This write-up is designed to serve as an executive summary or a guide for understanding the structure, purpose, and key components of a typical PDF report issued by KPMG’s Deal Advisory practice.
KPMG’s FDD practice is distinct because of their proprietary tools (like KPMG Clara, a smart data platform) and their sector-specific verticals (Tech, Healthcare, Energy, Financial Services). A KPMG PDF report is not a generic checklist; it is a narrative that tells the story of the company’s cash conversion cycle, EBITDA normalizations, and hidden liabilities.
When you read a KPMG PDF compared to a smaller firm, the distinctions are usually:
While the P&L shows profitability, this section shows actual cash generation.
This section is crucial for determining the "Cash-Free, Debt-Free" purchase price. KPMG reports are rigorous here to prevent the seller from manipulating working capital before closing (a tactic known as "window dressing").
This is the centerpiece of the PDF.
| Component | Amount ($M) | Commentary | | :--- | :---: | :--- | | Reported EBITDA | 15.0 | As per Seller's management accounts. | | Add: Non-recurring legal fees | 1.5 | One-time litigation settlement. | | Add: Owners' compensation excess | 0.8 | Normalizing CEO salary to market rate. | | Less: Capex repair & maintenance | (0.5) | Seller expensed items that should be capitalized. | | Adjusted EBITDA | 16.8 | Normalized Earnings Power. |
A KPMG Financial Due Diligence report is a risk-mitigation tool designed to answer one question: "Is the earnings power of this business sustainable and supportable by the balance sheet?" The PDF structure is designed to lead the reader from the high-level answer (Executive Summary) to the granular evidence (Appendices).
A standard KPMG Financial Due Diligence (FDD) report typically investigates a target company's financial health to assess risks and validate investment theses. While specific formats vary by client, the structure generally includes the following core sections: 1. Executive Summary
Key Findings & Red Flags: A concise overview of significant risks, potential deal breakers, and value-creation opportunities.
Investment Thesis Testing: Analysis of whether the target meets the buyer's strategic goals.
Valuation Adjustments: Summary of proposed adjustments to the purchase price based on financial findings. 2. Quality of Earnings (QoE) financial due diligence report kpmg pdf
EBITDA Adjustments: Identification of one-off events (e.g., legal settlements, restructuring costs) to determine "maintainable" earnings.
Revenue Analysis: Deep dive into revenue drivers, customer concentration, and historical growth trends.
Profitability Trends: Scrutiny of reported profits to ensure they are sustainable and not inflated by aggressive accounting. 3. Net Working Capital (NWC)
Historical Trends: Analysis of receivables, payables, and inventory over the past 12–24 months.
Target Working Capital: Establishing a "normal" level of NWC required to run the business, which often impacts the final closing price. 4. Quality of Assets & Liabilities
Balance Sheet Diagnosis: Review of asset quality (e.g., obsolete inventory) and verification of reported debt.
Hidden & Contingent Liabilities: Investigation into undisclosed debts, off-balance-sheet risks, and potential litigation.
Tax Exposure: Review of historical tax compliance and potential future tax liabilities. 5. Cash Flow & Projections
Cash Flow Generators: Analysis of the business's ability to generate cash from operations versus financing or investment.
Capital Expenditure (CapEx): Review of past spending and future requirements to maintain or grow the business.
Forecast Assessment: Testing the reasonableness of management’s future financial projections against historical data. 6. Operational & Other Considerations This write-up is designed to serve as an
Management Information Systems: Evaluation of the reliability of the target's financial reporting and internal controls.
Employment Matters: Review of employee equity (ESOPs), pension commitments, and potential employment litigation.
ESG Integration: (Optional but increasing) Analysis of environmental, social, and governance factors affecting the deal.
Financial due diligence: What is it & how to do it [2025] - Cube Software
A financial due diligence (FDD) report from KPMG or similar Big Four firms is a structured analysis designed to help buyers or sellers understand the "quality" of a target company's financial performance. Unlike a standard audit, it focuses on identifying risks, sustainable earnings, and potential "deal-breakers". Typical Structure of a KPMG FDD Report
A full-fledged report is typically organized into these key sections:
Executive Summary: High-level overview of key findings, valuation impacts, and identified risks.
Quality of Earnings (QofE): Analysis of "Actual Earnings" to identify one-off events and determine "sustainable" EBITDA.
Net Debt & Indebtedness: Identifying unrecorded contingencies, debt-like items, and the target's total financial obligations.
Working Capital: Assessment of "normal" working capital levels to determine price adjustments at closing.
Historical & Forecast Performance: Review of 3–5 years of audited statements versus management’s future projections. Why KPMG
Cash Flow & Capex: Evaluation of cash flow patterns, liquidity, and future capital expenditure requirements.
Taxation: Assessment of tax profile, compliance history, and potential historical exposures. Key Components to Include
If you are drafting a paper or mock report, ensure you address these specific areas:
Financial Projections: Analyzing the drivers behind maintainable profits and cash flows.
Management Information & Controls: Evaluating the reliability of the systems and financial data provided.
Contingent Liabilities: Identifying commitments that might adversely affect the target's position post-transaction.
Employment Issues: Reviewing payroll, benefits, and potential labor-related risks. Official KPMG Resources
Integrated Due Diligence Brochure: Outlines the scope of financial, tax, and commercial DD.
KPMG Transaction Services: Detailed description of buy-side and sell-side FDD services.
Commercial Due Diligence Guideline: Explains the methodology and reporting of findings.