Glossary · Diligence
Commercial due diligence
Definition
Commercial due diligence tests the story behind the numbers. It looks at the size and direction of the market, how loyal the customers are, who the competitors are and whether the growth plan is realistic. Buyers often commission it from strategy consultants, and private equity funds lean on it to back their investment case.
Where commercial due diligence comes up
On this site, in our guides and in the conversations we've written up.
Podcast · Venture Summits Venture Summits: Daniel Havet Hansen, former CMO of Admincontrol At Verdane he runs commercial due diligence on prospective investments, the very process Admincontrol's data room is built to support. 
Video · RSM South Africa What operational due diligence checks that financial and legal DD miss Commercial due diligence looks at the markets the business will work in, the assumptions around them and the key drivers. Related terms
Due diligence The investigation a buyer, investor or lender runs on a company before committing: its finances, contracts, legal position and operations. Financial due diligence Diligence on the numbers: earnings, working capital, debt and cash flow behind the headline figures. Operational due diligence Diligence on how the business actually runs: processes, systems, supply chain, sites and people. Legal due diligence The lawyers' review of a company: ownership, key contracts, disputes, licences, employment terms and intellectual property. Red flag report A short diligence report that lists only the serious issues, instead of describing everything that was reviewed. Tax due diligence A review of the target's tax filings, structures and exposures, so hidden tax liabilities are priced in or covered. Vendor due diligence Due diligence a seller commissions on its own business before a sale, so bidders get one independent report up front.