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Commercial due diligence.

Aka. Commercial diligence · CDD · Market diligence
All terms

What is commercial due diligence?

Commercial due diligence — usually shortened to CDD or commercial diligence — is the workstream that examines a target from the outside in: its market, its customers, its competitors, and the durability of its growth. Where financial diligence asks whether the historical numbers are real, commercial diligence asks whether the future the buyer is paying for is achievable.

It is built around the investment thesis. If the deal model assumes the company grows revenue at a given rate, holds its margins, and defends its position against competitors, CDD is the test of whether each of those assumptions survives contact with the evidence.

The work is typically commissioned from a strategy consultancy or a specialist diligence firm, and increasingly draws on primary research — customer interviews, win/loss analysis, channel checks — rather than relying solely on the seller's materials.

What commercial diligence investigates

CDD pressure-tests the demand side of the business against the buyer's model.

  1. Market sizing and growth. How large the addressable market really is, how fast it is growing, and whether the target's growth assumptions are consistent with the market's.
  2. Customer base. Concentration, retention, churn, and the economics of acquiring and keeping customers — the foundation of revenue durability.
  3. Competitive position. Who the target competes with, where it wins and loses, and whether its advantage is structural or temporary.
  4. Pricing power. Whether the company can raise prices without losing volume — often the single most valuable lever in a model.
  5. Thesis validation. Whether the growth in the buyer's model is supported, and where the realistic range of outcomes sits relative to the base case.

Frequently asked.

4 questions
01 What's the difference between commercial and financial due diligence?

Financial due diligence looks inward at the historical numbers — testing whether reported earnings are real and sustainable. Commercial due diligence looks outward at the market and customers — testing whether the future revenue and growth the buyer is paying for can actually be delivered.

The two are complementary: financial diligence validates the base; commercial diligence validates the trajectory.

02 Who performs commercial due diligence?

It is usually outsourced to a strategy consultancy or a specialist commercial diligence firm, because it requires primary market research and industry expertise that deal teams rarely have in-house. The internal deal team owns the thesis the CDD is testing.

03 Does commercial diligence use customer interviews?

Strong CDD almost always does. Primary research — interviewing the target's customers, lost prospects, and channel partners — is what separates a credible commercial diligence from a desk study built only on the seller's materials. It is how the team learns why customers actually buy and stay, and where the risks of churn or substitution lie.

04 How does commercial diligence affect the deal?

It directly shapes the growth assumptions in the buyer's model, which drive the price. If CDD finds the market is smaller or slower than assumed, or customer retention is weaker than presented, the buyer either lowers the price, re-cuts the thesis, or walks.

It can also be constructive — surfacing growth levers the buyer can pursue in the value creation plan after close.

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