GRAPH Papers® Commercial Diligence Best Practices

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Mark Stein

Mark is a founder and Senior Partner at GRAPH. Mark has been advising business owners and investors since 1990 and has been providing acquisition and investment-oriented strategy guidance to leading corporations, private equity clients and portfolio companies for over 20 years. READ MORE

Author: Mark Stein
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048

By Nature, it’s the Channel (and a Leading Value Gen Lever)

By Mark Stein

The Target Co. is playing in a great space (e.g., strong tailwinds, right segment(s), etc.), has product(s) that attract valuable customers, the diligence indicates that the product line is differentiated, and the management team is presenting a very good, if not great, growth case. Unit economics are strong, and the IC can reasonably conclude that this might be a great opportunity. A nice find…

042

Integrated Offerings will More Easily Provide Greater Returns than the Cross-Sell Opportunity

By Mark Stein

Many commercial diligence exercises and value gen plans based on platforms and add-ons (a plurality these days) call for testing customer interest in, and potential for, the “cross sale.” While cross-sale opportunities have value gen potential, I have seen scant evidence that even the better ones produce much more than modest returns and valuation yield - i.e., maybe an increase in earnings,…

038

The Greater Potential of Brand Equity Analysis to Drive Far More Significant Acquisition Returns and Deal Value

By Mark Stein

In every commercial due diligence assignment, clients reasonably expect a proper brand equity analysis. And yes, good diligence requires the requisite measures (i.e., relative brand familiarity, performance on the most important drivers-of-choice, likelihood to recommend/promote, etc.). Investment teams and the IC will always want to review these findings and take stock of the implications. But…

035

Don’t Wait for the Findings, Align on the Yardstick…Upfront

By Mark Stein

It’s always a bit too much of a race – to pull together the issues, align on what matters most, and then deploy the activities to nail an effective electronic survey to supplement the interviews to measure the commercial diligence matters.

032

Value Gen Stimulant in Commercial Diligence Processes

By Mark Stein

Today’s GRAPH Paper™ is short and simple. A quick process, best-practice on the value gen. front of commercial diligence that could prove to be a useful commitment to make for your 2019 projects. Most diligence assignments start with discussion and some amount of the diligence agenda focused on testing the commercial value generation ideas that exist. And among investment teams, we know that…

029

Timing the Meeting (the Commercial Due Diligence Partner Meeting with Management)

By Mark Stein

It is well established practice to bring your commercial due diligence partner to the Management Meeting. It creates context and gives your diligence practitioner a first-hand view of what management represents to be most significant.

025

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

By Mark Stein

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

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

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

Diligence Methods to Measure Price and Price Sensitivity, and the Opportunity to Improve Margins

By Mark Stein

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…

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