GRAPH Papers® Commercial Diligence Best Practices

We hope that you enjoy GRAPH Papers® - our ongoing series covering best-practices for assessing market opportunities and conducting commercial due diligence.

The insights behind these short pieces derive from real-world diligence experience. Our aim is to help our team and our clients develop and apply “standard work” methods that lead to better deal outcomes. Some of the tips will apply to specific sectors or types of asset, but we expect that most will be of interest to everyone in the diligence community – given that so much of what determines deal outcomes ties back to business fundamentals.

If you would like to share your thoughts about our ideas, please reach out to us.

Take a look at the topics covered in past GRAPH Papers®.

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058

The Next Step Beyond NPS (Net Promoter Score)

By Eoghan Bees

A common metric leveraged in commercial diligence – NPS (Net Promoter Score) – is based on a single and simple question presented to users of a good or service: “On a score of 0 to 10, how likely is it that you would recommend [XYZ] to a friend or colleague?” The metric and the question are designed to measure current satisfaction, and the design logic of the question (and the associated…
057

Taking Price Seriously in Commercial Due Diligence (CDD) Mandates

By Jeff Merkle

Using pricing as a lever is massively powerful, yet pricing is an often overlooked and underappreciated part of diligence. Several years back, one of the large corporate finance consultancies did some modeling using income statements from the top 1000 firms – they found that a 1% increase in average price with an “inelastic” customer base (i.e., no resulting change in demand) resulted in a…
056

Gaining Momentum Around Price Early in Diligence

By Jeff Merkle   VIDEO

During the diligence window, savvy investors are increasingly seeking early signals on the pricing opportunity – for both valuation and value gen considerations. Gaining an understanding of the pricing opportunity starts with a walk-through of multiple pricing factors. Chief among the various diagnostics is the pricing waterfall - the walk-down from list to pocket price, and identification of…
055

De-risking and Leveraging Brand Equity Ownership in Commercial Due Diligence

By Jeff Merkle

In Commercial Due Diligence, it’s often the assumption that customer relationships are an “asset” of the business, but that’s not always the case. The reality is that for many businesses, the quality and stability of customer relationships are owned by account representatives (and possibly only a few reps) – who walk out the door with those assets every night, and who (for the right…
054

Brand Equity: Institutionalized or Individualized?

By Jeff Merkle   VIDEO

Evaluating the degree to which Brand Equity lies with a target company versus with individual sales and service reps of the company should be a key exercise in Commercial Due Diligence - for both the benefit of valuation and for value gen opportunity assessment. Determining the clues that enable methods for institutionalizing the relationships drives strength of recurring/repeat revenue,…
053

Jack of All Trades, Master of None: The SaaS Breadth vs. Depth Diligence Dilemma

By Hailey Messenger

What do you want to be when you grow up? This classic question isn’t often examined when it comes to tech (and SaaS) companies seeking growth equity capital.
052

Diligence Considerations for Healthcare Provider Investments

By Lynt Johnson, MD, MBA

Private equity interest and deal activity for healthcare providers has certainly accelerated over the past decade. Platform acquisitions are particularly targeted as opportunities for back-office efficiency and revenue growth – and to address pricing power imbalances with the ever-focused payers.
051

The Importance of Product-Market Fit in Commercial Due Diligence

By Sophia Siddiqui

Globalization, digitalization, information access, and an increasingly discerning customer base have been contributing to a business environment that continues to build in competitive intensity year after year. To survive and thrive, companies must demonstrate meaningful growth that outperforms competitors or displaces incumbents. This growth can take the form of enhancement of existing…
050

CDD for Tech Implementation & Support Businesses – Spotting the Good, the Bad and the Ugly

By Phil Craig

With software multiples remaining stuck around record highs [in '22 and '23], many technology investors are pushing increasing dollars into the tech advisor and technology implementation/support partner market (often marketed as "Digital Transformation service providers"). These businesses are subject to similar market growth rates (minimum >10% p.a., many >20% p.a.), but relative to the…
049

Understanding Matters…Hospital Medical Technologies: Who Makes the Big Spend Decisions and How Do They Get There?

By Lynt Johnson, MD, MBA

Most new hospital medical technology purchases hit the capital procurement process. Capital purchasing decisions by hospitals can often be a complex maze of processes that impact the timeliness of consideration and final approval and allocation of funds for procurement. Typically, items above a certain monetary threshold meet the institutional requirement to be vetted through a capital purchasing…

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