Importance of the Commercial DD
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As the Commercial DD is the one that settles the market conditions and evolution, which at the end define the profitability of your potential acquisition, do you think this should be treated as the most important DD?
HI Maracena, I think Commercial DD is often underestimated part of the due diligence, something you often keep for the post acquisition assessment, but in my view, the Commercial DD is one of the most important part, it is a key reason why you are acquiring the business (ok, sometimes it can be to get access to new technology, defensive acquisitions, etc), but in majority deals you want to acquire a business with solid potential, which is value-accretive for your business, which will help you drive sales and increase profitability.
Commercial DD is important to do an indepth analysis of the current status of the target and viability of the deal post acquisition.
I believe it’s a very important DD that isn’t utilized enough. For a highly successful M&A, conducting a holistic due diligence is more important. Capturing the cultural, financials, and strategic DD (where I would include the commercial DD) is essential for a smooth process and integration.
You bring up an important point! While all forms of due diligence are crucial in M&A, the Commercial Due Diligence does play a significant role in determining the market conditions and future profitability of a potential acquisition. CDD focuses on evaluating the market dynamics, competitive landscape, customer behavior, and growth potential, among other factors. By thoroughly analyzing these aspects, CDD helps assess the viability and long-term success of the acquisition. While it is important to consider other aspects such as financial, legal, and operational due diligence, the insights gained from CDD can greatly influence the decision-making process and the ultimate profitability of the acquisition. Therefore, treating CDD as one of the most important due diligence components is certainly justified.
As Jonathan mentions, other DD is just as important as commercial DD, but the difference between commercial DD and other DD is that it concentrates on the future growth potential of the buyer, which is very important when you want to acquire a company, because you wouldn’t want to buy a company that has no business growth in the future.
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