Due Diligence

Boosting Transaction Success with Due Diligence

Due diligence can make the difference between a successful corporate marriage and a miserable one—and between stellar and poor performance in a private equity portfolio. BCG’s strategic due diligence provides corporate acquirers and private equity firms with maximum insight into their targets so they can make the right decision.

Due diligence is the bedrock of any prospective transaction. Largely confined to financial information two decades ago, acquisition due diligence now covers every meaningful dimension of a target company, including strategy, operations, marketing and sales, finance, leadership, and human resources.

As more corporate buyers and private equity capital chase a limited number of attractive deals, pressure is intensifying on acquirers to vet targets thoroughly. And while new data sources have made information far more available, its sheer quantities make advanced analytics essential.

How BCG Enhances Commercial Due Diligence

Strong due diligence helps corporate buyers realize greater synergies and paves the way for a smoother transaction process. For private equity investors, it can yield vital industry knowledge and insight into profit-enhancing operating changes, among many other things.

Conversely, inadequate due diligence can destroy value significantly and irreversibly. Corporate acquirers can find themselves saddled with high costs and few actual synergies. Private equity firms are painfully aware that one poor choice can drive down the performance of an entire portfolio for years.

BCG’s due diligence consulting helps ensure that acquirers receive substantive, relevant, comprehensive information in minimal time. The benefits are tangible: our research shows that BCG-assisted mergers create 9% more shareholder value than average mergers do in the first 24 months.

As a due diligence consultant, BCG brings substantial assets to the vetting process, including:

Due diligence addresses the greatest risk for any acquirer: information asymmetry. Acquisition targets always have more knowledge than prospective acquirers, and acquirers never have enough time to explore a target company fully. To help close the knowledge gap, BCG uses advanced software tools that flag value-accretive opportunities and potential minefields buried in vast quantities of data.

We’re keenly aware of the urgent nature of the bidding process, particularly when competitors are circling your target. Our deep knowledge of the due diligence process enables us to complete assessments in an accelerated timeframe while providing detailed, substantive information and insights.

BCG understands the differing needs of corporate buyers and PE investors:

For corporate buyers, our approach encompasses M&A from target search to post-merger integration. Due diligence emphasizes synergies, the target’s operations, joint value creation, and preparing for integration, while our shoulder-to-shoulder working style enables you to focus on what matters most: your business.

For PE firms, we deliver much-needed industry depth to inform and help guide your choices. Due diligence focuses on industry dynamics, business model stability and attractiveness, value creation opportunities, deal speed, financiers’ perspectives, and exit routes.

What we don’t do is rely on a standard due diligence checklist that may lead to gaps in analysis. BCG instead views each engagement as unique—and as part of a broader strategy dialogue that begins with a clear understanding of your current situation and where you want to go.

Dissecting Due Diligence

Buy-side due diligence can be defined as an iterative process of raising and addressing financial, operational, cultural, and other critical questions. BCG’s due diligence consulting draws out answers based on our experience and expertise, our credibility as a neutral observer in the marketplace, and our deep analytical capabilities.

Our corporate and private equity due diligence processes differ somewhat, and the focus of each engagement depends on the target and acquirer. The basic approach, however, is similar. A typical analysis includes big-picture and detailed analysis of key areas, including:

  • Market dynamics
  • Sources of competitive advantage
  • Potential for optimization of internal operations
  • BCG’s view on the achievability of the business plan and value creation potential

We drill down into vital areas, including those necessary to assess value creation potential:

Our analysis of each area covers a lot of ground. Operational due diligence, for example, may include detailed assessments of purchasing, quality control, manufacturing facilities and methods, operating costs, overhead, product differences, distribution, and logistics.

Once our due diligence work is done, we document our findings in a comprehensive equity case, often accompanied by a banking case to support acquisition financing. Our realistic, neutral assessment of your target and the deal enables you to make a considered, fact-based decision about moving ahead. If you do, the equity case serves as the basis for your final bid. If you don’t, you can walk away without regrets—knowing you’re acting on intelligence and analytics capabilities that only BCG can deliver.

Meet Our Due Diligence Consultants

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M&A, Transactions, and PMI Services

BCG has deep expertise in a multitude of industries, with comprehensive knowledge of all aspects of M&A activity and post-merger integration, to help you realize the full value of your transaction.

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