Assessing the Impact of Cyclicality in an Investment – a Voice-of-Customer Informed Diligence Approach
Goldman Sachs recently forecast that US growth will slow “significantly” in 2019. And with the US economy now in its second longest period of growth since WWII, it would be surprising if there wasn’t a decline at some point in the coming years. Given that context, it’s no surprise that more of our clients seem increasingly keen to understand how a prospective acquisition would perform in…
A Practical Commercial Diligence Approach to Assess the Risk of Artificial Intelligence (AI) Disruption
The impact of constantly expanding applications of AI technology (Note 1) has many investors nervous about traditional human-labor-based businesses – from professional and technical services to administrative clerks. The sustainability of these businesses is a deep and challenging topic to assess. However, it is made harder by the convoluted analytics that many consultants have proposed to…
Avoiding Asymmetric Competitors in Technology Investing
In a recent conversation with a leading technology-focused sponsor, I was asked an interesting question: if [insert hyperscale technology company name] is getting into everything, then how do I know what’s safe? In this case, we were talking about Amazon, but the same could have applied to Microsoft, Google, Apple, Salesforce, Adobe, and more.
Commercial Due Diligence and Value Generation via Network Effects
Many attractive investments are predicated on network effects – these are businesses that connect users, buyers, and/or suppliers. Companies like Visa, eBay, and LinkedIn have famously enjoyed the benefits of network effects to accrue immense, highly durable value. Outside of software, businesses such as recruiting, retailing, media, health provider networks, and many others, enjoy network…
Fruit that’s Ripe for Non-traditional Disruption (and how to diligence the prospect of it)
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.