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  • Per-Olov Lindgren

Take Due Diligence to the next level - Do this:

Most M&A advisors who specialize in value-creating acquisitions estimate that 60% of the added value in the acquired company comes from growth on the revenue side. Therefore, buyers who are interested in raising company value should focus on rapid revenue growth. In order to succeed in an acquisition, the buyer should include a revenue increase very early in his planning. That is, this goal should be part of the process long before a deal is agreed. One of the best ways to understand the market and make the right acquisition is to conduct a commercial due diligence. For the commercial DD, it is quite common for buyers to hire M&A consultants who then inform them about factors such as market size, market growth, competitors, how customers buy and macro trends from the large analysis companies. Customer surveys are included in the traditional DDs, but unfortunately they are given less space than the overall factors. General market analyzes often become the most important and the information about the actual customers is not given sufficient weight. It has been documented in many investigations that the most important indicator of a company's value is a strong customer loyalty with good business relations. Based on this, customer feedback should be a cornerstone of a commercial DD and not an additional piece of information. Direct feedback from the current customers that has been carefully analyzed provides insight and answers to the most important future and growth questions.

How to conduct customer interviews:

Many different customer interviews / surveys are already done today by both buyers and sellers. It is quite common for these interviews / surveys to be conducted to verify that today's deliveries are as they should be and are not intended to reveal information outside that box. These become more a form of reference control with very little information about the customer's innermost thoughts or about competitors.

In the USA, they have started to use a technology based on the Quality of Customers® model. The model involves asking the customer about their thoughts and situation from a holistic perspective for their business, without revealing that the interviews are related to an acquisition process.

In the interviews, the questions and in-depth conversations will vary for different organizations, but contain questions about how satisfied they are with the supplier, what opportunities for increased sales are there, how does the supplier relate to its competitors. The method provides useful feedback that is beneficial to both the buyer and the seller.

The interview processes should be transparent and at least include:

• One-on-one interviews with well-thought-out questions about customer satisfaction • Key customers for about 60-70% of sales are interviewed • Several people who have a role in the customer's purchase decision are interviewed • Write down the customer's comments word for word

With well-thought-out questions, answers are given to:

  • Customer satisfaction

  • The actual loyalty

  • Price risks and possible additional sales

  • Which got the latest deal

  • Growth or slowdown in customers

  • Need for product / service changes

  • Advantages of competitors (price function etc)

  • New or developed needs that the customer has

  • How the sales company's product / service relates to the customer's actual needs

  • How the sales company's product / service relates to competitors

With a professional survey, customer feedback can confirm future issues in the due-diligence process. (eg Sales, margin forecasts and competitive position). It provides a planning basis for integration, product / service development, pricing strategies and investments or settlement needs. This also creates a basis for a so-called. Game plan of what needs to be done when the store is closed.

On the other hand, feedback such as "they do not live up to their promise", "in comparison with competitors, their price cannot be justified", "the latest delivery from another supplier completely outcompeted them" can lead to the decision not to acquire or lower the purchase price.

The buyer also gets a very clear picture of how the integration should be done in the near future after access. With growth as a goal, this provides a basis for how sales, cross sales, product improvements and the like. shall be driven to enable the growth needed in the business.

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