Closing the Year Strong: How a Preemptive QofE Can Maximize Deal Value Before 2026

As the year draws to a close, businesses will perform a number of tasks to organize their financials, review their performance, and prepare for the immediate future. One such task that could be monumentally important for businesses is a year-end Quality of Earnings (QofE) review. 

A QofE review could be one of the most effective ways for a business to seize a competitive advantage by driving value and assessing risk before the start of the new year. When started before the actual sale process is launched, an end-of-year QofE review allows a business to be proactive in maximizing value. 

Why the end of the year is the optimal time for a QofE review 

At the end of the year, businesses should have sufficient data to provide a comprehensive snapshot of their performance, including metrics on revenue, expenses, working capital, and cash flow. Through a QofE review, businesses can use fully measured results, correct any irregularities, adjust for add-backs, and create an accurate, comprehensive report that illustrates the normalized state of the business to potential investors. 

The end of the year is also a prime time for this type of review, as most businesses recognize that Q1 is a period of heightened buy-side engagement. It helps to enter the first quarter of the year “buyer-ready” with credible financial metrics and answers to any possible questions buyers may have. 

Value drivers and risk factors 

Though audits and financial statements are standard in the business world, QofE reviews dive far deeper, going beyond simply documenting earnings to evaluate the quality and sustainability of reported earnings. The reviews work to normalize Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), removing one-off expenses and owner compensation. QofE reports examine metrics such as customer concentration, seasonal dynamics, and capital trends, often revealing hidden core values and risk factors that could ultimately impact a company’s valuation. 

Proactive diligence enables leadership to address weaknesses, including margin volatility and discretionary costs, thereby improving credible deal value. Key value drivers such as recurring revenue, diversified customer bases, and predictable cash flows can be better evaluated through the QofE review. In addition, risks such as one-time gains, liabilities, and poor internal controls can be addressed. 

The benefit of early diligence remedies 

In mergers and acquisitions (M&As), deals can frequently stall or completely implode because of glaring financial discrepancies that are exposed at the final hour. Common discrepancies include revenue recognition issues, inflated working capital, excessive debt, or unqualified normalization adjustments. 

Without performing early diligence, companies can easily underestimate the total cost of deals, overleverage, and leave themselves exposed post-deal. They can also miss or disregard alternative financing structures and terms, fail to reconcile inventory, and experience low engagement from the management team and high turnover. 

By performing early QofE diligence, businesses can avoid these eleventh-hour pitfalls, ensuring all earnings are sustainable and that all non-cash or non-recurring items are appropriately identified and excluded, dramatically improving transparency and negotiation leverage.

Buyer-ready in early 2026 

With a thorough, seller-side QofE review, companies can move fast and confidently when dealmaking activity spikes, as it often does in Q1. Being prepared allows companies to accelerate transaction timelines, build buyer trust, ward off price chipping, and enable the company team to focus on terms, not document and metric gathering. 

In today’s deal market, it pays to be prepared. With a comprehensive QofE review, organizations can be buyer-ready in early 2026, offering a validated earnings story that allows buyers to view them as transparent and professional. 

How one company improved deal terms through a QofE review 

There are many case studies where companies benefited from comprehensive QofE reviews. Consider one mid-market SaaS company that conducted a late-year QofE, which revealed aggressive revenue recognition practices and elevated owner “perk” expenses. The company could address these issues ahead of a sale by implementing more robust revenue policies, transitioning discretionary spending, and normalizing EBITDA. These changes increased buyer trust, resulting in a successful deal closure in Q2. 

What is included in an end-of-year QofE review? 

Companies that want to maximize deal value in 2026 should prepare a thorough QofE report that includes some beneficial standards. Reviews should normalize EBITDA, adjusting for non-recurring, discretionary, and owner-related expenses. Reviews should also assess revenue quality, including client concentration, seasonality, churn, and pricing dynamics. 

Working capital should also be included in any QofE review. The report should evaluate the requirements and implications for negotiations. Reports should also take a look at cash flow, inventory, COGS, customer and employee turnover, debt and financing structure, and legal compliance. 

Risk assessment is a significant part of any QofE review. This assessment should identify inconsistencies, margin volatility, and internal control weaknesses. 

By being proactive before year’s end, companies can gain a widespread clarity that they can leverage to maximize value, minimize risk and surprises, and step into 2026’s lightning-fast M&A environment with confidence.