Radical Diligence

A key challenge of any potential acquirer is understanding the business; it’s people and processes from the outside. It’s one thing to understand that a company has a good product and a good market or that – according to its financial statements – it has good margins. It is entirely another to understand how it brings those products to market, what internal dynamics drive – or discourage – the business, who are the key players and what changes could be made easily or quickly to drive cost reductions or sales growth.

One of the things that we have specialized in over the years is our detailed outside-in analysis. We recently performed a detailed analysis of a target company for a sponsor, laying out a number of margin improvement, cost reduction, management retention and sales growth initiatives. All without acquiring insider information. Through a methodical approach analyzing public financial statements, disclosures, news articles, interviews, etc. we were able to build a detailed picture of how the organization operated and where there were leverage points. This analysis enabled our clients to launch an acquisition offer, gain access to the data room and begin their due-diligence and vetting process. Following the disclosure of confidential data, we found our public analysis on cost reduction and margin improvement to be more than 95% accurate. What we found is that we were able to perform significant vetting of the target before any letter of intent, data request or diligence process.

Also published on Medium.