Commercial due diligence is a central step in private equity dealmaking, but the right scope looks very different for platform acquisitions and add-on deals. A commercial due diligence report that fits the investment thesis and timeline helps sponsors separate conviction from noise, avoid paying for unnecessary work, and surface risks that would not show up in financial or operational files. This breakdown explains how to right-size commercial due diligence, what to expect in a strong report, and how to select a provider who fits your deal.
Understanding Commercial Due Diligence
Commercial due diligence evaluates the external realities that drive revenue and growth. It focuses on market structure, customer behavior, competitive dynamics, pricing power, and the target’s go-to-market effectiveness. For private equity investors, it answers the question: does the target’s commercial story hold up in the market and at the price offered.
Right-sizing starts with the deal thesis. Platform deals usually require a full market due diligence to validate long-term growth drivers, barriers to entry, market cycles, and the scalability of the go-to-market model. Add-on deals often prioritize thesis-critical questions such as cross-sell potential into the platform’s installed base, customer overlap, the durability of niche positioning, and the integration impact on pricing and churn.
Budget and speed follow scope. A comprehensive platform diligence study may include extensive voice of customer research, competitor channel checks, and a bottom-up market sizing model. Add-on diligence reporting can be scoped to targeted modules that address strategic fit and risk flags in weeks rather than months.
Types of Due Diligence and Key Comparisons
Commercial due diligence differs from financial, operational, and legal diligence in both purpose and methods. Financial due diligence validates historical performance and quality of earnings. Operational diligence looks at systems, supply chains, and execution capacity. Legal diligence addresses contracts, IP, and compliance. Commercial due diligence sits on top of these and tests whether revenue assumptions and growth plans are supported by market reality.
The balance between CDD and other workstreams shifts by deal type:
- Platform acquisitions. Expect a broad market analysis, structured customer research, competitive response modeling, and scenario testing on pricing and share capture. The goal is a full external view to support a multi-year value creation plan.
- Add-on acquisitions. Focus on adjacency logic and integration risk. Questions often center on channel conflict with the platform, incremental wallet share potential, cost to sell into new segments, and whether the target brings defensible capability or simply revenue.
- Carve-outs and roll-ups. Carve-outs may require extra work on brand equity and customer stickiness without the parent. Roll-ups need a clear view of market fragmentation, regional dynamics, and the feasibility of a buy-and-build strategy at transaction pace.
These differences are practical. A 250-page market treatise can be overkill for a small tuck-in, while a light customer pulse can miss structural risks in a platform. Align commercial due diligence methods and depth to what will change your underwriting.
What to Expect in a Commercial Due Diligence Report
A high-quality CDD report should be clear, decision-oriented, and anchored to the investment thesis. Typical components include:
- Executive summary tied to underwriting. Top five findings, quantified upside and downside, and specific implications for valuation and value creation.
- Market sizing and growth outlook. TAM, SAM, and reachable opportunity built bottom-up, with clear assumptions and sensitivity ranges.
- Segmentation and demand drivers. How sub-sectors, customer cohorts, and use cases differ in growth, margins, and stickiness.
- Competitive landscape. Current and emerging competitors, share estimates where feasible, switching costs, and likely competitive responses to the target’s playbook.
- Pricing and unit economics. Price levels, discounting norms, elasticity by segment, and channel margins.
- Voice of customer insights. Structured interviews or surveys that assess satisfaction, drivers of selection, renewal risk, and willingness to pay.
- Go-to-market assessment. Sales model productivity, channel effectiveness, marketing efficiency, and the cost to acquire and retain customers.
- Risk and scenario analysis. Key uncertainties, potential shocks, and realistic scenarios that show what it would take to hit the plan.
Platform vs add-on reports differ in emphasis. For platforms, the report should lean heavily on independent market models, comprehensive VOC, and views on sustainable advantage. For add-ons, the diligence report should concentrate on fit with the platform, customer and SKU overlap, cross-sell pathways, expected pricing and churn impact, and speed-to-synergy. The deliverable should make clear what you can underwrite today, what depends on integration, and what remains unproven.
Choosing the Right Commercial Due Diligence Provider
Selecting a CDD provider is about matching expertise, approach, and speed to the deal. In practical terms, look for five attributes:
- Sector fluency. Providers should demonstrate pattern recognition in your specific sub-sector, not just broad industry coverage. Ask for recent study examples, not just credentials.
- Primary research capability. Confirm they can recruit the right customer and channel decision-makers quickly, design unbiased guides, and synthesize insights quantitatively. Press on sample design, response rates, and how they triangulate with third-party data.
- Market modeling discipline. Request a view of their market sizing methodology and how they handle sparse data environments. Good providers show their math and run sensitivities that matter to valuation.
- Deal-speed operating model. For add-ons, you need tight cycles, lean teams, and daily iteration with the deal team. For platforms, you need capacity to scale into broader modules without losing cohesion. Clarify who will be on the field, how often you will see interim reads, and how changes in scope are handled without delays.
- Independence and clarity. The strongest diligence teams draw bright lines between opinion and evidence. Look for transparent assumptions, explicit confidence levels, and a willingness to call risks that threaten the thesis.
Ask targeted questions before picking the first available provider:
- What are the top three thesis questions you would test first based on our draft CIM and model?
- How will you pressure test price increases or share gains in this sub-market?
- What customer segments and geos would you prioritize for interviews and why?
- Show an anonymized example of a CDD report’s executive summary and risk scenarios.
- Provide two references for work completed in the last 12 months in a similar niche.
Right-sizing also applies to the provider relationship. Consider phased scopes that gate research in logical tranches. For add-ons, commission a rapid fit assessment first, then proceed to deeper research if the initial signals are positive. For platforms, phase the work so market modeling and VOC run in parallel, with early readouts that shape further depth.
Selecting the Right Commercial Due Diligence Partner
Commercial due diligence is most valuable when it answers the specific questions that move your underwriting. Platform deals demand comprehensive external validation of market opportunity and defensibility. Add-on deals require focused analysis on strategic fit, synergy pathways, and integration risk. A strong report is structured, transparent, and aligned to the investment thesis. The right provider brings sector fluency, rigorous methods, and operating speed that match the deal. Right-sizing scope and team to the transaction improves clarity, shortens cycles, and supports better investment decisions.