By Ángel Garrorena Crisóstomo, CEO at Lean Sales
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In the world of Search Funds, every acquisition represents a strategic bet. And the quality of that bet doesn’t just depend on financial statements or legal standing. A rigorous commercial due diligence is often the deciding factor that separates a successful investment from a future liability.
Why it matters for searchers and investors
For a searcher, conducting a thorough commercial audit enables them to validate the business model, identify hidden risks, and determine whether the target company aligns with your growth strategy and capabilities. It confirms not just what the company claims to be, but what it truly is, and what it can realistically become.
For investors, this level of analysis builds confidence in both the searcher and the deal. A solid commercial due diligence ensures that the opportunity rests on a business with real traction, healthy margins, and well-defined levers for growth, consistent with the expected return on investment.
Ultimately, doing this analysis right minimizes surprises post-closing and protects future profitability.
What commercial due diligence reveals that others don’t
M&A deals typically involve multiple areas of diligence: financial, legal, tax, technical, and more. But the commercial due diligence, often overlooked or merged into operational assessments, is the one that answers the most strategic questions:
- Is the company’s commercial model robust and scalable?
- Can it consistently generate and retain customers?
- Are there dependencies on specific channels, people, or segments?
- Is sustainable growth truly achievable?
This is the analysis that focuses on the current health of the business and its future viability, critical for any investor who expects to scale post-acquisition.
7 key areas every searcher should assess
A professional commercial audit is structured around a number of strategic levers. Here are the core dimensions to evaluate before making a purchase decision:
1. Growth potential and scalability
Understand whether the business can expand organically or through new channels, products, or geographies. Includes:
- Organic and inorganic growth opportunities
- Process scalability
- Ability to adapt to changing market demands
- Cross-sell and up-sell potential
2. Customer base and revenue concentration
Identify risks related to over-reliance on a few clients, short-term contracts, or non-recurring revenues. Evaluate:
- Client diversification
- Profitability by customer and business line
- Customer retention and loyalty levels
3. Go-to-market strategy and sales channels
Understand how the company brings its product or service to market and whether the model is sustainable. Review:
- Sales model efficiency
- Channel diversity and performance
- Sales conversion times and sales cycle length
- Acquisition strategies and lead generation success
- 4. Team dependency and organizational structure
Gauge the company’s reliance on specific individuals (founders, key salespeople, etc.) and operational bottlenecks. Analyze:
- Key person risk
- Workload distribution
- Interdepartmental dependencies and balance
5. Regulatory trends and risks
Assess the regulatory environment and potential impacts on business continuity. Consider:
- Current compliance level
- Exposure to legislative changes
- Adaptability to new requirements
6. Customer retention and churn
Customer loyalty is a strong predictor of sustainable revenue. Analyze:
- NPS and satisfaction metrics
- Churn rate and root causes
- Retention strategies and their effectiveness
7. Technology and sales tools
Technology can drive efficiency—or stall growth. Review:
- Use of CRM and automation
- Integration across sales, marketing, and service
- Readiness for scale through digital tool
Conclusion: Protecting the investment and building on solid ground
Well-executed commercial due diligence is not a cost, it’s an investment in clarity. It helps the searcher set realistic expectations, shape the post-acquisition strategy, and build trust with investors.
In an environment where the success of the deal heavily relies on post-close execution, understanding how the business truly generates revenue and whether that engine is scalable is the smartest diligence you can perform.
And if you lack the internal resources or expertise to do it right, outsourcing this work to specialized professionals is a smart move; it will save time, reduce risk, and eliminate future surprises.
