Seeking Input for FDD & CDD Interview Case Preparation

For your upcoming interview, here’s how you can structure and prepare for both the Financial Due Diligence (FDD) and Commercial Due Diligence (CDD) case studies:

Financial Due Diligence (FDD)

• LBO Model Walkthrough: Since you’re already planning to use an LBO model, ensure you can clearly articulate:
  1. The key drivers of the model (e.g., revenue growth, EBITDA margins, capex, and working capital).
  2. Sensitivity analysis to show how changes in assumptions impact returns.
  3. Highlight any red flags or risks you identify in the financials (e.g., quality of earnings, net working capital adjustments, or debt levels).
  4. Be prepared to discuss adjustments for exceptional items, accrued professional fees, or unused legal provisions, as these are common FDD topics.

Commercial Due Diligence (CDD)

• Structuring the CDD Case: For the qualitative side, focus on the following framework:

  1. Market Analysis: Assess the target’s market size, growth potential, and competitive landscape. Highlight any trends or shifts in the industry that could impact the target.
  2. Customer Analysis: Dive into customer concentration, retention rates, and satisfaction. If possible, include a SWOT analysis to evaluate strengths, weaknesses, opportunities, and threats.
  3. Competitive Positioning: Compare the target to its competitors in terms of pricing, product differentiation, and market share.
  4. Revenue Quality: Evaluate the sustainability of revenue streams, including contract-level assessments if applicable.
  5. Risks and Opportunities: Identify key risks (e.g., regulatory, operational) and potential growth levers.

• Presentation Tips:

  • Use a concise, structured format (e.g., a 2-page memo or a short slide deck).
  • Include visuals like charts or tables to make your points more compelling.
  • Tie your findings back to the investment thesis—why this target is (or isn’t) a good buy.

Additional Resources

• Templates: If you have access to proprietary materials or templates (e.g., from MBB or other consulting firms), use them to structure your analysis. For example, a CIM (Confidential Information Memorandum) or a SWOT analysis template can be helpful.
• Key Questions to Prepare:
  • Why exclude exceptional items in quality of earnings analysis?
  • How to treat deferred considerations or minority interests in FDD?
  • What are the main highlights and risks of the deal?

By combining a detailed LBO model for FDD and a structured market/customer/competitive analysis for CDD, you’ll demonstrate both quantitative and qualitative diligence skills. Good luck!