Notes on DiligenceTM
Best Practices

Getting Ahead as a First-Mover on Electrification Investments

By Kevin Slayden on July 10, 2019

Electrification is accelerating rapidly throughout global value chains, presenting vast opportunities for PE firms.

An estimated 250 startups in the electrification space have attracted close to $20 billion in venture capital in recent years [1].  Investors ranging from large oil, auto, and telecommunications corporations to small PE firms are pouring capital into the field.

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Topics: Industrials, Key Purchasing Criteria, Market Due Diligence, Electrification

ACH Payments: An Overlooked Hotspot for PE Investment

By Kevin Slayden on June 24, 2019

Payments has emerged as an incredibly attractive investment space over the past few years due an already large and growing + $2 trillion industry. Within the field, both established players and nimble FinTech start-ups continue to appeal to investors by delivering the ability to scale and process payments in a smarter, more innovative way.

Within payments, ACH is often discounted by investors who sometimes see it as a heavily commoditized sub-sector in the industry and a less attractive investment opportunity than emerging technology. However, select firms in the ACH space make incredibly attractive PE targets.

ACH transaction volume has grown 6% in Q1 of 2019 compared to 2018, while seeing explosive growth in sector specific transactions (P2P, for example, has grown 25%) [1]. Given the large transaction volume, if ACH services were to be upgraded and monetized by a PE investor, they could generate enhanced and stable cash flows.  

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Topics: Key Purchasing Criteria, Market Due Diligence, Investment Thesis, Financial Services & Payments, Fintech, ACH Payments

Finding jewels for PE investment in the Engineering and Construction (E&C) market

By Kevin Slayden on May 23, 2019

PE firms have been historically cautious about investing in the E&C sector given its cyclical nature and the risky, project-based revenue profile of many firms in the space. 

Despite the inherent challenges and risks, the E&C market has emerged as a hot market space in recent years. Industry leaders have prioritized acquisitions as part of their growth strategy as illustrated by 534 E&C Industry transactions in 2018. This level of deal flow is a significant jump from historical trends which stood at 390 to 440 deals between 2010 and 2017 [1]. 

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Topics: Key Purchasing Criteria, Market Due Diligence, Engineering & Construction market, Investment Thesis

Representative Sample Selection in a VoC

By Simone Luciani on April 26, 2019
In  an effort to  move  the deal process forward , there is a tendency to  apply a cursory approach to  the diligence process ,   including  the  critical step of identifying and carrying out customer selection in a  VoC.    
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Topics: Investigative Research, Voice of Customer, Competitive Analysis, Key Purchasing Criteria, Market Due Diligence

Are You “Reading Between the Lines” in the Voice of Customer Interview?

By Kevin Slayden on March 28, 2019

If you are not “reading between the lines” of the VoC interview, you are likely to be missing the nuanced insights that can make or break a deal.

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Topics: Investigative Research, Voice of Customer, Competitive Analysis, Key Purchasing Criteria, Market Due Diligence

Dynamic Research Approach

By Kevin Slayden on February 26, 2019

Is your market due diligence effort dynamic enough?  Quite possibly the answer is no and this can be a costly missed opportunity.

At the outset of a due diligence project, research teams typically define a research scope to test a set of investment theses.  The initial research scope reflects the team’s initial best guess on what issues will be most important in terms of risk and opportunity for that specific deal. 

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Topics: Market Sizing, Investigative Research, Voice of Customer, Competitive Analysis, Net Promoter Score, Key Purchasing Criteria, Market Due Diligence

Value of "True" Industry Experts

By Kevin Slayden on January 15, 2019

Is it still possible to achieve information asymmetry in today’s highly competitive deal market?  Yes, but it requires deviating from the standard GLG and Alpha Sights approach to sourcing experts. 

The standard approach to expert interviews has three major shortcomings:

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Topics: Market Sizing, Investigative Research, Voice of Customer, Competitive Analysis, Net Promoter Score, Key Purchasing Criteria, Market Due Diligence

Red Tape Diligence: When Regulation = Profit Enhancement

By Jay Howard on October 5, 2016

Regulation. Probably not top of many people’s list of favorite Commercial Diligence issues. After all, compliance is often an annoyance that challenges budgets and margins.

Yet, regs can also equal opportunity: the potential to increase revenue and enhance barriers to entry. With the right plan, a well-positioned target company may profit by earning the status of “valued partner” for helping customers sort through red tape, and enjoy accelerated replacement cycles and greater upgrades, enhanced pricing, and the chance to drive differentiation from the competition.

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Topics: Adoption, Purchasing Process, Segmentation, Switching Costs, Demand Drivers, Regulatory opportunities, pricing opportunities

A Carve Out, Like All Surgery, Requires Special Consideration

By Robert Carpenter-Israel on September 14, 2016
When it comes to carve out opportunities, the business case is always made that the asset will perform better out of the hands of the parent or ‘mothership’ (i.e., too much corporate overhead charge, underinvestment, suppressing potential, etc.). But there are many cases where there is value loss from separation – and that loss needs to be understood and recovered.
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Topics: Drivers of Choice, Investigative Research, Value Proposition, Customer Retention, Best Practices, Voice of Customer

About Notes on Diligence

Notes on Diligence™ is an ongoing email series on commercial due diligence best practice for active acquirers. Recognizing that life is busy, each article is short and focused on a single, digestible diligence topic.

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