Well executed commercial due diligence CDD can significantly impact the trajectory of corporate mergers & acquisitions and the fundamental performance of private equity portfolios. At Covelent, our commercial due diligence consultants arm clients with deep, actionable insights into their prospective targets, enabling them to make better informed decisions.
Commercial due diligence stands as the foundation of any potential business deal. Today's acquisition due diligence encompasses a comprehensive sweep across the target company’s facets: strategy, operations, marketing, sales, finance, and beyond.
With an increasing number of buyers and private equity capital vying for a finite pool of appealing deals, the pressure is mounting for acquirers to conduct thorough examinations of potential targets.
Covelent's Commercial Due Diligence Consulting Approach
Effective commercial due diligence can facilitate a smoother transaction process for corporate buyers and uncover critical industry insights and operational improvements for private equity investors, leading to enhanced profitability and other significant benefits.
Conversely, insufficient commercial due diligence can lead to less than optimal outcomes, eroding value and resulting in unforeseen costs and unmet synergies. Private equity firms, in particular, recognise that a single suboptimal investment can adversely affect the overall performance of their portfolio for years.
Covelent’s commercial due diligence consulting ensures that acquirers are equipped with detailed, relevant, and comprehensive information fast.
In our role as commercial due diligence consultants, Covelent leverages significant strengths in the screening and vetting process, including advanced analytical tools and deep procedural knowledge. These tools are adept at identifying opportunities for adding value and pinpointing potential risks from extensive data sets.
Overcoming Information Imbalances
The primary challenge in acquisition is the imbalance of information—targets invariably know more than acquirers, who often lack the time to fully investigate a target. Covelent addresses this gap using sophisticated software and a deep understanding of the commercial due diligence landscape, tailored to the distinct needs of both corporate buyers and private equity investors:
CDD For Corporate Buyers:
Our strategy covers the full spectrum of M&A activities, from target identification to post-merger integration. We focus on identifying synergies, examining the target's operations, fostering joint value creation, and facilitating integration, allowing you to concentrate on your core business.
CDD For PE Firms:
We provide the essential industry insights needed to inform decision-making. Our commercial due diligence delves into industry trends, business model viability, opportunities for value creation, deal execution speed, financial perspectives, and potential exit strategies.
Covelent diverges from the conventional, one-size-fits-all commercial due diligence checklist, which can result in overlooked aspects. Instead, we treat each project as unique, initiating a broader strategic dialogue based on a clear understanding of your objectives and aspirations.
Structuring Commercial Due Diligence with Covelent
Our approach to buy-side commercial due diligence is iterative, addressing critical financial, operational, and cultural questions. Drawing from our expertise and reputation as a market observer, we offer in-depth analysis across various essential business areas:
- Market trends and dynamics
- Competitive advantages
- Synergy opportunities
- Operational optimisation potentials
- Business plan achievability and value creation possibilities
We thoroughly explore all relevant sectors from marketing and sales to operations, HR, and IT to gauge the potential for value creation. Upon completing our commercial due diligence, we encapsulate our insights in a detailed equity case, often paired with a banking case to aid in acquisition financing. This comprehensive assessment enables you to make a well-considered decision, providing a solid foundation for your final bid or allowing you to step back confidently, equipped with the unmatched analytical depth that only Covelent can offer.
Recent examples of our work
- We guided a childcare products manufacturer through commercial due diligence for a potential acquisition, focusing on market dynamics, competitive positioning, and growth potential. Our insights enabled a swift decision-making process, leading to a successful transaction that closed in five months and bolstered the client’s market position.
- We supported an insurance company in evaluating a financial services acquisition target, analysing market share, product offerings, and potential synergies. Our comprehensive assessment provided clarity, allowing the client to proceed confidently with a strategic acquisition that expanded its market presence.
- We assisted a hydro-electric company with commercial due diligence for an acquisition in the renewable energy sector. By analysing asset quality, market trends, and regulatory factors, we helped secure a deal at a price 6% above initial estimates, aligning with the client’s sustainability and growth goals.
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