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Commercial Due Diligence

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maconda GmbH

Friesenstraße 72-74

50670 Köln

Deutschland

Investigating deals with CDDs - our core competence

Efficient, independent, fact-orientated.

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Commercial due diligence (CDD) is an important component in the examination of a company before and during a transaction. In this very demanding task, we focus on the aspects that actually influence the investment decision. Whether it is a quick check, a red flag analysis or a full commercial due diligence, we will support you competently and with commitment in every phase of the due diligence process. A quick start with competent teams meeting tight completion deadlines are also second nature for us. Of course, our reports are fully bankable, evidenced by many accompanied transactions, mostly in the range of €30-500 million enterprise value.

In our integrated approach, we combine commercial reviews – strategy, market, competition, customers – with financial analyses. This will give you a deeper understanding of the target company and allow you to realistically assess the opportunities and risks of the planned transaction. We provide you with market information that is not available to everyone, thus opening up a fact-based, independent perspective. This is especially valuable in non-transparent niche markets – our speciality – where access to information that shines a light into the darkness is essential. We model markets and forecast developments on the basis of a variety of sources such as many conversations with market participants and much more

Central tasks of a commercial due diligence:

  • Differentiated examination of the target company’s business model for sustainability (strategic, organisational, also partly operational)
  • Profound and careful assessment of the market outlook
  • Analysis of the industry structure and competitive position
  • The company’s relationships with key customers and suppliers
  • Assessment of macroeconomic influences and the regulatory environment
  • Verification of the planning assumptions from a market perspective and evaluation of whether and how the forecast results are achievable

We work closely with our clients and other due diligence teams to accomplish these tasks. In this way, we ensure a well-coordinated approach and a high degree of accuracy of our statements.

Case studies

Frozen products

Initial situation

Investment company with a focus on medium-sized growth companies is considering a minority interest in a specialised German manufacturer of frozen pork products

Task

Commercial due diligence on the target company and market environment, based on maconda’s many years of experience in the food sector

maconda contribution

  • Examining the future importance of pork vis-à-vis trends such as declining meat consumption and increasing health awareness
  • Development of the out-of-home market by segment (fast food etc.)
  • Detailed analysis of the supply chain; review of the supplier base; analysis of pricing
  • Evaluation of the target company’s pricing strategy and flexibility with regard to necessary price adjustments
  • Analysis of the customer base and identification of relevant purchasing criteria; presentation of fundamental differences between food retail and food service customers
  • Implementation and evaluation of more than 30 shelf checks with detailed product and price surveys and a large number of structured and explorative market interviews
  • Assessment of growth options, including expansion of sales activities via new customers at home and abroad, concrete proposals for targeted expansion of the product range

Heating

Initial situation

Globally active German manufacturer of heating and cooling systems is planning a strategic investment in an established and innovative supplier of heat distribution systems for residential and commercial properties

Task

Detailed commercial due diligence on the company and market environment

maconda contribution

  • Evaluation of the future viability of distribution systems that can efficiently control entire heating networks
  • Identification of synergy potentials between investor and target company and development of concepts for strategic positioning
  • Structured survey of more than 100 heating contractors as well as a large number of explorative interviews with market participants and experts
  • Analysis of essential selection criteria for a provider and the fulfilment by the company
  • Assessment of relationships with key stakeholders, e.g. planners, heating contractors, etc., and analysis of strengths and weaknesses in the procurement process
  • Analysis of the company’s positioning in a fragmented and regional market environment
  • Creating a detailed market model for the market that is hardly covered by studies and other data

Woodworking machines

Initial situation

Internationally active financial investor plans to acquire a leading German manufacturer of stationary machines for woodworking with international presence and brand recognition

