MARKETING & SALES

Commercial Due Diligence

An independent and rigorous commercial assessment of acquisition targets considering the market environment, competitive landscape, company capabilities and performance.

What challenge(s) do our clients face?

In the context of data scarcity, time pressure and future unpredictability, how to achieve a well-rounded and thorough assessment of a potential acquisition target?

Gauging a company’s attractiveness is no easy feat. A review of a target’s financial performance may tell you about their financial health at present, but what happens if the external environment changes or a new competitor enters? Will they be able to adapt to new customer preferences, enter new markets or innovate?

In order to truly evaluate the strength of an acquisition, the potential buyer must build an in-depth knowledge of the target company AND the market in which it is positioned. This can prevent costly mistakes and future issues such as:

  • Entering a segment with lower capacity to grow than expected, due to overcalculating the addressable demand or market share projection
  • Stunted growth as a result of overestimating growth levers and market movements
  • Reduced profitability from cannibalization or anti-synergies which were not identified through deep channel dynamics understanding
  • Selecting the wrong target for the acquirer’s strategy and ambitions due to an imbalance in the value assessment equation
  • Failure to achieve the mid-term objective of selling the company, following an ambitious evaluation of the exit strategy and commercial equity
  • Acquisition of companies with commercial capabilities that hinder or even block growth and innovation ambitions, due to an incomplete capability assessment

How do we help?

We help our clients make fully informed decisions that prevent unforeseen risks and maximize value creation.

Integration’s differential lies in putting our marketing & sales knowledge and pragmatic implementation experience at our clients’ service, in order to test and challenge the investment thesis from a commercial perspective. This supports and drives the decision-making process, raises awareness and answers questions that directly impact M&A success.

Integration provides a tailored approach based on your objective and whether it is a merger or acquisition, typically completing some or all of the below activities:

1. Market Overview, Growth Opportunities & Risks Mapping:

  • Providing a deep understanding of the acquisition target’s sector – not only gathering data and trends, but also interviewing players within the business ecosystem to bring a realistic view of the market, growth scenarios, risks and mitigation routes.

2. Competence Map:

  • In the case of an acquisition: evaluation of the target’s capability to differentiate, innovate, grow and improve, as well as how this will affect the investment thesis and value equation.
  • In the case of a merger: evaluation of both the client’s and the target’s commercial competences, to identify and estimate the value of synergies and anti-synergies.

3. Synergies and anti-synergies (for mergers)

  • Identification and estimation of the commercial synergies realized through the merger externally (e.g. distribution reach, channel penetration, client relationship) and internally (e.g. marketing and trade marketing, structure, team and execution).
  • Assessment of how long the synergies will take to embed and impact the businesses, based on our extensive experience in GTM design and implementation.

4. Financial Simulation of commercial aspects

  • Creation of a financial model which helps project value into the future considering all relevant variables

5. Exit Strategy (usually for Private Equities or short to mid-term investments)

  • Mapping of the exit options and the success factors for achieving them, based on interviews with relevant players, benchmarks and data.

Should our clients go ahead with a merger or acquisition based on this commercial due diligence, we are also able to support in the post-merger integration (PMI) phase.

What are the benefits?

Ability to prioritize business opportunities, make Go/No Go decisions, and conduct informed strategic planning as a result of:

  • Ability to size and value market segments according to current and potential category offerings
  • Clarity on the competences required to capture market opportunities
  • Improved evaluation of risk and opportunity
  • Accurate financial models which are finetuned to reflect market realities and drivers (and which can be adjusted based on the changing environment)

Increased likelihood of success in market moves as a result of:

  • Identification of the best entry strategies in a new market according to the strategic objectives of the company and expected gains
  • Improved connection and relationship with important market players who can facilitate the move
  • Identification of synergic categories which can create gains in scale and consequent dilutions in cost.

How does it work?

Our aim is simply to provide you with the confidence to make informed decisions about M&A.

This means we will enter as and when you need our support and at the level of depth required, according to your objective, business strategy and areas of doubt.

For example, if your objective is focused on acquiring a target to generate value for a later sale or capital opening, our focus will be mainly on identifying and sizing growth levers and exit alternatives. In contrast, if a deal’s objective is to create a close merger, a thorough synergy evaluation will take place to guarantee that incorporating the target brings the growth and efficiency desired.

