FDD Report Structure: What Analysts Need to Know
The structure of a Financial Due Diligence report: key sections, what goes in each, and how to write clearly and concisely for a deal audience.
The FDD report is the primary deliverable of any Financial Due Diligence engagement. It is what the client — typically a private equity fund or a corporate acquirer — uses to make a major financial decision. Understanding its structure helps analysts write more efficiently and shows interviewers that you understand the context of your work.
Types of FDD Reports
FDD outputs come in different formats depending on client needs and budget:
- Full long-form report: Detailed narrative with schedules, typically 50–150 pages. Standard for large transactions.
- Red-flag report: Shorter document focusing only on material risks, typically 15–30 pages. Used in early-stage or time-pressured processes.
- Data book / fact book: Excel-heavy output with tables and commentary, minimal narrative. Common in PE where the client will build its own model.
The Standard Long-Form Report Structure
1. Executive Summary
The most important section — it is read first by everyone. It must:
- Summarise key findings concisely (1–3 pages maximum)
- Highlight the adjusted EBITDA and NWC target with brief explanations
- List material issues and risks in order of financial significance
- Not introduce any material finding that has not been discussed with the client beforehand
Writing a strong executive summary is one of the hardest skills in TS writing.
2. Background and Scope
A brief description of:
- The target business and its context
- The scope of work (what the FDD covered and, critically, what it did not)
- The data relied upon and any limitations
- Independence and reliance statements
3. Business Overview
A short commercial summary to help the report stand alone:
- Business model and revenue streams
- Key products, customers and markets
- Organisational structure and management
4. Quality of Earnings
The core section. Typically includes:
- Historical P&L (last 2–3 years plus LTM)
- EBITDA bridge: reported to adjusted EBITDA
- Detailed notes on each adjustment
- Revenue analysis (by customer, product, geography)
- Cost analysis (main cost categories, trends, risks)
5. Net Working Capital
- Monthly or quarterly NWC history (last 2–3 years)
- NWC target calculation and methodology
- Key risks (DSO trends, inventory quality, payment stretching)
6. Net Debt
- Net debt schedule at the reference date
- Debt-like items identified and argued
- Cash analysis
7. Financial Position
- Balance sheet summary
- Off-balance-sheet items
- Contingent liabilities
8. Appendices
Supporting schedules referenced in the main body:
- Detailed P&L schedules
- Customer revenue schedules
- NWC schedules
- Net debt roll-forward
Writing Principles for FDD Reports
- Findings first: State the finding in the first sentence; explain it in the next.
- Quantify everything: Vague risk language is not useful in deal reports.
- Source every figure: Reference the data room document, page number and date.
- Short paragraphs: Dense paragraphs are hard to read at 2am before a deal committee.
Conclusion
A well-structured FDD report is a genuinely useful document that allows a buyer to make an informed decision with confidence. Learning to write one is a core professional skill for any TS analyst.
The Transaction Services Interview Programme (€119.99, one-time) includes annotated FDD report templates and writing guidance for all key sections. Get started today.