Task

Review of the company within the scope of a commercial due diligence and the preparation of a bankable CDD report for the investment decision

maconda contribution

  • Evaluation of willingness to invest, usage behaviour, replacement cycles and machine requirements of the heterogeneous target group
  • Examination of relevant market drivers and trends, e.g. Industry 4.0 and CNC machining centres
  • Collection of macroeconomic factors and qualitative market information based on a large number of expert interviews
  • Modelling of an uncovered niche market in numerous foreign markets and testing with management and industry experts
  • Evaluation and prioritisation of attractive growth markets in Europe, America and Asia
  • Elaboration of possibilities for diversification of the product and service portfolio, conceptualisation of a sustainable product programme within the framework of several workshops with management

Optician chain

Initial situation

Private equity house considers a majority stake in one of the largest and most innovative optical chains in Germany with international growth potential

Task

Comprehensive commercial due diligence and the preparation of a sound bankable CDD report

maconda contribution

  • Evaluation of the branch concept with regard to operating model, location type and city size, also based on enrichment with macro- and microgeographical data such as centrality
  • Comprehensive branch network analysis with associated KPIs (space productivity, conversion, returning customers, etc.)
  • Identification of drivers and levers for branch performance, like-for-like and ramp-up analysis
  • Evaluation of the personnel structure, especially qualification, remuneration and migration
  • Comprehensive market and competition analysis, analysis of relevant and potential customer groups
  • Assessment of growth opportunities at home and abroad, including suitable locations, white spots and pipeline

Pet food

Initial situation

German financial investor with a focus on medium-sized companies is considering an investment in an established manufacturer of premium dog and cat food under a private label

Task

Commercial due diligence with comprehensive analysis of a less transparent niche market

maconda contribution

  • Comprehensive overview of different types of animal feed, types of use and forms of presentation; analysis of the various distribution channels
  • Modelling of the size and structure of the relevant market segment, among other things via numerous market interviews, trade fair visits, visits to specialist retailers as well as intensive supplier screening
  • Comparative analysis of different competitive constellations; assessment of the strategic positioning of the target company in the diverse supplier landscape
  • Detailed assessment of the complete supply chain – from recipe development, manufacturing concept, sourcing, etc. to the finished product.
  • Comprehensive customer analysis, esp. profiling of the most important customers, evaluation of the customer relationship and resulting opportunities and risks
  • Simulation of a stress test to illustrate the impact of hypothetical risks on top-line development and profitability within the planning horizon

Software

Initial situation

German investment company with a focus on software companies plans to acquire a majority stake in a leading software provider for temporary employment agencies and building cleaners in Germany with very high name recognition

Task

Comprehensive commercial due diligence on the target company and the two niche markets served

maconda contribution

  • Detailed analysis of the revenue development of individual software products as well as the development of licence, maintenance and SaaS revenues to identify growth drivers
  • Evaluation of the two target markets of temporary work and cleaning, elaboration of the main drivers, including legislation, economic development, shortage of skilled workers.
  • Modelling and forecasting of the market volume for software in both markets for a 6-year period
  • Conduct a structured survey among (potential) customers, validate assumptions in the market model, e.g. degree of coverage with ERP software by company size
  • Detailed analysis of the competitive landscape and positioning of the company
  • Conduct a growth workshop with management to identify and prioritise growth paths beyond the business plan.

Food supplements

Initial situation

Austrian Family Office considers a majority stake in a medium-sized manufacturer of dietary supplements and functional foods for international markets under its own brand and private label

Task

Comprehensive commercial due diligence on the target company and market environment to assess the multi-layered business model with different product focus depending on region

maconda contribution

  • Targeted prioritisation of the most relevant product/market combinations, subsequent analysis of the product programmes in the associated sales channels
  • Detailed investigation of the German core market for food supplements; detailed profile of the largest customers and their behaviour
  • Pointed analyses of various other markets in Western Europe, Asia, the Middle East, etc.
  • Assessment of key customers and distributors; customer interviews in Europe, Asia and Africa
  • Carrying out more than 30 structured shop and shelf checks in drug stores, food retailers and pharmacies
  • Assessment of the competitiveness of the production facilities, the possible capex requirements as well as quality management
  • Evaluation of the competitive landscape within the sales channels; identify key competitive advantages over contract manufacturers and branded suppliers.

