Due Diligence

Ensuring that transitional periods are as smooth as possible

Buying a business can pose many unforeseen risks, where everything is not as it seems on the outside. We frequently hear firms say their biggest concern is that “they don’t know what they don’t know.” Due diligence is the first step to clear the fog, understand the real value of the target firm, and determine if it is the right fit for you.

Why is Due Diligence Important?
  1. Validate your deal thesis – complete deals with sound strategic rationales and integration plans.
  2. Quantify what seems like a good idea and have confidence that sustainable economic value can be gained from the acquisition.
  3. Understand the assumptions being made and the implications.
  4. Make sure potential risks are understood to know when to bid and when to walk away.

As a buyer or seller, you have inherent biases about the company. Successful due diligence requires an unbiased inside view of the company to ensure your blind spots do not result in future negative surprises. Each company is unique, and no two transactions should be treated the exact same way. We deep dive into the company, critically analyzing various factors.

Operational and Financial Assessment

Our approach is centered around building trust with the team. Understanding what factors lead to superior performance – corporate culture, vendor management, customer relationships, competitor analysis, etc. allows us to validate the upside.  By interviewing key personnel in the company, analyzing business processes and taking a deep dive into the financials, it allows us to get to the root cause of business challenges through:

  • Understanding cashflow drivers
  • Stress testing revenue and cost assumptions to determine if targets are realistic
  • Determining if processes are dependent on specific resources
  • Assessing potential integration with the other portfolio companies
  • Understanding potential risks and determining if a viable mitigation strategy exists

Market and Competitor Assessment

To assess the true value of the target, it cannot be measured purely on a standalone basis. It is critical to understand the industry and how the company measures up relative to competitors. This step allows us to identify and hone in on how the company adapts to changes in the market environment and how their value proposition differs from competitors.

  • Competitor profiles to understand strategy, service offerings and financials
  • Drivers of industry size and growth to determine attractiveness of the market
  • Areas of disruption that may affect existing assets
  • Customer needs, average retention and strategy to ease the period of uncertainty
  • Brand value relative to competition and competitive positioning

Post Integration Roadmap

Closing a deal is just the beginning. The real challenge starts with integration planning and ensuring the assumed value of the deal gets realized. The comprehensiveness of your initial due diligence and the speed of the integration define the complexity.

  • Feel prepared from a day 1 readiness plan to day 100
  • Understand upfront investments that need to be made in systems and people
  • Alleviate the reputational risk associated with a poorly executed integration
  • Determine the exit strategy if it does not go as planned

The Poirier Group can support your PE company through all stages of the M&A Process including Deal Generation, Due Diligence, Portfolio Value Creation and Exit planning.