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.

But we have observed that the exercise is often compromised and there is an easy way to optimize.

For great reason – as a prospective bidder – you meet with management early in your process. It’s an obvious and significant opportunity to feel out if this is going to be worth your energy and resources – and to test some of your earliest ideas or concerns.

But in the context of independent diligence, there is much more value in deferring a meeting that includes the third-party diligence partner by a few weeks. Of course, we too would learn something in an early meeting, but we also trust that you will share the key themes with us anyway. By waiting to introduce us with 2 or 3 weeks of commercial investigation under our belt, things get better:

1. We are more insulated from what management has to say in our earliest weeks and we are given room to form a truly independent, customer-driven view. You want us to be independent for good reason, and management will very likely present a logical narrative in this meeting; and the bankers are only going to allow the most likeable and most compelling in this session. They are not going to present ideas that are easily refuted in market and customer work – so the natural path exercise coming out of these sessions may be biased toward a positive set of ideas. They have the information advantage and they have already packaged up the VDD and management preso materials to that end
2. In a few weeks (after doing independent work) we will have specific ideas (positive and negative factors) from customers, competitors and channel – and being able to press these in a discussion with management is a diligence step that should be exercised. It will be revealing
3. In a few weeks we will have compelling facts (i.e., facts and insights from customers) – and we will be able to better advise you on what does not ring true in our meeting with management. Together, we can then determine the highest value topics for ongoing diligence focus, to further inform the next bid or process step

Not every opportunity will allow a separate or later session. However, most clients who seek to set up a second meeting a few weeks later between management and us, succeed. By then, the ask and response serves as a good signal, and many management teams welcome it as they too want to have a smart investment partner who can help drive further improvements in the business. If the dynamics of the process make it clear that the first meeting will likely be the only opportunity, then there is still a significant advantage for the diligence partner’s participation. But looking back across exercises, we have found that this deferred meeting is a better design and tilts the process a bit more positively in your favor.

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