Commercial Due Diligence
Also known as: CDD, Market Due Diligence
Definition
Commercial due diligence tests whether the revenue story in a transaction is durable. It reviews market position, customer concentration, pipeline quality, pricing power, retention, competitive dynamics, sales process, channel health, and expansion potential.
Good commercial diligence does not stop at market size. It asks whether the company can keep winning without founder heroics, channel luck, or a few accounts masking churn.
For technology middle-market deals, commercial diligence needs to connect to finance and delivery. A revenue plan that the delivery system cannot support is not a growth thesis; it is margin compression waiting to happen.
Related terms
- Cohort Retention — Retention measured by customer groups that started in the same period. Cohorts reveal whether growth is durable or masked by new-logo acquisition.
- Customer Concentration — Revenue dependency on a small number of customers. Concentration can compress valuation when losing one account would materially impair EBITDA or growth.
- Pipeline Coverage — The ratio of qualified pipeline to sales target. Coverage indicates whether the team has enough real opportunities to hit the number.
Where this gets applied
- Revenue Architecture — ICP, deal-desk, sales-engineering ratios, MEDDPICC, deal-stage definitions. Move win rates from 29% to 68%.
- GTM Execution — Pipeline coverage, top-down/bottom-up motion, AE/SE ratios, comp realignment, partner-channel structure.
- Exit Readiness — Pre-LOI cleanup. Financial reporting normalization, contract hygiene, IP assignment review, customer-concentration mitigation.