by Brian DeChesare Comments (33)

Big 4 Transaction Services: Pathway to Private Equity, or Just a Small Improvement Over Audit?

Big 4 Transaction Services

At some point, almost everyone “becomes interested” in Big 4 Transaction Services (TS) teams:

  • Auditors fantasize about escaping from a boring, repetitive grind and moving into a higher-paying job with more interesting work.
  • Aspiring investment bankers think about their Plan B options and wonder if a Big 4 job offer might be a good pathway into IB.
  • Corporate finance professionals want to escape their repetitive work and assume that anything related to deals will be an improvement.
  • And career changers figure that Big 4 firms might offer easier pathways into higher-paying jobs in finance, consulting, and related fields.

I could go on, but you get the idea.

The point is, everyone debates the merits of these jobs, but there’s still a lot of confusion over what “Transaction Services” means.

We’ll delve into all these points in this article, but let’s start with the basic definition:

The Transaction Services Job Description

Transaction Services Definition: Transaction Services (TS) teams at Big 4 and other accounting firms advise on specific aspects of M&A transactions, such as financial due diligence and the valuation of intangible assets, and they help buyers assess the financial risk of deals; when TS teams advise sellers, they confirm financial results and business trends to potential buyers.

The TS group may also be called “Transaction Advisory Services” (TAS), among other names.

At the large accounting firms, such as the Big 4, Transaction Services is usually split into different sub-groups:

  • Valuations and Appraisals
  • Financial Due Diligence (FDD)
  • Corporate Finance (may be a separate group)
  • Integration Services
  • “Business Recovery Services” or Restructuring (may be a separate group)

We will focus on groups #1 and #2 (Valuations and Financial Due Diligence) here.

Corporate Finance and Restructuring are quite different and don’t fit the TS definition above, and the Integration Services group is smaller and has less readily available information.

We did publish an interview about Big 4 Restructuring a long time ago, so refer to that for more details.

We’ve been using the name “Big 4 Transaction Services,” but many non-Big 4 firms and business valuation firms offer these services as well; examples include RSM, BDO, Grant Thornton, Moss Adams, and CLA.

The nature of Transaction Services roles differs heavily based on region.

In Europe, for example, TS teams analyze both historical financial information and forecasts.

But in the U.S., TS teams can analyze only past results due to regulatory differences.

As a result, you gain more exposure to actual financial modeling in European TS roles, and the exit opportunities are better.

Big 4 Transaction Services vs. Investment Banking

Professionals in TS groups work on deals differently than investment bankers.

M&A investment bankers execute the entire deal process from start to finish, including finding and contacting potential buyers and sellers, marketing the company, and negotiating the purchase agreement.

By contrast, Big 4 TS teams:

  • Work on only one specific part of the deal (e.g., when a potential buyer is conducting due diligence, or when a deal is closing and the buyer needs to integrate the company and re-value the seller’s Balance Sheet).
  • Are paid on an hourly basis with fees that are not linked to the deal closing successfully.
  • Earn fees per engagement somewhere in the $200K – $800K USD range, which is less than what investment banks earn even on “small deals” (but the collection probability is also much higher).

The exceptions here are the Corporate Finance and Restructuring teams at Big 4 firms, but they’re often considered separate from Transaction Services (see below).

Valuation vs. Financial Due Diligence vs. Integration Services vs. Corporate Finance vs. Restructuring

There are many groups within or around “Transaction Services,” so it’s worth explaining how they differ.

The Valuation, Financial Due Diligence, and Integration Services teams all advise on specific aspects of deals and get paid for specific projects, so they fit the definition above.

The Valuation group, similar to business valuation firms, usually works on tasks like purchase price allocation, re-valuing sellers’ assets and liabilities in M&A deals, Goodwill impairment testing, and the valuation of financial assets.

If you’re in the group, you’ll learn far more about valuation than the average banker, but you won’t get much exposure to entire deal processes or other types of modeling.

The Financial Due Diligence (FDD) group digs into companies’ financial statements to highlight trends and identify “red flags” before buyers complete M&A deals.

