FDD
Financial Due Diligence
Short definition
Financial DD tests whether earnings quality, net debt, NWC and cash conversion support the close price. It is the bridge from management EBITDA to bank CFADS.
Detailed explanation
QoE strips non-recurring income, aggressive accruals and non-cash EBITDA add-backs. The net-debt bridge counts cash-like and debt-like items.
The NWC target underpins a locked box or completion accounts. Tax and related-party balances are classic FDD red flags.
Why it matters for the CFO
The multiple is printed on adjusted EBITDA. If FDD does not break that denominator, overpayment shows as cash in year one, not at close.
How to read it
Normalised EBITDA is not forward EBITDA. Mixing them inflates the multiple twice.
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What to learn next
Definitions are educational. They are not investment, credit or tax advice.