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Transaction Services Information

Guide
Introduction: Transaction Services (TS), sometimes called Transaction Advisory Services
(TAS), is a grouping of services provided by firms generally related to M&A
transactions. TS groups are organized in different lines of service categories by different
firms, but generally fall somewhere under the advisory category. The various firms will
bucket different types of services within TS, but for the purposes of this post Ill focus on
the services bucketed into TS by my firm and attempt to give a high level explanation of
what you could expect to work on in these different functional areas, pay, and general
exit opportunities.
TS Overview: TS is comprised of three main verticals: CMAAS, Valuation, and FDD.
M&A Tax also works very closely with the TS groups, but theoretically is not included
within the TS umbrella. My firm has a larger deals umbrella that M&A tax sits under,
as well as some specialized deals-related strategy and project management teams.
CMAAS:
CMAAS stands for Capital Markets and Accounting Advisory Services. CMAAS are
generally speaking the technical experts in accounting. They very often work on hedge
accounting, purchase accounting, and revenue recognition projects. For example, in a
software deal with significant VSOE rev rec issues, CMAAS may be called in to consult
on the quality of the targets rev rec policies. They also work to assess an organization for
IPO readiness, meaning they assist in preparing the S-1 and ensuring appropriate
compliance with applicable regs. My personal impression is that people who really enjoy
digging into the ASC or performing large and complex tie-outs in an audit environment
would enjoy CMAAS. I would imagine typical exit opportunities here are general
corporate accounting roles with a bit of a head starts towards policy making director or
controller positions.
Valuation:
Valuation is an umbrella term that covers several different specialized areas of valuation
including the valuation of business enterprises and intangible assets, complex financial
instruments, and tangible assets (think property plant and equipment). Types of
engagements include valuations for purchase accounting purposes, goodwill impairment
testing, minority and control equity interest analysis, gift and estate tax purposes, fairness

opinions, corporate planning, and acquisition pricing purposes. The group also may do
model review or deal related financial modeling engagements.
The workload is slow in the summer but there is large amount of audit support work
during the audit busy season and a non-audit work in the fall. Hours are volatile and
range between 40 and 60 at the staff/senior associate level with infrequent Friday
Monday short notice type engagements. Generally speaking, weekend work is reserved
for busy season and ad hoc projects. Travel is ~25 50% in the tangible asset group and
minimal in the other areas which is nice if you have family commitments.
Excel and writing skills are required as there may be sophisticated financial modeling and
report/memo writing. Some firms hire only auditors while others prefer people with a
strong finance and/or economics background. It is not uncommon for people to have
advanced degrees such as MBAs and/or PHDs depending on the discipline and the ABV,
ASA, or CFA certifications are generally required. Finance majors will typically sit for
the CFA while CPAs usually will go the ABV/ASA route.
Exit opportunities will vary based on the sub discipline but top 15 B-school is realistic.
Other opportunities may include niche IB, specialty val shops, corporate development,
FP&A, and back office private equity or bulge bracket banking roles.
FDD: FDD is probably the group most people think of when they think TS. FDD is
financial due diligence and we work on both the buy-side and sell-side in performing
diligence to assess earnings of the target company. FDD in larger markets (NYC, Boston,
Chicago, SF) typically serves more buy-side clients than sell-side. We become involved
on the buy-side typically after a LOI has already been signed and a general valuation
decided. This valuation is typically based on a relatively limited set of information
already provided by the target: typically a CIM (confidential information memorandum)
and maybe some audited financials or limited other financial schedules. We are then
hired to perform the diligence at a more nuts and bolts level. Were never performing
testing, but rather taking the financial information made available (trial balance, audit,
detailed schedules of rev/OpEx or working capital accounts, etc.) and performing
analysis to search for trends and themes in the business.
FDDs main deliverable is a Quality of Earnings (QoE) report, which effectively looks to
normalize earnings by stripping out non-operating, one time or otherwise non-recurring,
and other items from the P&L. A QoE will almost always start by walking from net
income to reported EBITDA, and then layering in subsequent adjustments on top of
reported EBITDA. Common adjustments are things like adjusting for discontinued or
recently started operations, removing significant non-cash gains/losses or

