Peugh Advisory

Approach

Financial diligence validates the numbers. I validate the thesis, and map where the value is.

The Question

Every acquisition has an investment thesis: a set of conditions that must be true for the deal to work. Revenue will hold. Margins are sustainable. The value creation plan is achievable. The team can execute.

Quality of Earnings validates that the EBITDA number is real. But a real number can still be fragile. A P&L that shows healthy margins might mask key-person dependencies that evaporate post-close. Growing revenue might hide customer concentration that's one contract loss from compounding. The thesis might assume operational improvements that require capabilities the business doesn't have.

The value creation opportunity—and the risk to the thesis—live in the operations. That's what I assess.

What I Look For
01
EBITDA Durability
What portion of adjusted EBITDA is at risk from key-person departure, customer concentration, or process fragility? What's recoverable through operational improvement? The output is a sustainable range, not a point estimate.
02
Operational Entropy
Where value leaks through process gaps, manual workarounds, system fragmentation, and deferred maintenance. Quantified as recoverable GP with capture probability and timeline.
03
Business Physics
How the business actually creates value. Unit economics, capacity utilization, growth constraints. What breaks at scale and what enables it.
04
Thesis Conditions
Explicit assessment of each condition required for the deal to work. Supported, supported with caveats, or not supported—with evidence.
05
Integration Capacity
For platform and tuck-in acquisitions: realistic assessment of integration timeline, resource requirements, and execution risk based on management capability and complexity.
The Deliverable

25–40 page memorandum structured for decision-making. Executive summary with investment recommendation. EBITDA durability analysis showing sustainable range. Value creation roadmap with sequenced initiatives, owners, timelines, and capture scenarios. Deal structure implications with precedent citations.

01
Investment Thesis Assessment
What must be true for this deal to work? Explicit conditions with assessment of each. Frames everything that follows.
02
Business Physics
Unit economics, capacity constraints, seasonality, working capital dynamics. How the business makes money and what limits growth.
03
EBITDA Durability Analysis
QoE-adjusted EBITDA stress-tested operationally. Risk adjustments for key-person, concentration, process fragility. Opportunity adjustments for recoverable value. Output: sustainable range with confidence levels.
04
Operational Entropy Analysis
Process gaps quantified as recoverable GP. Fix cost, difficulty, timeline for each. Total recoverable value translated to enterprise value at deal multiple.
05
Expense Forensics
Regression-based anomaly detection. Add-back validation. Related-party identification. Pro forma cost structure under professional management.
06
Scenario Analysis
Downside, base, upside with probability weighting. Monte Carlo simulation for complex situations with correlated variables.
07
Value Creation Roadmap
100-day plan: stabilization, quick wins, optimization. Each initiative with owner, value, timeline, dependencies. Capture scenarios at 25/50/75% with probability-weighted expected value.
08
Deal Structure Implications
How findings map to escrow sizing, holdback triggers, earnout structure, working capital peg. Market precedent for each mechanism.
Analytical Methods
Expense Regression
OLS regression flagging categories >2σ from predicted values for investigation
Monte Carlo
10,000+ iteration simulation with correlated variables via Cholesky decomposition
Benchmarking
Industry association data (NADA, NCM, ACCA), RMA, comparable transaction sets
Sourcing
Every quantified claim with source, date, and adjustment methodology
The Difference
Quality of Earnings
"Adjusted EBITDA is $2.1M."
Value Creation Assessment
"Adjusted EBITDA is $2.1M. $180K is key-person dependent—retention mechanism required, $75K holdback recommended with 18-month vest. Customer concentration at 40% in top 3, 90-day termination provisions—contract extensions as closing condition capture $220K in risk-adjusted value. Identified GP recovery: $150K via scheduling optimization, 65% capture probability at 18 months. Sustainable EBITDA range: $1.85M floor, $2.4M ceiling. 100-day roadmap attached."