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That would be accounting/ finance DD. Commercial DD revolves around the target’s market, customers, products, suppliers, partners etc. it’s a combo of primary and secondary research jam packed in a short period of time because in M&A the world will stop spinning if you don’t hit an artificial and aggressive deadline
Market sizing (total and addressable), customer segmentation, customer identification, strengths / weaknesses of competitors, market shares by product and player, future market trends, geographical differences in each of the factors, potential disruptors and threats, key purchasing criteria of customers, customer journey, pricing, key drivers of revenue, achievability of business plan, etc.
There’s a lot to learn, break down and build a perspective on in 3-4 weeks for a $5B+ company. 80 hours isn’t much considering the above + the number of interviews that need to be conducted.
I primarily work cdd projects with a focus on analytics. We'll reconstruct revenue and profitability on a transaction, customer and product basis.
After that in retail we tend to look at a few different things:
1. Customer profitability
2. Customer lifetime value
3. Geospatial performance driver's based on physical footprint /customer demographics
4. White space expansion opportunities
5. Performance improvement opportunities based on KPIs and demographics
6. Generate hypotheses for supply chain/distribution improvement with mixed integer
optimization
7. Market basket analyses to inform cross sell and sku rationalization hypotheses. Usually this involves association rules or a graph based approach.
8. Customer segmentation using some form of clustering or neural network
9. Price analysis both within banner and across competitor banners
10. Sentiment analysis and topic modeling
Plus a bunch of other stuff in two weeks or so. We leverage machine learning models and optimization pretty heavily for all of this. We also build our own libraries. Finally, we incorporate a significant amount of third party data into these analyses. It's a pretty big lift in a short period of time.
If anyone with a MS or PhD is interested in this type of work I'm hiring ;)
PwC 1 has no idea what he/she is talking about.
Source: Not in CDD, but work with them a ton
Glad my question may end up leading to a job for someone haha :)
Thanks for all the answers 🐠
P1 - I don't think it's glamorous either, but CDD is different from FDD, which is what you seem to be describing.
OP - CDDs typically involved an analysis of industry, competition and customers, and target company's growth prospects given these three aspects. Nature of work is similar to strategy projects. 80 hour workweek is because of deal driven deadlines. Unfortunate fact is PEs have a short timeline to close the deal, and need to fit a couple of months analysis into a few weeks. I have been on CDDs where we started on a Tuesday and the deadline was next Monday. Goes without saying we worked crazy hours and weekend.
OP, the American Dream is real!
SA1 - there's usually only so many workstreams you can divide into, at a certain point you have too many cooks in the kitchen. The DDs I've seen larger teams on are where there are multiple discrete business lines, and therefore easier to divide up.
I loved diligences because it was great for learning and getting greater responsibility, and best of all, absolutely no client BS or politics to deal with
Vetting. 80 hours is consulting anywhere in comm. Especially financial
Googling, skimming, BSing, making info look more dire/important than it is in fancy PPT layout, and then BSing some more at the readout
Also, ITDDs are typically focused on back-office and also include a review of personnel, strategy, etc. An operational diligence answers questions about: the sustainability of key suppliers, key customers, assets, personnel, etc.; operational cost savings opportunities; synergies...
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ITDD is conducted to understand a variety of questions: Does the target have sufficient IT systems and infrastructure to support the growth plan? Are the systems and infrastructure sound? What one-time costs would be needed to bring the IT environment up to standards? What one-time costs would be needed to integrate? What IT synergies exist. Among others.
You basically analyze financial statements all day. I’m not sure why everyone thinks it’s so glamorous.
D1 nailed it
I don't understand why the staff levels for deal teams aren't increased or why anyone would want to do it aside from it being a good "boot camp" for strategy consultants.
D1 - can you let me know which firm you work for and share a burner if you have one ? I’ve experience doing analytics for CDD ( FDD , OPs)
D1- thanks for the insights. Please drop the burner!
@D1. Very interested in your work. Do you have a burner?
To extend this convo, could someone explain what Ops and/or IT DD entails and how it is similar & different?