For example, they might determine the key revenue drivers over the past few years, figure out the company’s cash conversion cycle, determine whether or not the provided EBITDA figures are accurate, and find the company’s “true debt” levels (including hidden and off-Balance Sheet items).

Quality of Earnings (QoE) reports to assess a company’s recurring earnings and the validity of its accounting policies are also common.

The FDD team typically does this work during the bidding phase of an M&A deal, when potential buyers have access to the seller’s data room.

Finally, the Integration Services team assists with the post-merger integration process when the buyer and seller’s financials, taxes, reporting, and other systems must line up.

In contrast to these three groups, the Corporate Finance and Restructuring teams are much closer to investment banking.

The Corporate Finance team at most Big 4 firms is an internal investment bank that executes entire M&A deals from beginning to end.

The experience is more relevant for IB/PE roles, but these CF teams also tend to work on smaller deals than the FDD teams.

If the TS team works on due diligence for $1 billion deals, the CF team might execute deals in the $100 million – $200 million range.

So, the CF team is more like a middle market or boutique investment bank.

The Restructuring team is a cross between Restructuring investment banking and turnaround consulting, so please see those articles for more.

Also, take a look at our past coverage of Big 4 restructuring in the U.S. and Europe.

Recruiting: How to Join a Big 4 Transaction Services Group

Some Transaction Services groups hire candidates directly out of undergraduate or MBA programs, but internal hires from other groups, such as audit, tend to be more common.

On-campus recruiting, when it happens, usually takes place at the top ~10 schools in the country for accounting, which are different from the “target schools” for investment banking.

For example, in the U.S., the list might include universities like Notre Dame, the University of Illinois at Urbana-Champaign, UT Austin, BYU, Michigan (Ann Arbor), and others in that tier.

There is some overlap with the top schools for IB recruiting, but relatively few students from the Ivy League and equivalent schools end up in these roles.

An accounting degree helps, but it’s not necessary if you’ve had enough relevant work experience, and you already have the required Excel, accounting, and analytical skills.

The CA or CPA certifications can help if you’re moving into TS from another full-time job; accountants take these credentials more seriously than bankers (but again, it’s region-dependent).

If you want to move from audit to Transaction Services, hiring usually occurs after tax season each year.

However, you may need to network for around a year to get to know everyone in the TS group and maximize your chances.

So, you might be looking at 2-3 years to move from audit to TS.

If you want to improve your chances, involve yourself in the audits of acquisitive companies or ones with complex issues around revenue recognition, stock-based compensation, or intangible assets.

Transaction Services Interview Questions

If you network your way into the interview process, you can expect a few rounds of interviews with behavioral/fit and technical questions, potentially a case study or Excel test, and then a final-round interview with the Partners.

The interview questions are very similar to investment banking interview questions, but they’ll focus more on accounting and valuation and less on topics like LBO modeling.

For example, expect questions about what the Change in Working Capital means, EBIT vs. EBITDA vs. Net Income, and “accountant only” topics like trial balances and how to walk through events using debits and credits rather than financial statement changes.

The case study or Excel test could involve almost anything, so here are a few examples and practice exercises:

The Transaction Services “Work Product”

It’s difficult to find real examples of the reports that TS teams write because there’s no disclosure requirement.

I managed to find one short, partially redacted example, which you can access below:

 

Just like an investment bank can advise the buyer or the seller in an M&A deal, a TS team can also advise either party.

If the seller hires the TS team, the deliverable is usually a “vendor due diligence” (VDD) report that makes it easier for potential buyers to analyze the seller’s business before placing a bid.

If the buyer hires the TS team, the output is usually a “due diligence report” based on the seller’s data or a review of the seller’s existing VDD report, where one TS team challenges the conclusions and adjustments of another TS team.

