Commercial Due Diligence (CDD)

“More than the past I am interested in the future, because that’s where I intend to spend the rest of my life.” – Albert Einstein

From the perspective of most Private Equity companies the commercial due diligence (CDD) plays a special role within the deal cycle. In contrast to other types of due diligence (e.g. Commercial Due Diligencefinancial due diligence, operational due diligence, legal due diligence) the commercial due diligence analysis the strategic rational of a transaction and assesses comprehensively the sustainability of the target’s business model. The core areas of a commercial due diligence are typically:

  • Business model (e.g. value creation, value chain activities, profit model)
  • Market environment (e.g. market segmentation, size and growth)
  • Customer portfolio (e.g. dependencies, purchasing and supplier changing behaviour, customer potentials)
  • Competitive landscape (e.g. financial benchmarking, strategic positioning)
  • Business Plan (e.g. planning assumptions, price-volume grid, upside potential)
  • Additional areas depending on customer focus (e.g. exit options, buy & build strategy, business case)

Commercial Advisory examines the sustainability of the target’s business model and its ability to succeed in future. The emphasis of our work lies on the assessment of the achievability of the sales and gross margin planning. For this purpose we integrate the results of the market, customer and competitor analyses into our analysis and consider the internal sales and marketing ressources given to support the planned growth. Commercial Advisory’s focus is on future-oriented and forward-looking valuations and approaches rather than on descriptive and historic illustrations. Commercial Advisory has access to the most important research databases and conducts comprehensive interviewing programs with industry experts, customers and non-customers, competitors and suppliers to get the full picture (“360 degree approach”). Commercial Advisory provides its expert network to every client. Typical tasks during a commercial due diligence project:

  • Participation in management meetings
  • Execution of workshops with the management
  • Development of questionnaires for Q&A Sessions and monitoring of the dataroom
  • Personal interviews with industry experts (e.g. telephone interviews)
  • Coordination of external service providers, e.g. market research providers (if necessary)
  • Desk Research / Secondary research
  • Close cooperation and alignment with other due diligence providers (e.g. financial, legal, operational, tax)
  • Preparation of interim and final reports (in German and English)
  • Presentation and discussion of findings with the client

Commercial Advisory has extensive experience in dealing with small and mid-cap Private Equity clients. We support our clients with buyside commercial due diligence as well as sellside commercial due diligence services. We assess chances and risks alike. Our key focus is on small and medium-sized enterprices in Germany, Austria and Switzerland across various industries (e.g. automotive, business services, construction, healthcare, industrial products, retail & consumers, digital business models).

Books:
Why Acquisitions Fail: Practical Advice for Making Acquisitions Succeed by Denzil Rankine,2001
Commercial Due Diligence: The Key to Understanding Value in an Acquisition by Peter Howson, 2006
Commercial Due Diligence: Die strategische Logik erfolgreicher Transaktionen by Dr. Ralph Niederdrenk and Matthias Müller, 2012
Commercial Due Diligence: Die Königsdisziplin by Dr. Ralph Niederdrenk, 2017

Commercial Advisory Unternehmensberatung gives honest advice and provides clear answers to pre-defined questions. We are a trusted partner of SME and private equity investors. Please contact us for further information.

Commercial Due Diligence

Commercial Advisory Unternehmensberatung GmbHCommercial Due Diligence
Markus Knarr
Pettenkoferstraße 44
80336 München
+ 49 89 20355314

info@commercial-advisory.com

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