Commercial Due Diligence

Commercial due diligence examines the market, competition, and business model of a target company. It assesses whether the company's market position and growth assumptions are realistic. Buyers use it to evaluate commercial opportunities and risks before the acquisition. It looks at the size and growth of the addressable market, the structure of competition, the target's position within that structure, the durability of customer relationships and pricing power.

While financial due diligence focuses particularly on financial data, earnings quality and cash flows, commercial diligence concentrates on market opportunities and competitiveness and therefore informs the part of the purchase price that comes from the business plan. Methodologically it draws on public market data, industry conversations and above all on anonymised interviews with customers, former customers and competitors, because buyers' views say more about the reliability of a revenue forecast than any internal presentation. Typical outputs are an independent market forecast, an assessment of competitive advantage, an analysis of customer concentration and reasons for churn, and a judgement on which parts of the business plan are robust and which are not.

Scope ranges from a short red flag review with a few key questions to a full market study with hundreds of interviews. Sellers often commission their own commercial study in advance and make it available to all bidders in the process, to save time and to conduct the discussion on a shared factual basis. The robustness of the addressable market is a review point of its own, because sellers like to define the relevant market broadly in order to show growth potential. Diligence narrows it to the part genuinely reachable, meaning the segments in which the company can actually win with its offering, pricing and sales structure. Competitive dynamics are also examined, in particular whether new entrants with different business models are appearing and how quickly prices and market shares have shifted in the past.