Mitigating Risk Utilizing Market Research Due Diligence Support
In the high stakes world of mergers & acquisitions, joint ventures, and capital investment, savvy Investors seek insight into the target company’s customer attitudes and behaviors. Understanding that customer behavior, and what drives it, can help the Investor assess the overall strength of the business, its potential for further growth. The problem is that recent, relevant customer information is often not available on the target company, the due diligence period is notoriously short, and the risks of moving forward without solid knowledge on the company’s customer base are significant.
Due diligence can be especially challenging when the target company’s critical revenue income is from a highly fragmented or unfamiliar customer base, or when there is no readily available independent database against which to fact check the target company’s claims as to customer satisfaction, brand loyalty, market penetration, customer profile, price sensitivity etc. This is particularly likely to be a problem for products or services outside of consumer packaged goods.
Essential Resources reduces these types of risks for companies by conducting customized market research into critical aspects of a target company’s business and customer base as part of an overall due diligence effort.
Professional, Focused, and Independent Due Diligence Support Can Be Used To:
Fact check a target company’s claims as to the loyalty of its current customers, or future growth prospects
Uncover simmering or undisclosed problems with a target company’s customer base, which even the target itself may not be aware of
Test in advance critical aspects of any post-transaction business condition, such as the name and trade address of a merged company or new products or initiatives to be announced in conjunction with any merger
Determine if a proposed divestiture will have negative effects on shareholder or customer perceptions of the divesting company
Explore the potential for growth with new products, or expansion into tangential categories
Examples Of Key Due Diligence Issues To Address
Strength of the customer relationship, and basis for that strength. How well is the target company fulfilling customer needs today? What are the switching barriers? How sticky are the target’s solutions? What are the bases for that stickiness? Are they captively loyal using the products or services because there are no other good alternatives yet?
Potential for broader penetration. What is the potential for greater expansion of the target across an existing customer organization?
Potential for deeper penetration. What is the potential for selling a broader array of products/services to the existing customers (greater share of requirements)? What are the barriers to expanding the target’s product portfolio in use?
Receptivity to new products. What might be the customer’s receptivity to new products/services in the same or ancillary business sectors, building off the existing product portfolio?
Identify unmet needs or address industry critical issues. Are there unmet needs, problems or issues related to target’s industry that might be addressed via new products or services?
How Essential Resources Contributes To Our Clients’ Success
The value of this knowledge during the negotiation process is clear. The success of any acquisition or investment will hinge on the ability of the target to not only retain existing customers, but to enhance and build those relationships, and expand the customer base. By obtaining the customers’ voice via a neutral third party you can replace opinion with fact-based knowledge, and that facilitates the investment deliberations.
Our firm is agile and flexible, and so we are able to turn around these projects on a timetable most market research companies simply can’t approach. We dive into your business, and quickly design research that is pragmatic, highly focused on the core points of concern on the acquisition or investment, and effective in getting you the knowledge needed, within that critical due diligence period.