Commercial Due Diligence
Two imperatives are near the top of every private equity firm’s priority list: selecting the right opportunities, and avoiding surprises.
L.E.K. supports both of these through our strategic commercial due diligence process.
How we help
Our approach to strategic commercial due diligence helps inform our clients’ investment decisions. We provide independent, fact-based analysis regarding a target’s most pressing commercial and operational issues. Within each opportunity, we focus on value creation by conducting deep analysis of the market landscape, securing the customer’s perspective, assessing the competitive dynamics, auditing operations, reviewing the plan for the business, and developing a go-forward value enhancement program. Our approach accelerates the process, maximizes value and reduces buyers’ risks, thereby framing the acquisition for well-structured ownership and eventually, an efficient exit.
We use a well-honed strategic commercial due diligence process to deliver the independent validation required for private equity firms to make investment decisions confidently. We combine rigorous analysis with a fact-driven assessment of market dynamics. We conduct in-depth interviews with customers and other market participants and evaluate the competitive landscape to identify opportunities and risks, validate our clients’ investment theses and prepare for exits. We are known for challenging management plans based on objectivity and deep industry knowledge.
Key client questions
Clients seeking to maximize the value of an acquisition should ask:
- What are the evolving market dynamics?
- How well do customers’ needs align with the target’s value proposition?
- How strong is the target’s competitive position?
- What cost and revenue synergies exist with current activities?
- How achievable is the business plan? What are the opportunities for outperformance and what is the key downside risk?
Our commercial due diligence process drills down on these questions so that clients can go forward confidently.
Examples of our work
How does L.E.K.’s commercial due diligence help our clients create value? Here are a few examples:
- A private equity firm was evaluating acquisition targets in the growing wound-care market. L.E.K. conducted a commercial due diligence assessment of a global wound-care provider and provided the firm with the facts and insights to complete a successful acquisition.
- For a middle-market private equity firm, L.E.K. validated the staying power of a premium clothing segment and the growth potential of a brand within that segment. The PE firm purchased the company, and subsequently sold it at a premium.
- We validated the commercial attractiveness of one of the largest manufacturers of hot runner systems and components, focusing on the U.S., China, and Europe regions. Our assessment of the target company’s management revenue projections led to the PE client placing a lower bid than originally expected.
- L.E.K. performed due diligence on a rubber and plastic company with a significant China presence, including market and growth opportunities for the company. We validated the investment plan and identified opportunities for improvement in quality control and production optimization.
- We assisted a middle-market private equity firm in identifying market potential for a niche health & beauty company to grow it beyond its initial, narrow market position. The work resulted in the PE firm purchasing the asset, and subsequently, selling it three years later.
- L.E.K. supported the review of the acquisition of a global marine services company for a major PE fund including assessing its growth prospects as well as developing a comprehensive performance improvement program. Subsequently, we worked with the business for nine months supporting the implementation of the plans and bolt-on acquisitions. Our client achieved an attractive money multiple on exit.