The Blind Spot in PE Due Diligence: The Case for “Quality of Revenue” (QoR)

Private equity investors are increasingly focusing on growth to drive returns, yet many overlook a target’s go-to-market and pricing capabilities during diligence. Quality of Revenue (QoR) diligence fills this gap.

While Quality of Earnings (QoE) assesses the accuracy of historical financials, QoR is forward-looking: it evaluates the sustainability and growth potential of a target’s revenue engine. Market diligence is also forward-looking but is silent on a target’s likelihood of executing against its market opportunity. QoR’s fact-based forecast of a company’s revenue performance provides deal teams with a data-driven edge and enables greater conviction when bidding. QoR is as essential as QoE and market diligence for every target whose revenue relies on a salesforce.

In today’s competitive PE landscape, comprehensive QoR diligence is no longer a luxury; it’s a necessity. QoR’s critical insights not only validate a deal’s financial fundamentals, but also define the roadmap for revenue growth over the hold period. Augmenting deal teams with third-party expertise in growth strategy and data analytics can unlock the additional gains that separate top-quartile performers from top-decile leaders. For firms aiming to outperform consistently, integrating QoR diligence early is essential.

The Blue Ridge Partners QoR Solution

Informed by helping over a thousand PE-owned companies grow faster, Blue Ridge Partners has honed a repeatable process, based on 16 focused areas of insight. To learn more about this process, or to get an overview document on Quality of Revenue – reach out to Chris Madaus, Senior Managing Director – QoR Diligence and Business Services Practice Leader, at [email protected].