Answers / Financial Due Diligence
Walk me through a typical FDD engagement.
A core Financial Due Diligence interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
Week 0: Engagement setup, NDA, data room access. Week 1: Data download, databook population, initial impressions memo. Week 1–2: QoE deep dive (revenue/cost analysis, EBITDA adjustments). Week 2: Net debt and NWC analysis, first management call. Week 2–3: Draft report, internal review. Week 3: Final report delivery to client. Week 3–4: SPA support, completion accounts.
WHAT INTERVIEWERS LISTEN FOR
- ✓Structured timeline from setup to post-signing support
- ✓Focus on QoE, net debt, and NWC adjustments
- ✓Deliverables include memo, draft report, final report
COMMON MISTAKES
- ✗Omitting management calls or data room access
- ✗Confusing QoE with full audit procedures
- ✗Forgetting SPA support and completion accounts
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RELATED QUESTIONS
- How does FDD differ from an audit?
- Why is FDD important in an M&A transaction?
- What is the 'quality of net assets' and why is it important in FDD? Give an example of an issue you might uncover.
- How would you approach analyzing the EBITDA bridge of a target company with a complex business model, including multiple segments and significant one-time items? What specific line items would you focus on, and how would you defend your adjustments to the bridge?
- What is the primary purpose of a data request list in financial due diligence, and how would you prioritize the requests?
- Why must you reconcile management accounts to the audited statutory financials early in an FDD, and what do gaps tell you?