Project Marlin · Commercial & industrial inspection / testing services · Sell-side mandate · IM in preparation

Vendor Adjusted-EBITDA Package (draft IM financials)

Reviewed by DiligenceWorks · white-label Vendor Due Diligence — the buyer's QoE, run first (augments the advisor, not a replacement)

71VDD def.

VDD-defensibility score. $23.8M of the headline exposed to a buyer QoE.

$113.6M

Headline EV · 8.0× $14.2M adj. EBITDA

Seven adversarial checks

Band A · EBITDA qualityBand B · price & structure

Add-Backs & Normalizations Flag

Owner/family comp under-accrued vs market; a 3rd-year "non-recurring" rebrand/ERP cost that recurs; related-party spend. Legitimate add-backs confirmed.

−$0.9M EBITDA× 8.0 = −$7.2M price

Revenue Quality & Sustainability Reject

A one-off settlement booked in revenue, premature recognition on a contract not yet live, and a low-margin equipment-resale spike padding the headline.

−$1.0M EBITDA× 8.0 = −$8.0M price

Margin / Cost Normalization Flag

Below-market rent on the owner-owned lab and deferred equipment calibration / maintenance understate the run-rate cost base.

−$0.4M EBITDA× 8.0 = −$3.2M price

Working-Capital Peg Flag

Proposed NWC peg $6.4M vs normalized TTM-avg $8.2M; the buyer re-funds the gap at close and re-pegs in confirmatory diligence.

−$1.8M pricedollar-for-dollar

Net-Debt & Debt-like Reject

Deferred revenue / prepaid service contracts, accrued bonuses, finance leases and capex commitments a buyer pulls into the CFDF net-debt bridge.

−$3.6M pricedollar-for-dollar

Customer Concentration Reject

Top-3 = 41%, top-1 = 22% and up for re-tender; revenue / EBITDA at risk priced into structure, not the headline.

$3.0M EBITDA at risk~$17M rev. → structure

Management Forecast Credibility Reject

IM forecast 19% growth vs 5% trailing organic; ~$8M of forecast revenue has no historical base rate — no forward multiple on it.

$8M rev. unbacked→ don't carry in headline

Cards reveal in sequence during the demo. Green = pass · Amber = flag (harden / negotiate) · Red = reject (restate / structure). Three checks test EBITDA quality (add-backs, revenue quality, margin & cost); four test price & structure (working-capital peg, net-debt & debt-like, concentration, forecast credibility). EBITDA findings are multiplied by the 8.0× deal multiple; working-capital and debt-like are dollar-for-dollar off the proceeds; risk findings carry an at-risk figure and a structural remedy. Sell-side posture: find your own bodies before the buyer's banker does. Each amount is traceable (see audit drawer).

Exception report — buyer-QoE simulation

Item	Check	Finding · buyer challenge → remedy	Claimed	Supported	Delta	Source
1	Add-Backs	Owner comp normalized to market + a 3rd-consecutive-year "non-recurring" rebrand/ERP cost treated as an add-back — recurring, not one-time; legitimate add-backs confirmed Buyer challenge: these add-backs won't survive QoE → remedy: normalize owner comp to market and reclassify the recurring items before the IM	$0.9M	$0	$0.9M	comp benchmark · GL
2	Revenue Quality	A one-off insurance settlement booked in revenue, $0.5M recognized on a contract not yet live (go-live 2026-Q4), and a low-margin equipment-resale spike in run-rate Buyer challenge: the revenue isn't what it looks like (the Autonomy lens) → remedy: strip non-recurring and pre-live revenue from run-rate now	$1.0M	$0	$1.0M	GL · contract register
3	Margin / Cost	Below-market rent on the owner-owned lab and deferred equipment calibration / maintenance understate run-rate cost and inflate margin Buyer challenge: normalized cost is higher → remedy: book market rent and a normalized maintenance run-rate before market	—	—	$0.4M	lease comps · equipment register
4	Working-Capital Peg	Proposed target-NWC peg $6.4M vs normalized trailing-12-mo average $8.2M — the buyer re-funds the gap at close and re-pegs it in confirmatory diligence (a classic re-trade trigger) Buyer challenge: the SPA true-up re-pegs to normal → remedy: re-peg to the normalized average and present the realistic basis	$6.4M	$8.2M	$1.8M†	12-mo balance sheets
5	Net-Debt & Debt-like	Management proposed net debt $12.0M; a buyer pulls deferred revenue, accrued bonuses, finance leases and capex commitments into the CFDF bridge → $15.6M. Each item comes off equity proceeds dollar-for-dollar Buyer challenge: these are debt-like → remedy: pre-disclose and reflect them in the CFDF net-debt bridge	$12.0M	$15.6M	$3.6M†	debt-like schedule
6	Customer Concentration	Top-3 customers 41%, top-1 22% and up for re-tender / near-expiry; the buyer prices the renewal risk into structure, not the headline Buyer challenge: single-client re-tender risk → remedy: structure — escrow / earnout / holdback / retention CP	—	—	~$3.0M*	sales ledger
7	Management Forecast	IM forecast 19% growth vs 5% trailing organic; ~$8M of forecast revenue has no historical base rate — a buyer won't pay a forward multiple on unbacked growth Buyer challenge: no base rate for the hockey-stick → remedy: present trailing organic as the base case; don't carry the forecast in the headline	—	—	~$8M*	forecast history
Adjusted-EBITDA overstatement $2.3M → at 8.0× = $18.4M of price · + working-capital re-peg $1.8M · + debt-like $3.6M (both dollar-for-dollar off proceeds)					$23.8M	*at-risk → structure · †dollar-for-dollar

Bridge recompute (internal, not a headline card): every schedule and the adjusted-EBITDA → EV → (− working-capital re-peg − debt-like) → proceeds math is re-derived; double-counts and overstated subtotals are corrected within the bridge. Table-stakes, not a QoE workstream.

Recommended position — before going to market

Deal multiple 8.0× — illustrative; adjust to re-run the defensibility bridge (stub)

Defensibility bridge: Headline EV $113.6M → Defensible proceeds $89.8M → $23.8M value-at-risk in a buyer QoE
Defensible = $95.2M defensible EV (8.0× $11.9M restated adj. EBITDA) − $5.4M equity-bridge (working-capital re-peg $1.8M + debt-like $3.6M).

$89.8M

Defensible

$18.4M

Harden or concede

$5.4M

Withdraw or disclose

Export VDD / red-flag memo (PDF) Send to data room / IM (stub) Accept / override flags

Audit drawer (on click): Source = GL revenue line + contract register — a one-off insurance settlement ($0.5M) booked in revenue plus $0.5M recognized on a contract not yet live (go-live 2026-Q4) inflate run-rate adjusted EBITDA by $1.0M; at 8.0× that is $8.0M of the headline. Restate to run-rate before the IM goes out — found in prep, not in the buyer's confirmatory QoE. Sell-side posture: protect the seller's process by pre-empting the challenge, never "your client is a fraud."

Mandate book — this advisor (sell-side)

$140M

of buyer-QoE exposure surfaced across 9 sell-side mandates this year — every mandate hardened before market: found in week one of prep, not week ten of the buyer's confirmatory diligence

Bars = $ buyer-QoE exposure surfaced per mandate · amber = mandates above the re-trade-risk threshold.

Mockup only — illustrative figures, no live engine. Final figures come from the seven-check engine per DESIGN-ma-advisory-vendor-dd-verification.md.

White-label Vendor Due Diligence — runs as the advisor's own diligence product (M&A advisory is a secondary / channel play; see §8 of the Opportunity Landscape).