Why Commercial Due Diligence Matters in M&A
In today’s softer deal market, buyers must prove a target’s growth story before they sign. Commercial due diligence (CDD) does that by marrying what’s inside the data room with what’s happening outside the walls of the business.
Why CDD Matters
- Lower tolerance for misses – Global deal values have fallen by half since 2021; any post-close surprise is costly
- Forward-looking lens – Financial diligence explains what happened; CDD shows what will happen
- Tighter valuations – Fewer write-downs after closing
- Faster integration – Growth levers validated before Day 1
- Investor confidence – Every assumption links to hard evidence
Start Inside: Mine the Sales Data
Line-item transactions, pipeline reports and cohort analyses reveal revenue and margin trends, win-rates, churn, cross- and up-sell performance. It will also show customer concentration and which accounts are truly critical to explore further. Compare these facts to the target’s business plan, then remember that internal numbers live in a bubble. You still need the market’s point of view.
Look Outside: Add External Intelligence
Desk research (analyst reports, filings, macro data) sizes the total addressable market, flags disruptors and benchmarks performance. Primary research (customer interviews, expert calls, mystery shopping) tests pricing power, switching triggers and unmet needs. With the target’s permission, run focused customer-satisfaction surveys; if not, rely on anonymous outreach.
Key Takeaways for deal teams
- Start inside – Mine transactional and pipeline data at SKU-level granularity
- Look outside – Benchmark findings against desk research and fresh customer insights
- Triangulate continuously – Update conclusions with each data layer, clarify suspected issues with management
- Leverage tech – Use dashboards and geospatial tools to visualise multi-source data
- Build a Plan B – Draft a realistic business plan for what you will do once you own the asset
Bottom line: Commercial due diligence isn’t a checklist; it’s the cornerstone of winning and keeping a good deal