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
Our team generates bankable commercial due diligence (CDD) reports for private equity firms and family offices. In particular, we are focused on the small- and mid-cap segments (<100 MEUR Equity Value). Our team has completed over 200 CDD projects to date.
For most private equity firms, commercial due diligence (CDD) plays a critical role within the deal cycle. In contrast to other types of due diligence (e.g. financial due diligence, operational due diligence, legal due diligence), the commercial due diligence analyzes the strategic rationale of a transaction and comprehensively assesses the sustainability of the target’s business model.
The core areas of a commercial due diligence analysis are typically:
- Business model (e.g. value creation, value chain activities and profit model)
- Market environment (e.g. market segmentation, size and growth)
- Customer portfolio (e.g. dependencies, purchasing and supplier changing behaviour and customer opportunities)
- Competitive landscape (e.g. financial benchmarking and strategic positioning)
- Business Plan (e.g. planning assumptions, price-volume grid and upside potential)
- Additional areas depending on customer focus (e.g. exit options, buy & build strategy and business case)
Commercial Advisory examines the sustainability and attractiveness of the target’s business model and its ability to succeed in future. The emphasis of our work lies in evaluating the achievability of planned sales and gross margins. To make this assessment, we integrate the results of the market, customer and competitive analyses into our framework and consider the internal sales and marketing resources that will be leveraged 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 assumptions.
Our team has access to the most important commercial databases and conducts comprehensive primary research interviews with industry experts, customers and potential customers, competitors and suppliers to get a 360 degree view into the target and market environment. Commercial Advisory provides this expert network to every client.
Typical phases of our commercial due diligence project:
- Participating in management meetings
- Executing workshops with the management
- Development of questionnaires for Q&A Sessions and monitoring the dataroom
- Personal interviews with industry experts (e.g. telephone interviews)
- Coordinating 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)
- Preparing interim and final reports (in German and English)
- Presenting and discussing findings with the client
Commercial Advisory has extensive experience in working with small and mid-cap private equity clients. We support our clients with buyside as well as sellside commercial due diligence services. We assess opportunities and risks alike. Our key focus is on small and medium-sized enterprizes in Germany, Austria and Switzerland across a diverse range of industries (e.g. automotive, business services, construction, healthcare, industrial products, retail & consumers, digital business models, security technology).
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 provides honest advice and clear answers to critical questions. We are a trusted partner of small and medium-sized enterprises and private equity investors. Please contact us for further information.
Copyright notice of image: © Peshkova / Shutterstock.com