You have four, perhaps six weeks to validate the investment thesis, and the company forecast spreadsheet is based on assumptions that no one outside the management team has confirmed. In this situation, commercial due diligence market research is not about gathering everything that can be gathered, but about designing the minimum set of evidence needed to answer several specific questions. Below is an overview of the research approach: which methods can realistically fit within a short time frame, which data sources can be activated during that period, and how to control the quality of findings under deadline pressure.
What can realistically be investigated when commercial due diligence market research has to be completed within a few weeks?
Market due diligence differs from a standard research project in three respects: a fixed deadline, limited access to the company’s customers, and the high cost of an error in a single finding. A traditional research cycle – desk research, a qualitative phase, a quantitative phase, and reporting – normally takes from several weeks to several months. In a transaction, it must be compressed without losing the ability to state which sample and method each conclusion is based on.
This compression is possible because commercial due diligence market research focuses on a narrow set of questions. The aim is not to describe the market, but to test several assumptions underpinning the financial model. Most commonly, these include:
- Demand and its durability – whether order volumes result from a lasting need or from a one-off investment cycle or a temporary regulatory change.
- Customer loyalty and churn risk – how customers describe the cost of switching suppliers, when the next tender will take place, and whether the company is their first- or second-choice supplier.
- Competitive position from the buyer’s perspective – which criteria determine supplier selection and how the company performs against those criteria.
- The feasibility of the planned expansion – whether new segments, channels, or countries behave as assumed in the plan, and which entry barriers market participants identify.
- Price sensitivity – whether the planned price increases are matched by customers’ willingness to accept them.
Each of these questions has a different “evidence base.” Demand durability is examined through secondary data and interviews with industry experts. Customer churn risk is investigated primarily through conversations with customers, supplemented by analysis of company data on retention, contract renewals, and lost contracts. Price sensitivity requires a quantitative approach or, at a minimum, a structured qualitative one. Method selection should primarily follow from the question, taking into account the available time, budget, and recruitment feasibility.
The second condition for compression is parallel execution. In transaction research, stages do not follow one another but overlap: desk research continues while recruiters are already calling respondents, and the first interviews take place before the secondary data analysis is complete. Findings from early conversations modify the discussion guide for subsequent ones. This is an iterative approach in which the research instrument develops during fieldwork – provided that changes are documented and do not concern questions forming the basis for comparisons between respondents.
How should research be designed in an M&A transaction? Methods, sequence, and data sources
A practical market due diligence plan within a short time frame is based on four layers of evidence that complement and cross-check one another.
Layer 1: desk research and secondary data (days 1-7). The purpose of this phase is not to write a chapter about the market, but to build a map: who the market participants are, what the distribution channels are, which sources of hard data exist, and where their coverage ends. In practice, this involves using competitors’ financial statements from registries, industry association data, public statistics, tender and public procurement registers, customs and import data, price lists, and offers published through online channels. This layer provides scale parameters and, more importantly, a list of hypotheses to test in interviews.
Layer 2: expert interviews (days 5-15). Between a dozen and more than twenty in-depth conversations with former industry managers, distributors, technical consultants, and association representatives. Such respondents may be available relatively quickly and can help explain market mechanics: how purchasing decisions are made, what the actual replacement cycle is, and where supply constraints lie. However, their potential conflicts of interest, confidentiality obligations, and limited knowledge of competitors’ current situation must be considered. The format is IDIs conducted by telephone or remotely, using a semi-structured discussion guide.
Layer 3: interviews with customers and lost customers (days 8-25). This is the most valuable and operationally challenging part of the study. Recruitment follows two routes: from a list provided by the company and independently, using proprietary databases and public sources. This makes it possible to reach competitors’ customers and companies that have left the company. Contact with customers from the company list should be conducted neutrally, respecting confidentiality rules and personal data protection requirements, and without misleading respondents about the purpose of the study. The second route is important because the company’s list may be subject to selection bias. In practice, the research tests the company’s share of the customer’s spend, the schedule for upcoming purchasing decisions, the list of alternatives under consideration, and evaluation criteria.
Layer 4: rapid quantitative research (days 10-28). Used when the question requires a figure rather than a description: the distribution of shares of spend, category penetration, price sensitivity, or stated intention to change suppliers. In B2C, it is most often conducted as CAWI using a panel; in B2B, as CATI or a CATI/CAWI hybrid with targeted recruitment. The questionnaire must be short, and the sample must be described in terms of its structure, because in due diligence, every numerical conclusion may be challenged by the other side.
Due diligence is not about having complete data, but about answering several questions on which the entire investment thesis depends. Teams that try to describe the market comprehensively may end up with a lengthy document and no answer to whether the growth assumed in the forecast is supported by customer behavior. The reverse sequence – first a list of decisive questions, then selecting a method for each of them – makes it possible to meet the deadline while maintaining methodological rigor.
