Expert and customer calls are pivotal components of Commercial Due Diligence (CDD), providing unique and powerful insights that often reshape investment hypotheses. They introduce fresh perspectives, validate strategic assumptions, and reveal hidden risks and opportunities, driving deeper lines of inquiry that traditional diligence methods might overlook.
The Evolving Nature of Commercial Due Diligence
Over the past decade, Commercial Due Diligence (CDD) has evolved dramatically. Traditional approaches that emphasised historical financial performance and legal compliance provided a largely retrospective view, missing critical insights into future potential and emerging risks.
Today’s technology markets require more sophisticated diligence methods, characterised by three key trends:
Advanced technologies now automate processes such as document categorisation and clause extraction, significantly improving efficiency and accuracy.
Strategic due diligence has risen alongside financial assessment, shifting focus towards future potential and long-term value creation.
Regulatory frameworks have broadened the scope of CDD to encompass sustainability, ethical considerations, and cybersecurity, previously overlooked by conventional approaches.
These developments underscore why integrating expert networks and customer referencing is now indispensable for comprehensive commercial assessments. Each delivers distinct, complementary insights that together build a nuanced understanding of a target's true market position.
Expert Network Calls: Revealing Strategic Market Context
Expert calls offer specialised knowledge not accessible through conventional research methods. However, extracting value demands tailored methodologies honed through extensive experience.
We typically target interviews with industry professionals, former executives, suppliers, and regulators. These conversations reveal granular insights into market dynamics, competitive positioning, and operational risks otherwise hidden from public view.
We usually utilise "blind interviews," where experts assess market scenarios without knowing the specific target company, encouraging candid insights free from bias. We also employ triangulation by consulting multiple experts independently, enabling cross-validation and exploration of contrasting views.
Expert calls excel in providing:
Detailed industry benchmarking on confidential metrics such as cost structures, pricing strategies, and operational KPIs.
Competitive intelligence, including internal challenges and market perceptions.
Forecasting market trends and potential disruption scenarios.
Regulatory impact assessments, crucial in rapidly evolving technology sectors.
Yet, expert insights alone carry risks, often overstating product differentiation, misjudging customer price sensitivity, or overlooking operational issues—making customer referencing a vital counterbalance.
Customer Referencing: The Grounded Reality Check
Direct customer feedback delivers authentic perspectives on a company’s performance and market standing. However, capturing honest and representative insights requires more than simply contacting the provided references.
When running these, we typically start with clear objectives and targeted hypotheses about customer satisfaction, pricing perceptions, competitive positioning, and product strengths or weaknesses. Sometimes you just have to work with what you are given, but careful customer selection ensures representative sampling across strategic, typical, at-risk, and recently onboarded customers. Supplementing provided lists with independently sourced contacts mitigates selection bias.
It's usual to use specific questioning techniques designed to elicit candid feedback:
"Next-Best Alternative": Reveals genuine competitive threats.
"Critical Incident": Highlights concrete operational strengths or shortcomings.
"Pain-Point Probing": Uncovers meaningful daily operational challenges.
"Forced-Ranking": Clarifies true competitive differentiation and vulnerabilities.
"Future-Looking Scenarios": E.g. "Do you see yourself being a customer in 2 years time?" Explores strategic scalability and growth barriers.
These methods yield richer, actionable insights than conventional approaches typically achieve.
Why Single-Method Approaches Fall Short
Relying solely on expert networks or customer referencing creates dangerous blind spots, evident in numerous technology transactions.
Exclusive reliance on expert networks can lead to:
Overestimating product uniqueness.
Misjudging price sensitivity.
Underestimating operational deficiencies.
Conversely, relying solely on customer referencing risks:
Missing emerging competitive threats.
Short-term perspective biases.
Selection bias from management-curated references.
Integrating both methodologies is essential for comprehensive, accurate diligence.
Adapting to Today's Technology M&A Challenges
The rapidly evolving technology M&A landscape necessitates diligence approaches addressing emerging issues:
Rapid Technological Change: Validating technology roadmaps through expert and customer insights.
Remote & Hybrid Work: Assessing operational resilience and customer satisfaction remotely.
Regulatory Scrutiny: Mapping regulatory trends and validating preparedness through combined expert and customer evaluations.
Turning Insight into Transaction Value
Integrating expert and customer calls directly enhances transaction value by:
Improving valuation accuracy through validated assumptions.
Structuring deals to mitigate risks and optimise earn-outs.
Prioritising post-acquisition actions based on deep market understanding.
Reducing integration risks.
Strengthening negotiation positions with comprehensive insights.
The long-term strategic value of this combined diligence approach extends far beyond immediate transactional benefits, informing ongoing competitive positioning, customer retention, and operational strategies.
In today's complex technology landscape, expertly integrated diligence is not merely a transaction necessity—it is a strategic asset vital for informed, confident decision-making.
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