Commercial Diligence to Bid with Confidence
The Importance of Commercial Due Diligence
As you evaluate an investment, the point comes when top-line growth or go-to-market (GTM) cost enters the deal thesis. Now it is up to your organization to make a well-informed decision.
That window of opportunity often comes near the first-round bid, and it is up to your company to evaluate the deal. Conducting a meaningful commercial due diligence exercise will provide answers as you take a deep dive into available data and interview management.
Alexander Group can partner with you on a focused GTM diligence effort better understand your target company’s ability to deliver on the deal thesis.
Diligence Requires Key Questions
During your commercial diligence process, it is essential to investigate whether the target has, or can quickly build, the foundational Marketing, Sales and Service capabilities to bring the deal thesis to life. The required analysis for most diligence efforts delivers an understanding of the market size, growth, attractiveness and competitive positioning.
However, this analysis does not give the deal team an understanding of the asset’s ability to deliver on the thesis. Investing in this level of commercial diligence increases bid confidence and aids in the identification of the upside.
Alexander Group can partner with you in answering the following questions during commercial diligence:
- Is the commercial organization aligned to the markets and segments where they have a right to win? Are they positioned to win customers that will deliver the needed unit economics?
- Do they leverage the right mix of motions, channels and roles to win more than their fair share?
- Is the model effective and efficient? Will it scale?
- Are there any people, processes, technology or other deal model inhibitors?
- Does the business have the leadership and talent to enact change and deliver growth?
Answering these questions requires understanding the target’s marketing, sales and post-sales organization as well as peer and competitive reference points. In addition, your deal team must understand the model itself (motions, roles, organizational structure, etc.), as well as how it performs against key benchmarks, including:
- Sales and Marketing Expense to Revenue
- Lifetime Value (LTV) to Customer Acquisition Cost (CAC)
- Gross Recurring Revenue (GRR)
- Net Recurring Revenue (NRR)
- Productivity Per Seller
- Span of Control
Deal teams often invest too much to have a winning strategy undermined by poor commercial execution.
Alexander Group can work with you on your commercial deep dive during diligence to deliver bid confidence and enable underwriting.
Commercial Diligence Done Right
Commercial Diligence is an important input when underwriting growth. It builds on insights from market work and prepares ownership and the management team to move quickly on value creation initiatives.