Adjusting for contract changes or cost structures implemented late in the period. Annualizing a significant rental discount secured in Q4.
The findings directly influence the purchase price, helping to avoid overpaying for a business.
| Component | Amount ($M) | Commentary | | :--- | :---: | :--- | | | 15.0 | As per Seller's management accounts. | | Add: Non-recurring legal fees | 1.5 | One-time litigation settlement. | | Add: Owners' compensation excess | 0.8 | Normalizing CEO salary to market rate. | | Less: Capex repair & maintenance | (0.5) | Seller expensed items that should be capitalized. | | Adjusted EBITDA | 16.8 | Normalized Earnings Power. | financial due diligence report kpmg pdf
KPMG stresses the seller’s management forecast. They look for "hockey stick" projections (aggressive growth in the final year). They model sensitivities—what happens to EBITDA if raw materials rise 10%? What if a key customer leaves?
It helps investors identify potential pitfalls, such as aggressive revenue recognition, hidden debts, or overvalued assets. | Component | Amount ($M) | Commentary |
Investors often prefer when the target has complex debt structures (e.g., project finance) because their Net Debt analysis is considered the industry gold standard.
Analyze seasonal or historical trends and determine a "normal" working capital level for the closing adjustment. | | Less: Capex repair & maintenance | (0
Perhaps the most critical component of any FDD report, the is considered the bedrock of financial due diligence. This analysis separates "accounting profits" from repeatable, sustainable core performance. Teams perform normalization adjustments, stripping away one-time items such as legal settlements or non-market salaries to identify the true Adjusted EBITDA.
However, I can provide a comprehensive of a KPMG-style Financial Due Diligence report. This is the standard format used by the "Big Four" (KPMG, Deloitte, EY, PwC) in M&A transactions.