Commercial Due Diligence Cases
This lesson teaches how to analyze a target business in a compressed, investor-style case setting.
Why This Matters
Commercial due diligence cases test whether you can answer a high-stakes question quickly:
- is this business attractive enough to invest in?
They often feel faster and more hypothesis-driven than classic strategy cases.
The Case Pattern
A commercial due diligence case usually focuses on:
- market attractiveness
- competitive dynamics
- target position
- growth outlook
- key investment risks
The goal is not to redesign the business. The goal is to decide whether the target is a good investment.
What the Interviewer Is Testing
These cases often come from a private equity perspective.
That means the bar is different:
- market quality matters
- growth durability matters
- the target’s position matters
- risks must be surfaced early
How to Approach It
1. Clarify the investor question
Determine whether the investor wants to know:
- should we invest?
- what are the main risks?
- what growth assumptions need testing?
2. Assess the market
Look at:
- size
- growth
- segmentation
- structural attractiveness
3. Assess competition
Understand:
- intensity of rivalry
- basis of competition
- barriers to entry
4. Assess target position
Ask:
- does the target have a defendable advantage?
- how strong is customer retention?
- what is the quality of the revenue?
5. Assess upside and risk
Identify:
- growth opportunities
- margin improvement opportunities
- concentration risks
- disruption risks
Case Example
Prompt:
"A private equity fund is evaluating a healthcare services target."
A strong candidate might focus on:
- market growth drivers
- reimbursement or regulatory risk
- fragmentation vs consolidation opportunity
- the target’s differentiation, retention, and unit economics
What Strong Candidates Do
A strong candidate:
- moves quickly to the core investment question
- focuses on the few issues that determine attractiveness
- tests whether growth is durable
- highlights investor-relevant risks early
What Weaker Candidates Tend to Do
A weaker candidate often:
- treats the case like a broad company strategy project
- spends too much time on generic frameworks
- ignores quality of revenue and concentration risk
- fails to separate market attractiveness from target attractiveness
Common Traps
Mistake 1: Over-expanding the scope
Commercial due diligence cases require fast prioritization, not exhaustive analysis.
Mistake 2: Ignoring downside risk
Investors care as much about what could go wrong as what could go right.
Mistake 3: Missing the target-specific edge
A good market does not guarantee a good target.
Practice Prompt
A PE investor is looking at a target in education services. What would you need to test before recommending investment?
Example Approach
"I would frame the case around market attractiveness, competitive dynamics, target position, and key investment risks. First, I’d test whether the market is large, growing, and structurally attractive. Second, I’d examine how intense competition is and what differentiates the target. Third, I’d look at revenue quality, retention, and margin profile. Finally, I’d identify the few risks that could break the investment thesis before making a recommendation."
What to Remember
- Commercial due diligence cases are fast, investor-oriented attractiveness tests.
- Separate market quality, target quality, and risk.
- Prioritize the few issues that drive the investment decision.
- Use a sharper, more selective lens than in broader strategy cases.