FAQ

Commercial due diligence answers the core commercial question of a transaction: Is the target company’s business plan achievable in the real market environment? The market, competitive landscape, and customer base are examined—not retrospectively, but with an eye toward the viability of the plan. This process relies not only on existing data but also on direct interviews with market participants.

Financial due diligence examines historical financial data, while commercial due diligence assesses whether future financial targets are achievable in the market. Financial due diligence normalizes earnings, working capital, and debt; commercial due diligence assesses market growth, competitive dynamics, and customer loyalty. A&P covers the commercial aspects and collaborates with other advisors throughout the transaction process, particularly in the context of financial due diligence.

The choice depends on the target market and the specific questions at hand. Breadth is an advantage when a target operates in a large, well-documented sector and multiple workstreams are handled simultaneously. Depth is crucial when the investment thesis is centered on a niche market. In such cases, what matters is which provider already has a deep understanding of sub-segments, competitors, and market participants—rather than having to gain that understanding during the project.

The cost of a commercial due diligence depends primarily on the scope, market segments, and regions involved, as well as the interview program and the time available. A&P tailors the scope of the review to the key uncertainties of the transaction rather than applying a standard scope. A non-binding initial assessment of a specific target provides the basis for a reliable cost estimate and a tailored proposal.

The duration of a commercial due diligence process depends on the transaction process and the agreed-upon scope of the review. The key factors setting the pace are, in particular, bid deadlines or the agreed-upon exclusivity window; the interview schedule, interim reports, and final reporting are all aligned with these. Therefore, what matters most is not so much a standard, fixed duration as the question of which interim results must be available at which point in the process.

It makes sense to begin commercial due diligence as soon as the investment thesis is established and access to information is secured—usually upon entering the second round of bidding or at the start of the exclusivity period. Those who start earlier can test the thesis through an upstream pre-acquisition strategy before the full scope of due diligence is required. Those who start too late lose time for follow-up discussions and valuation arguments.

A commercial due diligence report assesses market attractiveness, competitive position, customer structure, and the commercial drivers of the business plan. What is crucial is not only the description of the market, but also an independent assessment of which assumptions in the investment case are sound, where risks lie, and what opportunities or potential for value creation this presents for the transaction.

A&P conducts due diligence for companies in the mechanical and plant engineering sectors, in automation technology, and for related service and software companies in the capital goods sector. Our coverage ranges from component and system suppliers to machine manufacturers and industrial end-users; we operate at the sub-segment level. This allows us to reliably assess market position and competitive dynamics even in highly specialized niche markets.

Both. Private-equity investors are a key focus—clients include more than 80 funds in Europe, China/Southeast Asia, and the U.S. At the same time, A&P has been working for industrial companies for many years, drawing on over 20 years of traditional industrial consulting experience with more than 140 clients. It is precisely this combination of transaction and industry experience that enables a nuanced assessment of market position, competitive landscape, and strategic potential.

The difference lies in our specialization in the industrial sector and our analysis at the sub-segment level. Mechanical engineering is not a single industry but a multitude of niches: While more broadly focused consulting firms often operate at the sector or market level, A&P concentrates on the specific submarkets, competitors, and market dynamics relevant to the investment decision at hand. This depth is complemented by a network of over 100 senior industry experts and more than 1,000 due diligence projects supported since the firm’s founding in 2005.

Commercial due diligence begins with defining the scope and investment thesis and proceeds through market and competitive analysis, interviews with experts and customers, and an examination of the commercial drivers of the business plan, culminating in an independent evaluation. The individual findings are cross-validated and synthesized into a clear assessment of opportunities, risks, and the robustness of the investment case.

A&P supports private equity funds and industrial companies during key phases of the transaction process. This begins with the pre-acquisition strategy, which includes market assessment, target screening, and review of the investment thesis. This is followed by commercial due diligence and, on the seller’s side, vendor due diligence. After closing, post-merger integration, value enhancement, and the Project Management Office support the operational implementation.

A&P currently has 12+ active consultants working on ongoing projects. The consulting team is supplemented by senior industry specialists from a network of more than 100 experts, including former CEOs and engineering directors. The firm’s professional background stems from founder Christian Androschin’s extensive experience in the capital goods sector, with over 35 years of experience exclusively in this industry.

The first step is a non-binding discussion about the specific target and the investment thesis. A&P begins by providing an assessment of the scope, key issues, and the most appropriate approach. Afterward, the scope of the due diligence and the interview schedule are determined, the analysis is conducted, and interim reports are timed so that relevant findings can be incorporated into the investment committee’s deliberations, pricing, and negotiations in a timely manner.

Red flags can arise in every aspect of the review. In the market: a segment growing more slowly than the overall sector, or demand tied to a single investment cycle. Regarding the product: technological substitution or interchangeable performance without the ability to set prices. In terms of competition: margins significantly above or below the industry average without any apparent structural reason. Regarding customers: high dependence on a few buyers or a single end market. In terms of planning: growth driven primarily by price effects rather than volume. The key factor is whether these risks have already been factored into the investment case.

Without commercial due diligence, the valuation relies more heavily on the seller’s assumptions. The risk lies less in obvious errors than in the unspoken assumptions: market growth that reflects the sector as a whole rather than the relevant niche, or customer relationships whose stability remains unverified. Issues that only come to light after closing cost the investor the negotiating leverage they previously had.

The scope of the required documentation depends on the scope of the project. To get started, A&P typically needs the available documentation on the target—in particular, the business plan, financial information, market and customer data, as well as information on products, competitors, and the order backlog. The scope depends on the focus of the review. The key factor is which information is already available to evaluate the investment thesis and which open questions will need to be clarified later on through interviews with customers, experts, or competitors.

No—the scope of the review should be commensurate with the actual level of uncertainty. For an add-on in a portfolio company’s already familiar segment, a focused review of specific issues is often sufficient, whereas a platform investment in a new sub-segment justifies a full commercial due diligence. An upstream pre-acquisition strategy can also help determine whether a segment and a target even warrant a full due diligence process.