Besides the tasks mentioned above – analysis of revenue drivers, normalization of metrics like EBITDA and EPS, Working Capital and cash conversion cycle analysis, and determination of “true debt” levels – a few others include:

  • Detailed revenue analysis, broken down by customer, channel, geography, and product.
  • Customer contract analysis, including any onerous or hidden terms.
  • Trial balance analysis to detect shenanigans in the underlying debits and credits.
  • Lease analysis, where the team estimates the ongoing costs and rental increases from existing leases and the ones that need to be renewed.
  • Revenue and EBITDA bridges that demonstrate how both metrics have changed based on products, channels, and customers.
  • Budgeted vs. actual numbers to judge the accuracy of management’s past forecasts.
  • Inventory analysis, including aging, inventory by product, average levels, and provisions.
  • Review of financial forecasts (outside the U.S.) to determine whether they’re completely fictional or somewhat believable.

Professionals in the TS / FDD teams may also interview management about everything above, and they’ll write a detailed report with their findings at the end of the process.

If you’re in the valuation team, your work tasks will be similar to the ones covered in the business valuation firms article, with a focus on numbers rather than written reports.

What Do You Do as an Associate, Manager, Director, and Partner?

The hierarchy in Transaction Services differs a bit from the ones in investment banking and private equity careers, and the general shape looks like this:

  • Associate or “Consultant” – The entry-level role, where you do a lot of data and financial analysis (~2 years for a promotion from here).
  • Senior Associate or “Senior Consultant” – The next level up; similar work, but you get the more interesting bits (~3 years for a promotion).
  • Manager – You lead the Associates and review their work to write the reports (~3 years for a promotion).
  • Senior Manager – You lead the Managers, perform reviews, and delegate work to everyone else (~3-6 years for a promotion)
  • Director / VP – You do final reviews of the FDD and valuation reports and start managing client relationships (promotion time is highly variable).
  • Partner – This one is divided into Junior Partner and Equity Partner roles, and your job at this level is to win new clients and more business from existing clients.

If you perform very well, you might reach the Partner level in 10-15 years.

But don’t be fooled: it’s not necessarily “easier” to reach the top than in investment banking because the turnover is also lower.

In particular, it’s difficult to get promoted beyond the Manager level because few people leave the job at that stage, and you need to start showing evidence of your ability to generate revenue to advance.

Transaction Services Salary, Hours, and Lifestyle

Let’s start with the hours and lifestyle since those are easier to describe: expect to work around 50-60 hours per week.

There are occasional late nights and weekend work, but nothing like the frantic nature of investment banking.

In normal, non-pandemic times, you might also have to travel to client sites occasionally, but far less than the travel schedule required in management consulting.

Before giving the compensation ranges, it’s important to explain the Transaction Services business model.

The fees from TS engagements are lower than audit fees, but the margins on the engagements are higher.

Many deals are staffed with a Partner or Director, a Senior Manager, and 2-3 Managers and Associates.

If an engagement takes a few professionals a month to complete, and it results in $300K in fees, that’s a very healthy profit for the firm.

The budget for each engagement is 100% negotiable with the client, and in some cases, firms end up billing clients less if a deal falls through – because of relationships and the desire to win future work.

These factors explain why total compensation (salary + year-end bonus) is higher than audit compensation but lower than investment banking salaries:

  • Associate: $60K – $90K USD
  • Senior Associate: $80K – $120K
  • Manager: $100K – $150K
  • Senior Manager: $125K – $175K
  • Director / VP: $150K – $300K
  • Partner: $300K – $1 million+ (if profits for the Equity Partners that own part of the firm are also counted)

There are cost-of-living adjustments, so expect lower compensation if you’re in a cheaper location outside major financial centers.

For all positions except Partner, the base salary comprises the bulk of the total compensation; year-end bonuses might be only 10-20% of base salary.

Often, the best way to increase your earnings is to switch to a different firm and negotiate for a higher salary and bonus.

Promotion Within Transaction Services Groups

You might now be thinking, “Well, the pay is lower than IB or PE pay, but I can just grind it out until the Partner level and earn a lot!”

Not so fast: 1-2% of new hires might eventually become Junior Partners.

And even fewer will make it to the Equity Partner level, where total compensation moves closer to $1 million+ due to ownership in the firm.

To reach those levels, you need to generate millions of dollars in revenue each year.

An average assignment could be worth something in the low-hundreds-of-thousands range, so that requirement translates into 10-20 signed engagements each year.

