When making acquisitions in today’s fierce competition, it’s all about understanding the target company and the market it operates in. However, value chains and business ecosystems are getting increasingly complex. This changes the type of capabilities needed for companies to stay competitive. In this rapidly changing business landscape, it’s critical to understand what you’re really acquiring. Traditionally, a Commercial Due Diligences (CDD) is used to understand the market the company operates in and its competitive position. But, in more and more cases, the CDD is no longer enough. Depending on what type of company you want to acquire, and what industry it operates in, you may need to get a deeper understanding of their technical, operational and human capabilities.
The Commercial Due Diligence
The CDD aims to get a deep understanding of the acquisition target’s market, competitive position and growth potential. By understanding the target’s commercial performance and the prerequisites on the market, you’ll get a better understanding of whether the target’s business plan and financial plan are realistic and what the main commercial risks are.
The Technical Due Diligence
The purpose of the Technical Due Diligence (TDD) is to secure that the target has the right technical infrastructure and capabilities to deliver on the long-term business plan. The TDD is especially critical when the target company’s core operations or business model is highly dependent on digital capabilities. It’s done by analysing the target’s IT architecture, internal IT service delivery, and IT organization and competences. With digital capabilities getting more and more important in all businesses, the TDD will become a natural part of the transaction process.
The Operational Due Diligence
The Operational Due Diligence (ODD) seeks to confirm operational achievability of the management business plan and to identify operational upsides and risks. By deep diving into the target company’s operational capabilities, operating model and operational cost base a solid assessment is made. The ODD is of special importance when the investment case includes synergies or cost savings in addition to the management plan, when the standalone cost base for the target needs to be determined prior to a carve-out, and when the deal rationale includes full or partly integration with other companies in your portfolio.
The Human Due Diligence
The Human Due Diligence (HDD) aims to understand the capacity of key individuals within the target’s organization, examine how the management team complement each other, potential risks, and analyse the organization’s ability to secure future competence. To include an HDD is especially crucial when human capital is critical for the business success, and when the target is dependent on competences hard to find on the market.
The Integrated Due Diligence
For companies in need of a more holistic Due Diligence including two or more of the extended areas, Cupole can deliver an integrated product covering up to all four Due Diligence areas. We act as the focal point in the whole Due Diligence process, securing that the different parts are integrated and presented from a perspective making sense for your business. If you’re looking for a Due Diligence process with a more holistic view of the target, this is the service for you.
“In more and more investment cases the Commercial Due Diligence is not enough, the acquisition target’s technical, operational and human capabilities need to be analysed to fully understand the targets value potential and risks”