Know before you sign the LOI
The time and cost of finding out by hand, and what happens to deals when diligence finds problems late.
| The work | By hand | With DealBasis |
|---|---|---|
| Time to know if the numbers hold up | 4 to 6 weeks for a buy-side quality of earnings report2 | Seconds. Every document is read and checked as soon as you upload it |
| Cost of that first answer | $25,000 to $50,000 for a buy-side quality of earnings on a $5M to $15M company2 | A DealBasis subscription. Pricing on request |
| Reading the documents | Retyping figures from PDFs into a spreadsheet | Figures read from every page, table and sentence |
| Testing add-backs | Judgment calls that vary by analyst | The same rules on every deal, with the reason shown |
| Checking the numbers | Spot checks when there's time | Every figure cross-checked against the statements and ledger |
| Finding the source | Searching the PDF for where a number came from | One click to the page, row or cell |
| Committee materials | Building the memo and deck from scratch | Drafted from the record, ready to download |
Most broken deals fail on what diligence finds
Axial, a deal platform for the lower middle market, studied 75 deals sourced through it that broke after a signed LOI in 2025. Nearly half died on diligence findings, often after months of exclusivity.1
of broken deals died on diligence findings: quality of earnings or otherwise1
Deals killed by QoE EBITDA discrepancies rose from 10.6% in 2023 to 21.3% in 20251
Average time a private equity buyer spent in exclusivity before the deal broke1
Broken-deal expenses at one large private equity firm, KKR, over six years4
The quality of earnings fee alone, on a $5M to $15M company
That is the typical buy-side QoE fee2, and it is paid whether or not the deal closes, though some QoE firms discount it when a deal dies3. On top of it come legal fees (a median of $28,500 on closed searcher acquisitions3), travel, lender deposits and the deal team's months in exclusivity.
QoE EBITDA discrepancies
DealBasis tests management's EBITDA bridge before you sign. On Project Saguaro it found $592,000 of Adjusted EBITDA the documents don't support, $3.55M of enterprise value at 6.0x.
Other diligence findings
Unrecorded debt, revenue reversed after period end, receivables outpacing sales and entries just under approval limits surface in the first pass, not week five.
Renegotiation
Bid on the EBITDA the evidence supports from the start, so there is less to re-trade after diligence.
Months lost in exclusivity
Know which deals to walk away from before you sign an LOI and start the clock.
- Axial, Dead Deal Report: Unpacking 2025's Broken LOIs, January 2026. Figures cover 75 deals sourced on Axial that broke after a signed LOI; 46.6% is its two diligence categories added together.
- BD Emerson, How Much Does a Quality of Earnings Report Cost?, July 2026. Buy-side fees by enterprise value; four to six weeks for a buy-side report.
- Big Deal Small Business, Results of Deal Cost Survey, July 2021. Median legal spend across 15 searcher acquisitions; some respondents reported dead-deal discounts on QoE fees.
- U.S. Securities and Exchange Commission, SEC Charges KKR With Misallocating Broken Deal Expenses, June 2015. $338 million over six years ending 2011.