Commercial Due Diligence

Assessing a Companys Commercial Attractiveness

Background
Acquiring or divesting a business in
general is complex and entails numer-
ous challenges. Identifying the potential
risks involved is a crucial success factor.
In order to make a sound investment
decision, it is essential to have a clear
understanding of all external (market
environment, trends and forecasts, etc.)
and internal (organizational structure,
product portfolio, etc.) factors, and
dynamics influencing and shaping
the business context, in which the
potential target operates.
Capgeminis Commercial Due Diligence
aims to analyze the attractiveness and
sustainability of the targets business
model, evaluate the future cash flows
and financial forecasts and indicate the
potential risks by reducing the often
inherent information asymmetries.
Ultimately, we thereby help our clients
to increase the success rate of the future
merger or integration process.
Figure 1: Commercial Due Diligence objectives
Commercial Due Diligence
Pre-Deal
Memorandum of Letter of
understanding intent
1 2 3 4
Strategy Screening & Strategic
Review Selection Valuation
Commercial Due
Diligence
A Commercial Due Diligence usually takes place in the strategic
valuation phase prior to the actual deal
A CDD is conducted after the short-listing of potential
acquisition targets
The Commercial Due Dilligence does not aim at identifying improvement potentials but seeks to analyze the target
companys business model and provides a report of its attractiveness.
Proven holistic approach
Capgemini Consulting has developed
a proven holistic approach. Together
with the client team our global experts
and other advisors are involved
in our Commercial Due Diligence
process which reviews the industrial
and commercial capabilities of the
potential target. Our evaluations are
based on the upfront defined strategy
and performance goals of our clients.
Having ready-to-use, state-of-art
analytical tools and methodologies,
we focus on the value enhancing aspect
of the potential deal. This results in
a better understanding of the additional
value the transaction could deliver,
reducing the risk of overpaying for
the target or underestimating post-
deal efforts. Based on our in-depth
project expertise, our consultants know
how to address typical challenges
like complexity, limited available data,
scarce availability of key experts and
stakeholders and last but not least a
tight schedule.
Objectives
To analyze attractiveness and
Deal Post-Deal sustainability of targets business
Closure model and its context
of deal/ sign
5 6 To evaluate future cash flows and
Securing Integration
the Deal Set-up
Integration financial forecasts of the target
company
To indicate potential risks and
thereby increasing the success
rate of the merger or acquisition
Capgemini Consulting 2016
Comprehensive and clear results
Capgemini Consultings Commercial
Due Diligence results in a compact and
structured written report. We will be
Figure 2: Components of a Commercial Due Diligence
1. Summary: key findings 5. Production, purchasing and suppliers 9. Balance sheet analysis
Scope of service and inf ormation basis
Company profi le
Main production locations
Production capacity
Overview
Capital assets
Overview balance sheet, P&L, cash fl ow
General key fi ndings and open issues
Investment plan
Quality management
Inventory
Accounts receivables

able to assess the projected future cash

flows and earnings by understanding
and analyzing all underlying internal
business and external market factors.
Our consultants take a three step
approach to deliver the final report:
planning and conceptual design,
research and analysis, validation and
finalization. The report includes all
major areas such as market environ-
ment, competitive landscape, sales and
customers, production, purchasing
and suppliers as well as organization
and personnel. In addition, we are
SWOT analysis (operating model, USP)
Contract and negotiation fi ndings
Supplier and creditor analysis
Main supplier contracts
Liabilities
Accrued liabilities
Purchasing organization Equity capital
2. Market environment
Market size and segments
6. Organization and personnel
Organizational chart
10. Profit & loss analysis
Historic market growth Overview
Projected market growth
Legal framework
Management quality
Sales and margin
Growth drivers Production costs
Regulatory framework
Corporate management incl. shared services
Succession policy
Other operating revenue
Distribution expenses
Segment-specific trends
Staff development and employee overview
Employee productivity
Research and development costs
Administration costs
3. Competitive landscape
Payment system and motivation
Pension and other payments
Basic EBITDA
Financial result
Key competitor analysis
Market share trends
Products and services (incl. USP) 7. Accounting and controlling 11. Budgeting and planning
Gross profit and gross margin
Significant sales factors
Controlling instruments Overview of earnings, balance sheet and
Controlling and steering processes cash flow forecasts
Company strategy
Risk management and corporate governance Forecasting system
Internal and external revision Forecasting accuracy
4. Sales and customers IT infrastructure Overview business activity of current year
Forecasting assumptions
Customer analysis
Order analysis
Sensitivity analysis
8. Cash flow analysis
Distribution channels
Debtor management Overview
Working capital
Sales force and 3rd party agents

flexible to cover extended financial Core components Extended components (shared with Financial Due Diligence)
components like analyses on account-
ing and controlling, cash flow, balance Capgemini Consulting 2016

sheet, profit & loss as well as budgeting

and planning.

Capgemini Consulting your Figure 3: Our global Research Network

ideal partner
Paris Oslo Berlin London Mumbai Munich Madrid Shanghai Boston
Capgemini Consulting is known for
its delivery excellence in the arena
of transaction services. We can draw
on broad experience and references
in a national and international context
for corporate and private equity clients.
HUB
We understand key levers and typical
challenges of a Commercial Due Utilities Lab Financial Services Lab Life Sciences Research Telecoms Research Lab Media & Entertainment
Diligence project. Our professionals (France & India) (France & India) Lab (India) (UK & India) Research Lab (USA)

work with proven, standardized and

state-of-the-art methodologies and
analysis tools delivering insightful and
targeted results. Furthermore,
Capgemini Consulting is able to
leverage an international network of
sector specific and functional experts.
Global network of strategy experts, research specialists and sector-specific consultants
provide knowledge and information via nine shops
With a hub in India, our network of Sector Labs provides content-rich research, analysis and
insight into our clients specific business challenges
Our Points of View on emerging business trends and sector issues are industry-leading

We have access to a multitude of

exclusive data sources with a huge Capgemini Consulting 2016

number of data, documents and

information. All these factors enable
us to deliver results that add value
to your initiative.
 Contact:
Dr. Christoph Stich Igor Barkalov
Head of Transaction Services Principal
Principal Berliner Strasse 76
Loeffelstrasse 44-46 D-63065 Offenbach am Main
D-70597 Stuttgart Mobile +49 151 4025 1630
Mobile +49 151 4025 0696 igor.barkalov@capgemini.com
christoph.stich@capgemini.com

About Capgemini Consulting

Capgemini Consulting is the global strategy and transformation consulting
organization of the Capgemini Group, specializing in advising and supporting
enterprises sformation, from innovative strategy to execution
and with an unstinting focus on results. With the new digital economy creating
s nt disruptions and opportunities, our global team of over 3,600 talented
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leadership in business transformation and organizational change.

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About Capgemini
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worlds foremost providers of consulting, technology and outsourcing
services. The Group reported 2015 global revenues of EUR 11.9 billion.
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deeply multicultural organization, Capgemini has developed its own way
of working, the Collaborative Business ExperienceTM, and draws on
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