revenues/expenses (think stock comp or gains on sale), or non-recurring items like earnouts, restructuring expenses, etc.
The two other core reports FDD groups look to provide to buy-side clients are a schedule
of net debt and debt-like items and net working capital. Debt and debt-like items are
generally written into the purchase agreement as an adjustment to the purchase price (see
the definition of enterprise value). Typical debt-like items can include things such as
deferred revenue (controversial), accrued taxes, accrued earnouts, or other liabilities not
related to the core business. Net working capital is analyzed for trending for the purposes
of setting a net working capital peg to protect the buyer from the seller extracting all of
the working capital in a business between the time of signing the deal and transferring
control.
FDD on the sell-side is consulting with the seller in preparing for the diligence process.
We will typically perform the same diligence procedures and then consult with
management on how they should present financial information in the dataroom in order
to get through the diligence process as smoothly as possible. This includes identifying
questions and concerns buyers will have so that management can prepare for answering
these questions as they are asked in the diligence process. Exit opportunities from FDD
include the standard corporate accounting roles, as well as the opportunity to more easily
transfer into corporate development or FP&A roles. Middle office HF/PE is also very
easily attainable with this background. Future goals could include something like a PE
portfolio company CFO, as the past skills and experience acquired through FDD lend
themselves very well to managing the type of financial reporting PE management groups
are looking for.
How to get into TS:
This is far and away the question I get the most. For the vast majority of people, you will
not be able to be directly hired from campus into TS. Only very select schools are eligible
for recruitment into TS, and you probably already know about this if you go to one of
those programs. For the rest of us, the best path in is to start in audit and look to transfer
after 2-4 years. There is likely no shortcut around this. Suck it up and get a couple busy
seasons under your belt. If you work hard and pay attention, youll have a leg up on those
who start directly in TS, as theyre likely just doing excel monkey work at a first or
second year associate level anyway. Focus on getting strong ratings and foster a good
relationship with your assigned partner coaches and mentors. Communicate to them early
on in your career that this is something youre interested in for the future and would like

to build your career towards. Look to network with your peers and try to meet someone
whos already inside TS in your firm to help pull you across.
In the event you experience push back from your firm, consider looking to transfer firms.
This is something done fairly commonly in order to get into TS and not looked down
upon the same way it can be on the audit side. I work with many, many people who have
spent time at two or more of the big4 firms throughout their career.
General culture of TS:
TS is a very driven culture full of very smart and talented people. Turnover is lower than
in audit and many people are looking to stay in and move up throughout their career. The
cynicism about the job is thus substantially lower than in audit creating a more positive
culture. Theres generally about a 15% pay premium over audit as well, which also helps.
People are generally coached out when theyre not promoted rather than leaving due to
shitty work, although that certainly does also happen.
The job itself is much more volatile than audit. While audit may be very busy at times,
you typically have a pretty good idea in advance how that is going to shape up. Youre
busy in busy season and not busy the rest of the year. There are literally days where I
have gone into the office thinking I am leaving at 5 that I then end up staying until 1 am.
This is admittedly rare, but it does happen. This can make planning things much more
difficult on this side of the business. Weekly commitments can be challenging to
maintain and sometimes you will have to cancel plans at the last minute. The other side
of the coin is that flexibility is a bit better too. There are days where I have absolutely
nothing to do and walk out at 3pm. Today is one of those days, which is why Im taking
the time to write this shit up. Youre welcome. After a very busy project I may just roll
out some banked hours and take a couple days off. Its nice.
Expenses are also a little bit looser, so you may have partners giving out some dinners a
bit more often. Its always nice to go out on a date in NYC at a nice restaurant and order
a bottle of wine you couldnt otherwise afford and then throw down the AMEX at the end
of the meal. Ill end this guide with the following caution, which is relevant at least for
now in early 2016: TS went through a recent hiring craze across all of the firms due to
deal volume which we have been experiencing in the post-2008 cash build world.
However, trembles are starting to be felt in the market and its my personal feeling that
some of these good times are coming to an end. Its likely to go back to being a bit harder
to get into TS, and our promotions and raises are likely to not be as good for the next
couple years as they were for the previous.