Extensive industry experience

From A like Apparel to Z like Zooligical supplies

We are highly experienced in the following sectors – for your benefit:

Consumer Goods | Food | Apparel & Textiles | Retail & eCommerce | Packaging | Healthcare & MedTech | B2C Services | B2B Services (incl. BPO) | Future Technology & Software | Manufacturing Companies

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Beitragsbild zu CDD under the sign of covid

CDD under the sign of covid

Creative, differentiated, objective.

Recent experience shows that some industries profit from a crisis, and not just through a one-off run-up. Sustainability can certainly be determined, even without the famous crystal ball. The analysis criteria are becoming stricter and the views more critical, from investors and financiers. The importance of the commercial appraisal is increasing and a CDD is becoming necessary where perhaps none was required before covid.

The necessary tool in covid times

  • The low reliability of current performance figures makes it necessary to calculate scenarios when validating the business plan and estimating the development of the relevant market. To nullify the covid effect, the optimal starting point for the projected future development should also be found.
  • Do you like to cite “big” studies in CDDs? Especially studies and surveys that were conducted before covid in a “linear world” and have been readily cited are often useless. In any case, the predictive relevance is severely limited. A close look and modelling of the relevant market is required.
  • In many cases, however, especially in niche markets, purely data-based analysis remains difficult and hypotheses fed by broad market soundings become all the more important. Whether structured surveys of consumers and customers or explorative conversations with industry insiders, associations or competitors, interviews with a range of market participants then serve as a central source of information and important basis for the assessment.

CDD for eCommerce and digital business models

Data-driven, holistic.

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Since the beginning of eCommerce, we have been advising investors on the evaluation of business models in remote commerce. In addition to the classic questions, digital competencies are an integral part of every CDD in eCommerce and other digital and data-driven business models. Whether B2C, D2C, marketplaces or platforms, we always evaluate companies holistically in the context of all the relevant facets of the business model. Omnichannel concepts in particular require an analysis that combines both digital and conventional aspects. We use standard tools and analytics solutions to analyse both internal shop KPIs and external performance metrics. We look at strengths and areas for optimisation and make recommendations that are both industry-specific and company-specific.

What you can expect from us in a CDD on digital business models:

  • Digital skills, digital trends and best practices
  • Opportunities and risks for the business model arising from digitalisation
  • Customer base: customer lifetime value, customer cohorts with associated KPIs, customer relationship management, customer-centric sales and marketing concepts, etc.
  • Online Marketing and Online Metrics: SEO/SEA, Spendings, Social Media Presence, Visibility, Performance Measurement etc.
  • Online shop KPIs and omnichannel: Customer journey, traffic sources, visits, conversion rates, usability, omnichannel concepts, etc.

Gain transparency for your digital investments with our due diligence, which always keeps an eye on the specific industry and target

Case studies

Workwear

Initial situation

German investment company considers a majority stake in a B2B mail order company of medical and nursing workwear

Task

Evaluation of the target company and relevant niche market by means of comprehensive commercial due diligence and the preparation of a bankable report

maconda contribution

  • Define and classify the niche market served and the macro drivers
  • Assessment of the assortment, including structure and NOS concept
  • Comparative analysis of different competitive constellations and business models (specialists, multi-professional group providers, rental clothing), differentiating features
  • Characterisation and quantification of the primary target group
  • Analysis of the customer cohorts and their KPIs, development of starting points for increased penetration of the target group
  • Analysis of the potential for new business through increased internationalisation
  • Assessment of the conceptual CRM system (activation model, trigger control, order generation) and the measures for customer approach and retention

