During the last 25 years the global digital economy has grown rapidly. Thus, new successful business models were established, often by young companies. Such companies are agile and have an unconventional corporate culture. Their business models are for outside parties not always understandable and have different growth cycles. Sooner or later both already successful and “newly born” businesses will be in the focus of their bigger competitors, private equity firms and venture capitalists. Moreover, digital ventures need capital to grow and to establish themselves in the “winner takes it all” market. Investors, in return, require an assurance that their money will be invested properly. Both parties need a solid framework for an independent valuation of the intended transaction. Thus, a professional due diligence is of particular importance. FOSTEC & Company offers a portfolio of Due Diligence services, which may be divided into four (Figure 1).
Figure 1: M&A buy-side support by acquisition of digital & E-Commerce targets
The FOSTEC portfolio of Due Diligence Services thus consists of services of difference focus and different scope. The offerings range from initial Red Flag reports to full scope CDD reports which can also serve as a bankable report to secure the financing of the acquisition. FOSTEC & Company has already carried out a variety of Commercial Due Diligence Projects (Figure 2).
Figure 2: Selection of previously carried out Commercial Due Diligence Projects
The Commercial Due Diligence has generally the largest scope and includes services from the E-Business Due Diligence, the IT & Technical Due Diligence and the HR & People Due Diligence. The E-Business Due Diligence as well as the IT & Technical Due Diligence and the HR & People Due Diligence have a more focused scope and evaluate specific topics of a company.
While FOSTEC & Company has cross-industry consulting expertise in Due Diligence, we have focused specifically on the following areas in recent years (Figure 3).
Figure 3: Due Diligence industry expertise of FOSTEC & Company
Commercial Due Diligence
Commercial Due Diligence (CDD) is of central importance in the context of an acquisition or sale of a company. The critical evaluation of the strategic fit of the target, the expected synergy potential between the buyer and the object of purchase, and the overall sustainability of the transaction form the core of a comprehensive Commercial Due Diligence. As shown in Figure 3, a CDD essentially focuses on two external and two internal areas of analysis (Figure 4).
Figure 4: Areas to be analyzed within the Commercial Due Diligence
The external analysis areas examine the market attractiveness as well as the general conditions that cannot be influenced by the target company. The general environment (technological progress, economy, etc.) as well as the market and competition (potential, growth, trends, benchmarking, customers, etc.) are examined in detail.
The internal analysis areas evaluate realization competence and critical success factors of the target company. Strategy & focus (customer structure, geographic footprint, value contribution) as well as internal competencies (value chain, technologies, research & development, management, etc.) are evaluated in detail.
In addition to this fundamental methodological approach, we offer objective economic expertise as well as a deep market understanding in the focus areas of E-Commerce and digitalisation. Through numerous strategic projects as well as the derivation of inorganic growth measures, we understand the objectives of such projects and can support our clients in an advisory capacity. Through our broad network, we can also help you find potential acquisition targets or interested buyers. Please do not hesitate to contact us.
Our Due Diligence Services are a solid foundation for investors´ strategic decision making in the field of digitalization and E-Commerce. FOSTEC & Company as a Europe´s leading strategy consulting boutique is looking forward to your requests regarding company valuation and Due Diligence.More information about our Due Diligence services
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Markus Fost, MBA, is an expert in e-commerce, online business models and digital transformation, with broad experience in the fields of strategy, organisation, corporate finance and operational restructuring.Learn more