How to reconcile conflicting diligence numbers before investment committee
Two well-sourced numbers can disagree. A confidential information memorandum may present an adjusted earnings figure while a later quality-of-earnings report uses a different definition. The question for an investment committee is not which number looks more authoritative at a glance. It is what each number measures, how the bridge was built and which differences remain unresolved.
A conflict log is a small decision record. It travels with the model and memo, so a reviewer can move from a conclusion to the underlying evidence without reconstructing the entire diligence process. It should make uncertainty visible rather than treating a source citation as proof that the source is correct.
Start with an illustrative $2 million difference
Suppose a seller's CIM reports $20 million of FY2025 adjusted EBITDA. A quality-of-earnings report presents $18 million. Both documents refer to the same business, but the labels alone do not establish that the calculations are comparable. The figures in this example are fictional and are not a valuation or recommendation.
Before selecting a figure, compare the period, business perimeter, accounting basis and adjustments. A fiscal-year figure and a trailing-twelve-month figure may cover different months. A business sold during the period may be included in one presentation and removed from another. A one-time expense may be accepted in one calculation and disputed in the other. Each difference needs evidence, not an automatic preference for the newest document.
| Log field | Illustrative entry |
|---|---|
| Competing claims | CIM: $20m adjusted EBITDA; QoE: $18m |
| Period and scope | Confirm FY2025 and the entities included in both |
| Source | Preserve the document version, page and extraction date |
| Bridge | List each adjustment, amount, rationale and supporting evidence |
| Owner and status | Finance lead to reconcile; pending until supporting detail is reviewed |
| Decision | Record the approved case and residual uncertainty for the committee |
The $2 million arithmetic difference is not itself an adjustment. A bridge should explain how one number becomes the other. If the reports use different periods or business perimeters, reconcile those first. Only then evaluate individual add-backs. Never average two values merely to eliminate a disagreement.
Separate a seller's case from the reviewed case
For each proposed adjustment, record who proposed it, why it is considered non-recurring and what evidence supports the amount. A deal team might accept one adjustment, reject another and leave a third pending an adviser response. Those decisions should be visible in the log and in the model's assumptions.
Use three statuses with clear meanings: open means the team needs more evidence; resolved means the responsible reviewer has documented a conclusion; accepted uncertainty means the committee has explicitly considered a remaining gap. Receiving a file is not the same as resolving a question. Likewise, a conditional answer should retain its conditions.
The log need not become a second data room. It should point to the relevant evidence and make the next action obvious. Capture an owner, the question to answer, the date the answer is needed and where the supporting bridge can be found. A concise entry that a reviewer can reproduce is more useful than a long status note with no decision attached.
Show the effect without implying certainty
Once finance has established a reasonable range, the team can examine sensitivity. If a valuation uses a multiple of earnings, a change in the earnings assumption affects the implied enterprise value. The multiple itself is a separate assumption; debt, cash, working capital, fees and other deal-specific items also affect the equity bridge. A sensitivity is a way to identify which questions matter most, not a substitute for a qualified valuation.
For a private investment team, the final memo should identify the reviewed number, the source and version, the remaining disputed items and how the chosen assumptions affect the case. If new evidence arrives after the memo is drafted, preserve the earlier case and explain the revision. This gives the committee a record of what was known at each decision point.
Use AI to prepare the review, not make it
AI can help locate passages, organize competing figures and draft questions for the deal team. A professional still needs to inspect the cited source, check the periods and definitions, and validate the calculations and conclusions. A citation is the beginning of that review. It does not certify the underlying figure.
For more practical exercises, visit the investment-team fieldbook. The ReturnCatalyst due diligence overview describes the product workflow. All AI-generated diligence and financial outputs are decision support and require professional review; this article is not investment, accounting, valuation or legal advice.