MLR

Due Diligence

Specializing in QoE for SaaS and Software Companies

The due diligence team at Maxwell Locke & Ritter has performed hundreds of Quality of Earnings (“QoE”) engagements on SaaS and other recurring revenue companies throughout the US and Canada. We serve private equity groups, lenders, family offices, and corporate entities on both buy-side and sell-side transactions.  Please reach out to let us know how we can help you.

Diverse Team Experience

The due diligence accounting team at Maxwell Locke & Ritter has diverse backgrounds in private equity investments, investment banking, national firm public accounting, and private company ownership. With our broad range of experience, we offer insight into quantitative accounting practices, as well as qualitative strengths and weaknesses for each target.

We deliver a client­-focused approach to financial due diligence that mitigates risk and identifies key value drivers while avoiding conflicts of interest. Because our tax and audit departments complement our dedicated due diligence services team, we have the flexibility to tailor the engagement scope and due diligence report to meet your specific needs.

Due diligence services offered:
  • Adjusted MRR & CMRR
  • Quality of earnings analysis
  • Financial statement analysis
  • Working capital analysis
Types of clients served:
  • Private equity groups
  • Lenders
  • Family offices
  • Corporate acquirers
Types of transactions:
  • Acquisitions
  • Recapitalizations
  • Loan financing
  • Sell side
Target geographies served:
  • United States
  • Canada
  • Europe
  • Australia

Why ML&R Due Diligence services:

Each assignment receives significant senior-level attention while utilizing a team approach. Given that our transaction services team has diverse backgrounds in private equity investments, investment banking, national firm public accounting, and private company ownership; we offer insight into not only the target’s quantitative accounting practices, but also its qualitative strengths and weaknesses.

ML&R delivers a client-focused approach, void of conflicts of interest, designed to mitigate risk and identify key value drivers. We have the flexibility to tailor the engagement scope to meet your specific needs. Our dedicated transaction services team is complemented by the audit and tax departments of the largest locally-owned and managed accounting firm in Central Texas.

Maxwell Locke & Ritter due diligence typically includes an analysis of the target’s:

Revenue analysis:
  • Adjusted MRR and CMRR
  • MRR momentum
  • New, upsells, downsells, and customer churn
  • ASC 606 revenue recognition for implementation, one-time, and recurring revenue
  • Analysis of Management’s year one projections, if requested
P&L analysis:
  • LTV / CAC
  • COGS headcount and expense allocation
  • Gross margin trends
  • Key drivers, bridge, and adjusted EBITDA trends
  • ASC 606 expense recognition for commissions and other contract costs
  • Proof of cash

Balance sheet:
  • Deferred revenue
  • Net working capital
  • AR, AP aging
  • Inventory analysis
  • Accruals
  • Capitalized software and other capex
  • Accounting procedures and controls
  • Related party adjustments
Tax analysis:
  • Federal income
  • State and local income
  • Sales and use tax liabilities
  • Payroll

For experienced assistance with financial due diligence in these service areas, please contact us today to schedule a consultation. We look forward to helping you make financial decisions with confidence.

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KEY METRICS AND ISSUES FOR SAAS AND OTHER RECURRING REVENUE BUSINESSES

Our due diligence accounting team has put together information about subscription-based SaaS businesses and related metrics. Download it today.

Free Download

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