So, it’s arguably even more difficult than what a Managing Director in investment banking does because an MD can close a large deal or two and earn their pay.

Juggling dozens of clients and potential clients and trying to win assignments from them requires more multi-tasking and constant attention.

Oh, and if you do not advance to the Partner level, your exit opportunities are fine, but not spectacular:

Transaction Services Exit Opportunities

The top question here is “Can I get into private equity? I’m dreaming of private equity. Can I break into Blackstone or KKR directly from a Big 4 TS team?”

And the answer is “No, probably not.”

Some people do move from TS into private equity, but this usually happens:

  1. Outside the U.S.
  2. At smaller/startup funds.
  3. If you’ve worked with highly relevant clients, such as PE firms executing deals and bolt-on acquisitions.

The issue with moving directly into private equity is that you don’t gain experience working on entire deals from start to finish in TS.

It makes more sense to use a TS role as a springboard into investment banking or the internal IB team (“Corporate Finance”) at the Big 4 firm, and then move into PE from there.

Other exit opportunities depend on how long you’ve been working in the TS group:

  • 1-3 Years: It’s possible to win IB roles, but more so at boutique and middle market firms; FP&A roles in corporate finance, corporate development jobs, and certain consulting roles are also plausible.
  • 4-6 Years: You could get into corporate development, but investment banking gets more difficult at this stage because you’ll be over-qualified for Analyst roles. Corporate finance is still an option.
  • Past 6 Years: At this stage, you should just stay and make a run for a Partner-level role. If you want to leave, maybe move to a client and perform their valuations and due diligence in-house.

Is a Big 4 Transaction Services Team Right for You?

Overall, Transaction Services jobs are “OK.”

In terms of Plan B options for winning IB/PE roles, my view is that corporate banking and even independent business valuation firms come out ahead.

The main problem is that TS is an indirect/lengthy way to break into the industry because:

  • You usually need to join another Big 4 group, such as audit, and work there for a few years…
  • …and then move into TS, work there for a few years…
  • …and then move into IB.
  • And there’s still no guarantee of winning this IB role because it depends on your region, clients, and the hiring market at the time.

Big 4 TS teams make the most sense if:

  • You want to stay in the industry and work at a Big 4 firm for the long-term;
  • You want to get into corporate development or win a related corporate role without doing IB first; or
  • You’re in a region like Europe, where it’s somewhat easier to move into IB/PE due to the skillset differences.

Longer-term, there is also some risk of commoditization and automation because reviewing a company’s historical financial information is not exactly rocket science.

Yes, humans will always need to be involved, but with more advanced technology, lower headcounts could potentially support client engagements.

That said, the Transaction Services group beats audit in terms of pay, work, and exit opportunities.

So, if you’re bored to tears in your audit role and itching to do something different, TS is a good place to start.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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  1. Hi Brian, I am a recent grad from semi target and just started working at Big 4 business valuations group a few months ago. However, I came across an opportunity at BB in leveraged lending group (in their corporate banking/credit division). Which role do you think has better chance of transitioning to IB?

    1. The leveraged lending group, easily. People move from corporate banking into investment banking fairly often.

  2. Excellent article, thank you. Can you recommend a source that would sort the specific services by industry deal type/experience? I’m looking for financial due diligence and valuation on a merger project, specifically in the direct hire executive recruitment space. Finding CPA and CFA firms that have supported M&A in this world is challenging. Plenty of staffing…endless…but the direct hire search side is very different. Nevertheless, thanks for the article.

    1. Sorry, I cannot. This site focuses on careers in these fields, not the services that different providers offer, so we don’t track this information.

  3. Hi Brian – thanks for the article. I have 3 years experience in transactional banking (sales of treasury products like trade finance, cash management…) at a big bank looking to transition to structure/project/infrastructure finance at a BB. I have an opportunity to join a big 4 in their infrastructure deals advisory practice and tasks would be financial modelling (buy side modelling not acting as an advisor on the deals), risk analysis, business cases etc with most clients seemingly in the public sector. Would spending 1-2 years there be a good stepping stone to project/structured finance at a BB? Or maybe 1-2 years there -> M7 MBA -> BB? I’m based in Canada and open to relocate to US/UK if easier.

