What Does Transaction Services (FDD) Actually Mean?

Transaction services (TS) and financial due diligence (FDD) refer to the specialized accounting work done during an M&A transaction. The primary deliverable is a quality of earnings (QoE) report.

What a QoE actually does

It re-examines the company's financials with a buyer's lens — normalizing EBITDA, testing revenue quality, identifying one-time items, evaluating working capital, and validating add-backs. The result is a defensible view of the company's true earning power.

Who prepares it

A CPA firm with a dedicated transaction services practice. Not your regular auditor — the skill set is different. Big firms have TS practices; regional firms often do too.

Buy-side vs. sell-side QoE

• Buy-side QoE: the buyer engages a TS firm to validate the seller's numbers before closing
• Sell-side QoE: the seller engages a TS firm before launching the process to preemptively address adjustments

Why sell-side QoE has become standard

Buyers increasingly require it, and even when they don't, having a professionally normalized EBITDA number in the CIM materially improves credibility and reduces the risk of post-LOI re-pricing. Cost typically runs $25K–$75K depending on complexity.

The bottom line

If your deal is above $5M enterprise value, expect QoE to be part of it. Doing sell-side QoE early prevents ugly surprises during diligence and protects deal value at the finish line.