Hire a commercial due diligence provider when you are about to buy or invest in a company and the price depends on its market, its customers and its growth plan. The provider tests the seller's story: is the market as large and fast-growing as claimed, do customers stay, and can the business plan be hit?
Expect a fact base from market data, customer interviews and competitor checks, and a view on the revenue forecast. Financial, legal and tax diligence are separate workstreams. Commercial diligence answers whether the revenue will be there.
What they do
A commercial due diligence provider tests whether a target's revenue plan holds up.
Market. They size the market and its growth from the bottom up, using public data and interviews. The US Census Bureau's County Business Patterns, for example, reports establishments, employment and payroll by industry every year.
Customers. They interview or survey the target's customers and lost customers on why they buy, what they would switch to, and what they will spend next year.
Competition. They map competitors, compare prices and offers, and test the target's claimed advantages.
The plan. They rebuild the seller's revenue forecast, flag the assumptions that carry it, and produce a downside case.
Why depth matters. A 2019 study in Contemporary Accounting Research linked less due diligence time to lower post-deal profitability and a higher chance of goodwill impairments.
When to hire, and when not to
Hire when
- The price depends on growth in a market your team does not know well.
- The seller's plan shows growth well above the target's history.
- A few customers account for a large share of revenue, and you need to know whether they will stay.
- Lenders or your investment committee expect an independent report on the market.
- You are entering a new market through the acquisition and want an outside view before committing.
Skip it when
- The target is in your own market, and your team knows its customers and competitors better than any outside provider would.
- The deal is small enough that a few days of your own calls and public data cover the main questions.
- You only need a review of the accounts. That is financial due diligence.
- You have already decided to buy at any price. Diligence will not change the outcome.
How engagements are set up
Red-flag review
A short review of the main commercial risks before a first-round bid. Fits early auction stages where you need to decide whether to keep going.
Full commercial due diligence
Market sizing, customer interviews, competitor analysis and a rebuilt revenue forecast. Fits the confirmatory stage before signing.
Vendor due diligence
The seller commissions the report and shares it with bidders. Ask whether you can rely on it, and test the parts that matter to your price yourself.
Customer survey or interview program
A focused study of the target's customers only. Fits deals where customer retention is the main risk.
Market entry or acquisition screen
Assesses a market or a list of targets before a deal is in play. Fits buyers building an acquisition pipeline.
What it costs
Commercial due diligence can be priced as a fixed fee per phase, set by scope and timetable, or billed by time. Customer surveys, interview panels and data purchases may be billed on top. In a 2025 survey of consultants, 36% priced by project, 26% by value and 23% by the hour, and 88% did not list fees on their websites.
Ask for a fee for each phase, so you can stop after the red-flag review if the deal dies. Ask whether any part of the fee depends on the deal closing. A provider paid only on completion has a reason to want the deal to happen.
Before you talk to firms
- Your investment thesis: why this target, what you expect to change, and the 3 or 4 assumptions the price depends on.
- The data room index and the seller's business plan.
- The timetable: bid dates, exclusivity period and signing target.
- Rules for contacting the target's customers, agreed with the seller.
- Antitrust counsel's guidance on information sharing if you compete with the target.
Questions to ask in the pitch meeting
- How many commercial diligence projects have you done in this market in the last 3 years, and can I speak to 2 of those buyers?
- How will you size the market, and which data sources will you use?
- How many customer interviews will you run, how will you reach customers without breaking confidentiality, and will you include lost customers?
- Who will do the interviews, and who will write the conclusions?
- What would make you tell us the plan cannot be reached?
- Have you worked for the seller, the target or a competing bidder? How do you handle that conflict?
- If we compete with the target, how will you handle competitively sensitive information under antitrust rules?
- Will you provide a downside case, and what drives it?
- Can our lenders rely on your report, and on what terms?
Warning signs
- The market size comes from a single published report, not built from the bottom up.
- Customer interviews are limited to names the seller supplied.
- The report repeats the seller's growth plan without testing the assumptions behind it.
- The fee depends on the deal closing.
- They have worked for the seller on the same deal, or for a competing bidder, and do not say so.
- They want to see competitors' current prices or strategic plans directly. The FTC warns that sharing such information before closing can violate antitrust law.
Frequently asked questions
What is the difference between commercial and financial due diligence?
Commercial due diligence tests the market, customers, competitors and revenue plan. Financial due diligence tests the historical accounts, earnings quality, working capital and debt. They are often done by different firms. You need both for most acquisitions, and the two teams should share findings on revenue, so the financial model reflects what the commercial work found.
Does more due diligence lead to better deals?
One study suggests it does. A 2019 paper in Contemporary Accounting Research used the time to negotiate and close a deal as a measure of diligence. It found that less diligence was associated with lower post-acquisition profitability, a higher chance of goodwill impairments, and lower-quality fair value estimates. It also found that competitive pressure was associated with less diligence.
Can we rely on the seller's vendor due diligence report?
Use it as a starting point. The seller chose and paid the provider. Ask whether the provider will give you and your lenders reliance, check who was interviewed, and run your own tests on the assumptions that drive your price. Commission a shorter top-up study on the points that matter most to you.
What if we compete with the target?
The FTC says that current and future prices, strategic plans and costs can be competitively sensitive, especially between competitors, and that the risk lasts until the deal closes. Use a clean team or a third party to handle sensitive data, and involve antitrust counsel before diligence starts.
Sources
- Wangerin, M&A Due Diligence, Post-Acquisition Performance, and Financial Reporting for Business Combinations, Contemporary Accounting Research (2019)
- FTC Bureau of Competition, Avoiding antitrust pitfalls during pre-merger negotiations and due diligence (2018)
- US Census Bureau, County Business Patterns
- Consulting statistics: pricing models and fees (updated 2025)
Written by Stratrix editors from public sources and checked claim by claim by a second AI model. Firms pay Stratrix when they accept an introduction; they do not pay to influence this guide, and it names none of them. How introductions work