    1. Yes. I think you might need a top MBA just because 4-5 years of experience is pushing it in terms of being able to join a large bank as an Analyst. The US and UK are much better for IB recruiting than Canada for a host of reasons (more positions, higher turnover, more exit opportunities), so I would recommend relocating if possible.

  4. Avatar
    Ahmed Wahdan

    Hi Brian,
    Is the PwC edge program which provides rotations across PwC deals functions a good starting point in my career? Can it lead to Investment banking roles in the Middle East?

    1. Not familiar with it, but if it gives you rotations in some of the groups mentioned in this article, sure. It is more common to move from the Big 4 into IB in the EMEA region.

  5. Brian,

    Thanks for the article, TAS seems intersting with more normal working hours and i’m in ‘late to the game career switcher’ group

    Currently passed cfa lvl 2 and hopefully this meant something on big 4 TAS

    Regarding Valuation vs FDD division, which one is more suitable to cfa based person from non accounting background?

    And which one have better working hours?

    Thanks

    1. FDD is probably more directly relevant to the CFA, but they’re quite similar. Not sure about work hour differences.

    2. Hi Buds, I’ve worked both in Valuation and FDD as an Associate in a Big 4 TAS for around 2 years. Not yet a CFA myself but I agree with Brian that CFA is more useful in FDD. As to working hours, I think there are other factors that come to play such as the number and size of engagements you handle. But based on my experience, FDD usually involves more analyses compared to Valuation where at times it’s more of a plug and play.

  6. Hi Brian. Currently in my third year of TAS in Chicago where I’ve done both FDD and Management/Operational consulting projects for a wide range of clients (ranging from F500 to $10M manufacturing companies). Interested in making a move to sell-side IB and have a great network to lean on to potentially make this happen. My only hesitation is that I’ve already received my non-target MBA during my 4 years of school (due to being on scholarship for D1 basketball & coming into school with a semesters worth of AP credits – it was that or double major at the time), and I’m wondering if this hurts me. I know my options are probably more limited to smaller boutiques / regional banks if anything, but wanted to hear your thoughts on feasibility of this move / if it makes sense to you.

    Realize it’s not a traditional path by any means, but I have relevant skills/experience now (from both FDD/QofE projects and consulting engagements) and am hoping it’s not too late for me to break in. Also, been reading a lot on how COVID has caused a lot of turnover in IB, so wondering if this would help my chances or if you’ve also heard this. Thanks a lot for any advice/input!

    1. It may hurt you a bit at the large banks because they won’t necessarily know what to do with you, but smaller firms might be more open to it. It’s usually very difficult to get in via a non-target MBA, but you’re an exception since you have directly relevant experience. Yes, turnover is definitely higher in IB now because work-from-home has made everyone depressed. I think you should just start networking with a variety of different banks and see what turns up.

  7. Hi Brian, this article seems to focus more on TAS from an experienced associate/auditor POV but it looks like in recent years, this space has been opened up to undergraduate students. As a student who was only able to get an FDD internship for my junior internship, what would you recommend as next steps? Should I accept a FT and try to get an M7/T10 MBA after a couple of years? Recruit for a boutique IB firm for FT? I’m pretty fixed on getting my MBA though so I’m not sure what would look better. Try recruiting for FT CB at a BB? Any advice would help!

    1. Accept a FT offer and then try to move into IB as a lateral hire. I don’t really think you need an MBA to transition into IB if you have that type of experience. Only do it if networking / lateral recruiting does not work.

  8. Hey Brian,
    This summer, I’ll be working at a Big 4 firm in their Business Tax Consulting division, where I’ll be working exclusively with Financial Services companies. I will be applying to IB summer internships next year. Do you think this Big 4 internship is relevant enough for IB or should I look for more relevant internships? I’m in London if that helps and already had an investment banking spring week, along with a consulting one and asset management one.
    Thanks!