Bicycles

Initial situation

Financial investor specialising in investments in high-growth companies is considering an investment in an eCommerce platform active throughout Europe with various online shops, each with a range of products geared to different target groups

Task

Review of the target company and relevant markets by means of comprehensive commercial due diligence, preparation of a sound report for the investment decision

maconda contribution

  • Detailed analysis of the relevant cycling and outdoor markets, assessment of the further growth opportunities of online retailing for advice-intensive products
  • Evaluation of the competitive environment consisting of bricks-and-mortar retailers, online pure-players and providers from outside the industry; strategic positioning of the company
  • Assessment of market development and potential in the most important foreign markets, interviews with relevant market participants and experts
  • Evaluation of the customer structure and cohorts, ordering behaviour of existing and new customers, investigation of opportunities for customer loyalty
  • Assessment of the planned strong growth and the assumptions behind it, modelling of growth scenarios based on a large number of interviews with market experts at home and abroad

Muesli

Initial situation

German investment company considers a minority stake in a leading supplier of premium and individualised muesli

Task

Review of the target company and relevant niche market by means of a very comprehensive market due diligence, preparation of a sound report for the investment decision

maconda contribution

  • Evaluation of the unique positioning in the heterogeneous competitive environment, as well as the entry barriers of the niche
  • Estimation of size and perspective of the niche based on market, competition and customer data on ordering behaviour
  • Detailed analysis of the various distribution channels (web shop, own shops, food retail, corporate customers), cross-selling analyses
  • Characterisation of the primarily addressed target groups based on socio-demographic features and quantification of the existing customer potential
  • Assessment of customer structure and consumer behaviour with the help of microgeographical data, e.g. purchasing power and centrality
  • Analysis of customer cohorts incl. KPIs and customer stability
  • Location and performance analysis of own shops, white spot identification based on a scoring model

Sports nutrition

Initial situation

OTC oral hygiene provider belonging to an international financial investor considers a stake in an emerging eCommerce provider of vegan protein and superfood powders

Task

Analysis of the niche markets served in Germany and other countries by means of market due diligence

maconda contribution

  • Locating the niches served in the surrounding large markets for sports nutrition and dietary supplements
  • Identify the characteristics of the online, lifestyle and fitness affine target group, e.g. share of the population, dietary habits, demand patterns, willingness to pay
  • Carrying out shelf checks, structured comparisons of online offers as well as explorative market interviews in the relevant countries
  • Assessment of the different product groups as well as respective distribution channels, e.g. Amazon, online pure players, drug stores etc.
  • Positioning of the company in the competitive environment
  • Development of a market model to forecast demand, based on which the attractiveness of foreign markets is compared

Wine trade

Initial situation

German investment company examines an investment in a leading eCommerce shop for wine with a very large range of brands, an extensive catalogue as well as several own retail outlets

Task

Commercial due diligence with a focus on the analysis of the various distribution channels and their interplay, the customer base and its sustainability as well as the supply chain with a view to Spain, a large source of product

maconda contribution

  • Description of the different distribution channels; analysis of the interactions between bricks-and-mortar and online business
  • Detailed analysis of the competitive landscape; identification of measures for differentiation
  • Evaluation of the eCommerce concept; assessment of the online marketing strategy and user experience; preparation of a catalogue with product and marketing-related recommendations for increasing sales
  • Comprehensive location analysis; enrichment of the branch performance data with external microgeographic data of the respective locations and cross-validation with the online customers
  • Analysis of the procurement situation; insight into relevant winegrowing regions, price development, main suppliers
  • Comprehensive customer analysis; assess customer structure and development, ordering behaviour by customer cluster, customer cohorts, new customer acquisition, etc.
  • Evaluation of the CRM system with regard to impulse control, churn management, data mining, customer retention measures, etc.
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Do you have a current investment case and want to uncover the opportunities and risks of an investment? Then let one of the most experienced CDD consultants in the German-speaking region accompany you successfully!

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