Pre Acquisition - Commercial Due Diligence

commercial due diligence

Reasons For Conducting Commercial Due Diligence

Within the overall due diligence process, Commercial Due Diligence (CDD) is often one of the most undervalued elements. However, information uncovered in a well-executed CDD process often identifies issues that feed into the decision to price negotiations or even kill the deal. Examples that may affect the overall value of the company and therefore drive the negotiated price include:

  • At-risk volume from a major customer
  • Competitors investment in potential game-changing technology
  • Long term market conditions
  • Limited or no differentiation on critical product or service attributes
  • Declining competitive position
  • Potential changes in government regulations of subsidies
  • Looming offshore competition
  • Lack of control of the distribution channel and customer relationship

Commercial Due Diligence Deliverables

Commercial due diligence is the process that a prospective buyer undertakes when gauging a company’s future commercial potential.  PMG’s Commercial Due Diligence process is a robust, customer-centric process that collects both quantitative and relevant qualitative data tailored to support the overall due diligence process. The final deliverable is a fact-based, data-driven report providing the necessary input to better predict the future performance and potential for earnings of the target business.  The entire process is designed to be completed in only a few weeks, aligning with compressed timelines common to private equity deals.  The result is a clear understanding of the security of the future revenue stream and target long-term competitive advantage, including:

  • Determine size and growth of the addressable market for a target company’s product and service offerings to validate the target company’s claims about the growth potential of the market
  • Assessing how realistic the future revenue/ EBIT projections are based on past performance and market conditions
  • Evaluating the target company’s performance against customer requirements
  • Determining the alignment of offerings with customer needs and identifying performance gaps
  • Identifying what attributes are important in driving customer satisfaction and loyalty through proprietary analysis of the Net Promoter Score (NPS)
  • Assessing the target’s competitive position, identifying gaps in relative performance in the areas critical to share growth
  • Providing insight to the target company’s overall relative competitive strengths and weaknesses
  • Review current and potential market segmentation schema
  • Understand the synergies the buyer may offer the targeted company that may accelerate or increase the growth potential

Our Research Includes

commercial due diligence

Download Brochure

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