In 2018, we conducted dozens of customer due diligence engagements on behalf of private equity and strategic buyers. While all of these engagements were designed to mitigate customer concentration risk and provide insights to accelerate post-close value creation, roughly half included additional objectives to determine the impact that tariffs may have on a deal. Based on thousands of in-depth interviews with B2B decision makers, we have observed five ways that tariffs are impacting M&A deals and portfolio management strategies.
Going into a deal — especially when starting to build a new platform — it is imperative for acquirers to gain a deep understanding of a category. Commercial due diligence is effective at helping acquirers familiarize themselves with a category at a high level. However, a broad understanding of a category may not always be enough to validate investment theses and develop value creation playbooks for a specific target company.
Prior to joining Strategex, which exclusively serves B2B clients, I spent 15 years conducting B2C innovation, insight, and strategy engagements. The transition from B2C to B2B was fairly straightforward and intuitive since the essential approach to research methodology, design, analysis, and implementation didn’t change much. I was, however, struck by the sometimes drastically different ways that B2B and B2C firms approach innovation.
Over the past few years, the adoption of rigorous, third-party customer due diligence has rapidly increased on the buy-side. Acquirers have come to understand that an objective validation of the strength and stability of a target’s customer relationships is essential to validate their investment hypotheses and determine the long-term growth potential of a company.