With this in mind, Integration’s projects are usually conducted as such:

  1. Understand client’s investment thesis
  2. Understand client’s strategy and business operations
  3. Evaluate the target’s strategy and business operations
  4. Carry out tailored commercial due diligence accordingly to thesis objective and the level of available information, such as:
    • Market overview, growth opportunities & risks mapping
    • Competence map
    • Synergies and anti-synergies
    • Financial simulation of commercial aspects
    • Exit strategy
  5. Financial simulation of commercial due diligence impacts on thesis

Along this journey, our expertise in Go-to-Market design & implementation and PMI, enables our teams to fairly evaluate growth projections and competences, as well as to map and estimate synergies and anti-synergies with accuracy. This always considers realistic implementation feasibility based on our experience of previous cases in the industry.

SUCCESS STORIES

CHALLENGE

A private equity company was considering the acquisition of an agro-industry distributor and needed a wider perspective on its investment thesis in order to understand the target’s real growth levers. This was both from an external perspective, where to expand and how, and an internal perspective, through understanding the target’s competences and benchmarking it against other players in the market.

APPROACH

In order to execute a realistic commercial due diligence, we modelled an expansion plan together with industry experts. It considered the market’s dynamics and the company’s own constraints, such as its dependency on external elements (supply and demand) and internal capacity to grow.

This assessment was deepened by evaluating the target’s competences through fields visits and using Integration’s proprietary database and scoring criteria. This provided a fair comparison of capabilities and opportunities to generate differentiated value against a large sample of competitors in the same industry.

RESULT

The private equity company was able to enrich and confirm its thesis, creating an expansion plan that would double the number of physical units sold, based on the opportunities identified and prioritized.

CHALLENGE

A private equity company was considering the acquisition of a sub-acquirer and needed external support to test their acquisition thesis, identify growth opportunities and understand if the target’s unusual business model in this sector was promising or not.

APPROACH

In terms of growth opportunities, we developed a client oriented approach with research conducted on more than 300 retailers which included 20+ interviews with experts and industry (as well as desk research). Regarding their business model, as well as providing a deep understanding v. alternative models, Integration’s team also challenged the remuneration model in order to estimate the payback for both the target and its franchises; this maximized the impact of the growth plan.

RESULT

The insights provided were not only on market sizing, growth, competitors and services opportunities but also on regulation and new technology impacts throughout the value chain. The private equity company was therefore able to have its thesis confirmed and moved ahead with the acquisition. In less than 2 years it rose 6 positions in the national franchise ranking, growing 10-15% monthly.

CHALLENGE

One of the global leaders in providing employee benefits was in the process of an acquisition that, once the deal was closed, would require a post-merger integration process. They therefore required a deep understanding of the synergies and anti-synergies between the companies in order to prepare the merger and define the new commercial model in a way that would take advantage of both companies’ strengths.

APPROACH

Integration worked as a clean team (ie. with one exclusive team for each company), mapping all commercial aspects with the same criteria. This approach enabled a detailed estimate of synergies and anti-synergies. It also generated a clear definition of the critical topics for the merger (commercial model, partnership management, variable remuneration and commercial prices table).

RESULT

The two companies were able to anticipate the coming challenges from the merger whilst protecting the confidentiality required in a due diligence process. This detailed commercial due diligence covered the integration of more than 100 sales employees and clients as well as synergies, anti-synergies and major changes in the companies’ commercial models and policies.

CHALLENGE

Two companies in the beauty sector were in the preliminary stages of a Joint Venture process, wanting to understand potential synergies before proceeding with due diligence or not. They hired Integration to work as a clean team (ie. with one exclusive team for each company), evaluating each of their data to identify portfolio synergies (complementarity in sales, distribution, production, innovation and procurement). This clean team approach was key for protecting their data from one another and avoiding conflicts of interest.

APPROACH

This deep commercial due diligence was required to identify portfolio synergies for 15 categories, all with different price positions in more than 6 sales channels. These synergies were evaluated in relation to the innovation process, ingredient formulae and raw materials, sourcing, production, stock, sales, POS activation and consumer activation (marketing). As well as using desk research, data analysis and previous knowledge of both companies, Integration interviewed more than 40 specialized distributors and 5 different JV models were evaluated in order to identify if there was one that worked for both companies.

