QoE Report Structure: What Goes in an FDD Report
The structure of a Quality of Earnings / Financial Due Diligence report: sections, content and what each part tells the buyer in an M&A transaction.
Understanding the structure of an FDD report is important both for passing the interview and for performing well in the job. Here's a breakdown of what a typical QoE / FDD report contains and why each section matters.
The executive summary
This is the most-read section of the report — and often the only section read by senior decision-makers. It must contain:
- Key findings: the normalised EBITDA and the net debt position in a concise bridge format.
- Red flags: significant risks, anomalies or concerns that could affect the decision to proceed.
- Key observations: important context that doesn't rise to the level of a red flag but is material to understanding the business.
A strong executive summary is written after all the detailed analysis is complete. It translates complexity into actionable insight.
Revenue and margin analysis
This section covers:
- Revenue trends: historical growth, decomposed into organic vs acquired growth, price vs volume effects.
- Customer concentration: top 10 or top 20 customer analysis, contract quality and duration.
- Revenue quality: recurring vs non-recurring, contractual vs at-risk.
- Margin analysis: gross margin and EBITDA margin trends over the analysis period, with explanations for movements.
The purpose is to give the buyer confidence (or flag concern) about the sustainability of the top line.
Quality of Earnings
The central analytical section:
- EBITDA bridge: reported to normalised, with each adjustment described, quantified, evidenced and categorised.
- Detailed commentary on each significant adjustment.
- Sensitivity analysis: sometimes presented to show the impact of accepting/rejecting specific adjustments.
This section directly feeds the valuation — every EUR 100k of normalised EBITDA added or removed has a direct multiplier effect on the price.
Working capital analysis
- NWC trend analysis: monthly NWC over 24-36 months with DSO/DPO/DIO calculations.
- Normalised NWC and peg recommendation.
- Seasonality profile and implications for the closing date.
- Commentary on anomalies in the NWC profile.
Net debt and EV to Equity bridge
- Financial debt schedule: each component with amounts, terms and maturity.
- Cash analysis: available cash, restricted cash, assessment of trapped cash where relevant.
- Debt-like items: with evidence and basis for inclusion.
- Cash-like items: with evidence.
- Complete bridge from EV to Equity Value.
Key risks and observations
Items that didn't generate adjustments but are relevant to the buyer: customer contract renewal risk, dependence on key personnel, uncommitted capex requirements, post-closing integration costs.
How this maps to an interview
When asked "what does an FDD report cover?", structure your answer around these five sections. Explain not just what's in each section, but why it matters for the buyer's decision. That's the difference between a recitation and a real answer.
The programme's case studies produce real FDD outputs — so you'll know exactly what a completed report looks and feels like.