Validating the company’s forecasts requires separate discipline: breaking the forecast down into drivers and assigning a source of evidence to each. If the plan assumes revenue growth, it is necessary to distinguish how much comes from increased volume among existing customers, how much from new customers, how much from price, and how much from new products or markets. Each of these components is researched differently, and each has a different level of credibility. Volume growth among existing customers can be verified in conversations with those customers and, if available, in order and contract data. Growth from new markets can be examined through research with potential customers who do not yet know the company, which requires recruitment independent of its database.
Which errors most often undermine the credibility of market due diligence?
Time pressure in M&A transaction research creates a recurring set of methodological issues. Below are those that most often lead to conclusions that cannot be defended before an investment committee:
- A sample drawn exclusively from the company’s reference list. Customers identified by management may be more satisfied than average or more willing to speak. Conclusions about loyalty based solely on such a sample may be overstated. The minimum standard, where feasible, is to supplement the sample with competitors’ customers and companies that have left the company.
- Confusing stated intentions with behavior. The answer “we would consider changing suppliers if the price increased by 10%” is a stated intention, not a forecast. Its evidentiary value is strengthened by linking it to observed past behavior: whether the customer has changed suppliers before, at what price difference, and how long the process took.
- Treating a small sample as quantitative data. Fifteen in-depth interviews provide an understanding of mechanisms, not distributions. Presenting percentage shares from such a sample without clearly stating the limitations is a common error in CDD reports and may be challenged by the opposing party.
- Lack of triangulation. Each conclusion material to the investment thesis should, where data are available, be supported by more than one independent source – for example, secondary data and customer interviews. Convergence strengthens the conclusion; divergence is information in itself and requires description rather than smoothing over.
- Concealing evidence gaps. If it was not possible to reach customers in one of the countries within the available time frame, the report must state this. Silence on this point is riskier than openly indicating that a given assumption remains untested.
- Careless recruitment. In narrow markets, a carelessly phrased question may reveal that a process is underway. The standard is to position the research neutrally, truthfully, and in line with disclosure obligations, while avoiding questions that indicate a specific company as the subject of interest.
A separate limitation concerns what commercial due diligence market research cannot determine. Research describes how market participants perceive the situation, how they make purchasing decisions, and which behaviors can be observed in the data. It does not replace a financial model or legal analysis. The best-used research reports are those in which findings are clearly separated from transaction interpretation – market evidence remains the researcher’s responsibility, while the decision remains the investor’s.
How should a research provider be assessed and a brief prepared under transaction conditions?
Selecting a research partner under time pressure is based on several verifiable criteria. They should be checked before the assignment is signed, because there will be no time for corrections during fieldwork:
- Recruitment capability independent of the company’s database. A control question: how will the provider reach competitors’ customers in this specific industry and within this time frame?
- Experience in narrow B2B markets. Reaching a purchasing decision-maker in a niche industrial market requires different capabilities than conducting consumer research using a panel.
- Methodological transparency. The report should include a description of the sample, method, discussion guide, and limitations. Without this, it is difficult to assess the credibility of conclusions before the investment committee.
- Ongoing reporting arrangements. In market due diligence, findings are needed during the process, not after it ends. Weekly fieldwork updates make it possible to adjust the scope when a new risk emerges.
- Confidentiality procedures. The approach to masking the purpose of the research, handling respondents’ personal data, and rules for market contact.
The brief for the provider should not contain a description of the market, but rather a list of decisive questions together with information on which answers would challenge the model’s assumptions. Such a brief makes it possible to design research around evidence rather than report length and genuinely shortens delivery time.
Frequently asked questions
What is commercial due diligence?
Commercial due diligence is an examination of a company’s market and commercial environment conducted for transaction purposes, as distinct from financial, legal, or technical due diligence. It covers demand, customers, competition, sales channels, and the assumptions underlying the sales plan. From a research perspective, it is often a mixed-methods project delivered on a shortened timeline, based on secondary data and interviews with market participants.
What research is conducted as part of CDD?
The standard set includes desk research using secondary data, in-depth interviews with industry experts, interviews with the company’s customers, competitors’ customers, and lost customers, and – when the question requires numerical distributions – rapid CATI or CAWI quantitative research. In selected cases, this may also include mystery shopping, an audit of prices and offers across channels, and analysis of transaction and tender data. The selection of components depends on which forecast assumptions require evidence.
How can a company’s forecasts be verified using market data?
Validating a company’s forecasts begins by breaking them down into growth drivers: volume among existing customers, new customers, price, new products, and markets. Each driver is assigned a source of evidence – secondary data, customer interviews, quantitative research – and the data are checked against the assumed rate of growth. Conclusions material to the investment thesis should, where possible, be triangulated using more than one independent source, while assumptions that could not be tested within the available time frame should be explicitly identified as unresearched.
Ask about market research to support due diligence
If you are managing a transaction process and need market evidence within a period of several weeks, Hume’s Institute can help design the research scope around specific decisive questions. Contact us to discuss the timeline and recruitment possibilities in your industry.