RESULT

After identifying 35% category revenue cannibalization, both companies decided to not continue with the JV. This was reinforced as the project also identified that the benefits of the JV would only apply to one of the companies, whichever model was chosen.

OUR INDUSTRY EXPERIENCE

Integration has had the pleasure of working with Private Equity & Investments companies, Investment Funds and Corporate Strategy M&A executive teams, covering a range of business goals. Some examples of this experience includes joint ventures, divestitures, M&A target scans, competitor acquisitions, commercial projections for acquisition targets etc.

This work has also involved many different industry segments, from Consumer Goods (including Food and Beverages) to the Industrial and Financial Sector. Furthermore, because our experience spans several geographies, it is tailored to regional specificities as required. Integration counts on a global expert database to add experience and specific knowledge that can boost any of our solutions.

TALK TO US

Alice Maschera

Alice Maschera is a manager within Integration's UK operation. Alice is a specialist in the field of Marketing and Sales having supported numerous Consumer Goods and Retail companies in their market entry and commercial strategy. A graduate from the University of Cambridge, Alice is well-rounded and experienced across many of Integration's methodologies and service areas.

Carlos Lima

Carlos is the President of Integration and a Founding Partner. Carlos has worked with leading international companies across the globe as a consultant for the last 30 years and has developed a particular specialization in Marketing and Sales. He is considered an expert in the Consumer Goods sector and on the topics of Commercial and [...]

Daniel Rodrigues

Daniel is a Director within our Marketing & Sales practice and leader of Integration’s TechLab. Over the course of over 10 years with Integration, Daniel has helped clients from diverse industries and countries with digital and commercial challenges ranging from Go-to-Market Strategy to Commercial Due Diligence. Through his extensive business experience Daniel ensures that our [...]

Gary Singer

Gary Singer is a Managing Partner at Integration. He brings more than 25 years of experience helping companies in diverse industries improve top- and bottom-line results through new Sales and Marketing Strategies. Gary holds an MBA in Marketing & Statistics from the University of Chicago and a bachelor's degree in Quantitative Business Analysis from Pennsylvania [...]

Guido Solari

Guido is the leader of our Buenos Aires and Santiago office and is a director within our Marketing & Sales practice. Having worked with Integration since 2006, he has completed a wealth of projects across Latin America, the United States, Canada and Europe with clients spanning many sectors, including Retail, Consumer Goods, Government, Healthcare and [...]

Hugo Ribeiro

Hugo is a Founding Partner at Integration and can count on more than 30 years of experience in consulting. Hugo, who holds a post-graduate degree in Business Administration from Harvard University, is a senior specialist in the area of Finance & Management and frequently leads projects in Organizational Structure, Strategic Planning, M&A, Improvement of Productivity, [...]

Luis Bernal

Luis is a Manager in the Marketing & Sales practice. Originally from Columbia, Luis is an entrepreneur at heart, and has worked in several start-ups in Colombia, receiving his MBA from IPADE. He has accumulated international consulting experience whilst working across the United States, Mexico, Caribbean and Central America, Colombia and Brazil in industries such [...]

Matt Suggett

Matt Suggett is a Director at Integration, with significant consulting experience in projects such as Commercial Strategy, Market Entry Strategy, Pre- and Post- Deal M&A, and Organizational Redesign. He has supported clients in industries ranging from Consumer Goods and Healthcare to Metals & Mining across four continents. He holds a master's degree in Management from [...]

Rodrigo Pasianotto

Rodrigo Pasianotto is a Director at Integration, with more than 15 years of consulting experience, especially in the field of Marketing and Sales Consulting. Rodrigo has supported our clients across a range of challenges focusing on Strategic Roadmap, Go-To-Market, Market Scan, Entry Strategy, Brand Positioning, among other methodologies. He holds an MBA from Haas School [...]

Roger Saltiel

Roger is a partner at Integration and has been working since 2002 in the Marketing & Sales practice. Considered an authority in the Indirect Channel and Partner Relationship Management (PRM), he is a member of the Associação Brasileira de Atacadistas e Distribuidores (ABAD) [Brazilian Association of Wholesalers and Distributors], working in the leadership of the [...]

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