    1. It’s good enough.

  9. Hi Brian,

    I am currently doing federal tax at big 4 for a year now. I want to move into TS valuation and modeling. What do you think is the chance? Thanks!

      1. Hi Brian,

        Would you advise doing a traineeship at big 4 TS in Europe. Here i will work at 4 different TS departmemts during 2 years.

        Or would you recommend to go for a PE or CF boutique directly if possible?

        1. What are your goals? If you want to do IB, go to a PE or CF boutique. If you want to stay in the Big 4, do the Big 4 TS traineeship.

  10. Hi Brian,

    Insightful article as always. I’ve been a long time reader and you articles have helped me to secure 2 offers from Big 4 Advisory/Transaction services. However, these 2 roles are quite different and I’m not sure which offer to accept, so I would appreciate if you could give me some insights in terms of the career prospects and exit opportunities. Some details of the roles below:

    1. Deloitte: Associate – M&A Group (Commercial Strategy & Research) – Financial Advisory
    – 50% Strategy/consulting projects for corporates, 50% on M&A deals, mostly pre-deal commercial due diligence

    2. EY: Strategy and Transactions – Valuation modelling and economics
    – Mostly modelling work on asset valuation. ~60% time working with audits, rest of the time works on deals, litigation etc.

    As you can see, these two positions are quite different in nature and it may lead to a very different career path down the road. So I was hoping to learn what would be the prospects and exit ops for each respectively.

    Thanks, and I look forward to hearing back from you.

    1. Thanks. The second one is probably better because you’ll at least be doing some modeling work there. The first one sounds very qualitative, and you may not get “credit” for deal experience there. 60% of your time spent on audits isn’t great, but at least you’ll be able to point to some exposure to valuation and modeling for specific clients.

      1. I see – what about exits to corporate development? Would the first one provide good exit opportunities to corp dev? I quite like the first one as the work seemed more interesting but I’m not sure what kind of exits it would provide.

        1. Potentially, yes, but it’s hard to say because the description sounds vague. But I don’t think there’s a huge difference between them, at least not based on the descriptions.

  11. Brian – what do you recommend if a candidate has too much non finance experience (eg. 10 yrs of accounting + auditing) if they should leave out those experience off the resume if applying for the analyst/associate level opening at PE?

    1. Potentially, yes, but you do still have to list a university and graduation date. I think you could get away with leaving out the oldest ~5 years of experience and maybe just add a line that says you started out in audit and moved into some other group at your firm.

      1. Thanks for your insightful article. I Would like to receive your opinion, I did 6 years in banking in treasury, capital markets, Murex projects, and derivatives analysis, then I did 3 years of equity research and finally 3 years in consulting in Europe at functional corporate banking activities such as capital markets, Murex and cash management. I got a master at non target school in corporate finance a few years ago. I Would like to get a job in transactions service, corporate development, M&A, corporate finance or even sales and trading, do you think I still have a change and In which field may I improve the opportunity to get interviews and job in Europe? Additionally I am around 40 years, I appreciatte your ideas and help

        1. I think it will be difficult to move into any of those at this stage without an MBA. Maybe transaction services or corporate development, but you have a long work history that might be difficult to summarize/explain.

  12. Not sure if this exists in the US but other parts of the world also have a dedicated modelling team which sit close to the valuation team. Except their main deliverable is a model for clients to use or auditing a model created by a client. This can range from valuation modelling, project finance modelling, operational modelling to really random pieces of work like HR payroll modelling – so experience can vary vastly and dictate what future exit opps you may get. Generally this team can place quite well into analyst positions at MM/Boutique IB, small PE funds, decent sized Infra PE funds, equity research and corporate development

    1. Thanks for adding that. Yes, a dedicated modeling team that does real financial modeling can also place well in those roles. Regulations in the U.S. limit how much teams can advise on projections.

  13. Not sure if this is true outside of the UK, but equity research is a pretty common exit too, not just from big4 TS but big4 ACAs in general.

    1. Thanks for adding that. Yes, TS to equity research is possible as well, but it’s probably more common in Europe for similar reasons (more focus on projected financials).

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