GRAPH Papers™ Commercial Diligence Best Practices

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Mark Stein

Mark is a founder and Senior Partner at GRAPH. Mark has been working in the professional services sector since 1990 and has been providing strategy guidance for leading corporations and private equity clients and portfolio companies for 17 years. READ MORE

Author: Mark Stein
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025

Observations on how Financial (PE) and Strategic (Corp Dev) Investors Consider Segmentation Opportunities Differently from One Another

By Mark Stein | 31 July 2018

Serving a wide-range of clients, one pattern that I have noticed is the degree to which the strongest Corp Dev groups (the “Strategics”) consider customer segments as a means for asset value creation – and do so in ways that outrun what many Private Equity firms consider.

022

Diligence Trappings of Lawn Sign Decisions

By Mark Stein | 26 May 2018

Regardless of where any of us stand on a political spectrum, there is a superbly valuable due diligence lesson for investment teams that derives from the behavioral sciences of psychology and politics. There is a dangerous trap that we refer to as the lawn sign decision.

019

Using Diligence and the Ownership Change to Leverage What Matters to Customers

By Mark Stein | 26 March 2018

Conducting commercial diligence that matters should equip the new owner and the leadership team with insights that can quickly make an impact on market share and pricing opportunities (among other opportunities).

016

Price Sensitivity and the Opportunity to Improve Margins

By Mark Stein | 25 January 2018

Most commercial diligence projects will query the channel and the end-customers to measure price sensitivity. Most CIMs will have a graph indicating the degree to which customers are, or are not, sensitive to price – and suggesting room for margin enhancement. However, relying on customers’ or the channel’s expression or “vote” on price sensitivity can lead to false commercial diligence…

015

Uncovering a Platform Play

By Mark Stein | 4 January 2018

The common case: The target asset (i.e., the target company) has a demonstrated track record of running a good business, enjoys healthy margins and some nice growth. The research indicates that drivers of demand are strong and sustainable. But the diligence also surfaces the fact that none of the providers, including the target company, have a materially differentiated solution – and the market…

013

Fruit that’s Ripe for Non-traditional Disruption (and how to diligence the prospect of it)

By Mark Stein | 5 September 2017

The Amazon Whole Foods tie-up is certainly throwing more than a couple of mature industries for a loop: food production, logistics and distribution, mass-retail and groceries. Since the announcement (and as of today), Costco lost 17% of its value; Kroger is down 30%; Sprouts is down 24%; Wal-Mart took a hit but seems to be holding its own.

011

Indefensible (Competitive Position)

By Mark Stein | 4 January 2017

I’m am fairly certain that just about every commercial diligence assignment conducted is going to include measurement of the asset's commercial strength relative to customer needs and expectations, and relative to perceptions of competitors and alternatives.

009

Strength of Demand vs. Strength of Brand

By Mark Stein | 25 October 2016

What is more important when looking at a deal: the strength of demand drivers, or the strength of the target company's brand equity? With rare exception, Demand – not Choice (brand equity among suppliers) – is more fundamental to a successful acquisition outcome.

007

When Things aren’t Quite what they Seem - Distressing Commercial Due Diligence Close-calls

By Mark Stein | 25 April 2016

I thought I’d share some instructive discoveries we’ve had in commercial due diligence recently. I’m curious to hear yours. If you’re inspired, send me a quick reply with a couple of diligence events that surprised you (and that you hopefully caught). Here are a few from the past year:

006

A Quick Follow-up on Market Definitions

By Mark Stein | 29 March 2016

In an earlier GRAPH Paper™, my partner James referenced how important it is to accurately define the market when it comes to market sizing requirements. Per that GRAPH Paper, “Having clear definitions that everyone on the deal team is aligned on is essential.” Beyond supporting market sizing, being clear on the market definition helps the team better understand the target asset itself, and…

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