Diligence Matters Best Practices Briefs

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…

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…

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,…

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.

Assessing Price Sensitivity

Price sensitivity is a tricky subject to interpret correctly – doubly so in the tight timeframes common to current diligence windows. I’ve seen a lot of consulting reports that I believe misinterpret price sensitivity – either overstating or understating price in a ranking of decision makers’ Drivers of Choice. The importance of price in decision making is a critical question in any…

The Greater Potential of Brand Equity Analysis to Drive Far More Significant Acquisition Returns and Deal Value

By Mark Stein

In every commercial due diligence assignment, clients reasonably expect a proper brand equity analysis. And yes, good diligence requires the requisite measures (i.e., relative brand familiarity, performance on the most important drivers-of-choice, likelihood to recommend/promote, etc.). Investment teams and the IC will always want to review these findings and take stock of the implications. But…

A Practical Commercial Diligence Approach to Assess the Risk of Artificial Intelligence (AI) Disruption

By Jeff Merkle

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…