About
The work is done by hand. A firm of Chartered Professional Accountants stands behind it.
The transaction advisory practice at Treewalk, in Vancouver, working on owner-managed and lower middle market private company transactions in Canada and the United States.
Who does the work
Avnit Sekhon, CPA
Director, Transaction Advisory
Leads every quality of earnings engagement, and reads every letter of intent himself.
Alex McAulay, CPA
Founder and Chief Executive Officer
Signs the engagement letter and signs off on every report.
Avnit leads every quality of earnings engagement. In practice that means he runs the opening interviews with target management and with the target’s external accountant, reads the general ledger himself, builds the quality of earnings schedule, decides which of management’s proposed adjustments survive testing, and sets the net working capital peg.
He is also the person who tells a buyer when the number does not hold. That is the part of the job that requires having done it enough times to be confident about it, and it is the reason the free letter of intent review is his rather than delegated. He reads the LOI, usually the same day it arrives.
Why a second reading matters
Alex signs the engagement letter and signs off on every report before it is delivered. On a diligence engagement that is not a formality. The report is going to be used to argue about a purchase price, possibly in front of a lender or an investment committee, and every adjustment in it has to be defensible by somebody other than the person who wrote it.
A second reading by the person whose name is on the firm is the mechanism for that.
Why this sits inside a CPA firm
Diligence questions do not stay inside diligence. This is the concrete version of that claim. Mid-deal, buyers ask us things like:
Before the price is fixed
- Should this be a share purchase or an asset purchase, and what does the tax answer do to the price
On the first Monday after close
- Who prepares the opening balance sheet
- The target’s controller is a family member who is leaving at close, so who runs the accounting
- The payroll is on a provider we do not use, can it be moved before the first pay period after close
Eighteen months out
- The earnout is measured on EBITDA, so who calculates that number and on what basis, given that diligence has just finished establishing that the target’s own EBITDA figure needed a page of adjustments
None of those are diligence questions. All of them arrive during diligence, and every one of them changes the deal.
A three person diligence shop answers them by giving you a referral. That is not incompetence, it is scope. But a referral mid-deal means a new firm, a new engagement letter, a new conflict check and a new person reading the financials from the start, at the point in a transaction where you have the least time available.
The firm behind the practice
Treewalk is a firm of Chartered Professional Accountants with more than 40 CPAs and more than 75 staff, advising more than 200 businesses across North America. Tax, controllership, financial reporting and outsourced accounting are internal.
When one of those questions comes up, the answer comes from someone who already has the file open.
Working on a deal right now?
Send us the letter of intent and the purchase price. You will hear back from Avnit, usually the same day.
What we do not do
We do not provide valuation opinions. Diligence establishes what a business earns on a normalized basis. What it is worth is a separate exercise.
No audit or assurance
Treewalk does not perform audit or assurance engagements. A quality of earnings report provides no assurance opinion and never will, and the report says so on its first page.
Never both sides of one deal
We do not act for both sides of the same transaction.
The work, in general terms
We are engaged mostly by the buyer. In practice that has meant individual acquirers, search fund operators, small investment funds and holding companies, which is a different client than a corporate development team and expects a different kind of report. Individual buyers are usually spending their own money and they want to understand the reasoning, not just the conclusion.
The transactions are owner-managed and lower middle market private companies. Targets have been in field and professional services, construction trades, healthcare staffing, medical equipment servicing, industrial controls, technology and software, food and beverage, and housing. Geographically the practice is based in Vancouver and a large share of the targets are in the United States.
We do not name clients
Or describe identifiable transactions. Confidentiality obligations under the CPA Code do not expire when a deal does.
Which is also the answer to what happens to your file after your deal closes.
How buyers usually start
They send the letter of intent.
Avnit reads it and comes back with a view on whether the purchase price looks defensible on the information available, and where we would expect diligence to find problems. It costs nothing. If we do not think a full quality of earnings will change the decision, we say so, which happens often enough that it is worth stating.
Send us your LOI. We will review the purchase price.
A buyer with a signed letter of intent has already agreed a number. This tells you whether that number survives contact with the accounts, before diligence starts and while the other side is still cooperative.
- A view on whether the multiple looks defensible on the information available
- Where we would expect diligence to find problems
- An honest answer if you do not need a full engagement
Avnit will email you back. Reply to that message with the letter of intent attached.
No cost. One business day.