $18M range. The thesis runs on recurring revenue service platform with bolt-on operators. Most B2B services deals look better in the CIM than in the data room. Skip the CIM, ask for the contracts.
How Quality of Earnings actually gets structured.
Engage QofE within five business days of LOI signing.
Scope to include working capital normalization, deferred revenue, and customer concentration.
Share preliminary findings with the seller before final report, to surface disputes early.
Coordinate QofE findings into both the purchase agreement and the LP commitment package.
In B2B services, layer in MSA assignability mapped customer-by-customer as part of the Quality of Earnings workstream.
Treating QofE as a back-office exercise. It is the basis for the price, the working capital peg, and the LP pitch.
"The QofE is the deal book. Read it twice before you negotiate anything."Jason Powell · Quality of Earnings
The deal is one thing. The capital that opens up after close is another.
Capital after close is where the IRR actually gets made. The right introductions at month nine through month thirty are where this practice works as hard as it does at the LOI.
Related deal pages.
Independent Sponsor Economics for B2B Services
The package of deal-by-deal carry, management fees, and transaction fees that compensates the independent spo…
Management Fee Structuring for B2B Services
The annual fee paid by the deal entity to the independent sponsor for ongoing oversight, board service, and p…
Transaction Fee Structuring for B2B Services
The fee paid at closing to the independent sponsor for sourcing, structuring, and closing the platform deal a…
Equity Rollover for B2B Services
The portion of seller proceeds reinvested into the post-close entity, aligning seller with buyer.
Quality of Earnings for Healthcare Services
roll-up of physician practices and ancillary service lines
Quality of Earnings for Home Services
regional roll-ups of HVAC, plumbing, and electrical operators
Quality of Earnings for B2B Services, on independent sponsor terms.
Independent sponsor counsel that already speaks fluent deal-by-deal economics, structures clean LPAs, and travels with capital markets relationships for what comes after close.