Commercial Due Diligence & the Role of Markets

In commercial due diligence, the operating business is examined. The main strategic areas examined in commercial due diligence are the markets in which the company operates, the market position held by the company in these markets, the market strategy(s) and the business model. Commercial due diligence also covers potential market opportunities and risks.

Operationally, the quality and resilience of existing purchase and supply contracts and the security of supply of raw materials and required semi-finished goods and components are investigated.

Prospective buyers will not want to rely solely on the statement of the seller or the management team of the business unit for sale. The more recognized studies, contracts, information about the industry structure and the competitive environment, and ideally also opportunities for discussions with customers and suppliers that the seller can offer, the more reliable the information will be for the prospective buyer and the higher their willingness to pay will be. Since the price for a company is determined by its expected future development, an insight into the company’s research and development work would strengthen the prospective buyer’s confidence in the future.

Commercial due diligence examines the impact of technological change on future market position as well as future earnings and cash flows. This is not only relevant in high-tech industries, but also in traditional industries. Here, an arc is drawn from technical due diligence via commercial due diligence into financial due diligence.

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