However, 'rigorous' means more than just buying another rehashed market report. It also means more than talking to the senior managers of the target company and interviewing a few pre selected customers. Rigorous commercial due diligence requires a detailed analysis of all aspects of the target's business. The aim is not to justify the acquisition, but to question and test the assumptions that underpin the acquisition decision and the valuation. Most critically, it does not rely on public information but on detailed, primary data gathering.
Careful thought needs to be given to the timing of the commercial research.
Frequently, the target company and its customers will be quarantined, preventing the buyer from speaking to them once formal talks have begun. It may therefore be advisable to undertake the commercial research as a form of 'pre due diligence' when possible. By way of an example, a recent FMCG client decided at the last minute to undertake commercial due diligence before closing the deal. It thought it was buying a strongly branded company with excellent distribution and high margins. The commercial due diligence revealed that the company was almost 50 per cent own label, and only achieved wide distribution of its products because they also offered own label products at no margin.