What is Due Diligence in consulting
Hi All,
Can anyone who has worked on DD at a consulting firm describe what work it entails? Thank you!
Trending Content
| +29 | Nervous about MBB - incoming BA | 18 | 1d | |
| +11 | Premed to MBB Recruiting | 2 | 10h | |
| +10 | Chances at MBB - Reality Check | 1 | 22h | |
| +9 | Lateral to MBB from Investing Seat | 1 | 6h | |
| +6 | How much do your MDs make? | 1 | 4d | |
| +5 | Restructuring market | 4 | 1d | |
| +1 | Portfolio Operations Group--DFW area | 2 | 1d |
Career Resources
Bump
https://www.duedil.com/blog/a-guide-to-commercial-due-diligence has a high-level overview. Otherwise search the consulting/ PE forums; the information is in there.
Thank you this helped a lot!
CDD is always said to be a grind and really intense. Anyone have insight into why?
It's done under a very short turnaround (often as short as a week).
A week in very rare. More like 2-3 weeks.
Short duration, which means more time spent on painful ramp-up mode relative to the duration. Also PE clients tend to be relatively sophisticated, which increases the pressure to deliver quality work.
Also... the approach is fairly similar across different industries - after a while it becomes really repetitive
There are two DD's that are done most frequently:
CDD: Buy-side work, usually for a PE fund, maybe a corporate. 2-3 weeks. Very fast, goal is to give the client enough certainty to make their own investment decision. Usually very time sensitive, i.e., need the whole case wrapped up by X date, because a bid is due the next day. You cannot ask for an extension, get a few extra days, whatever. You have to produce. The upside is that you are done on that final day. Almost no rework required. It is funny that it will complete insanity, emails flying in and out, decks and models constantly being v-upped to "v23-final-updated-revised". Then, once you're done, it all just sort of.....stops. No more emails, no more phone calls. Like a cease fire, complete silence. You can just go home after that.
VDD: Sell-side, usually for a PE firm, working alongside the investmen bank and the c-suite of the selling company. If the C-suite are the founders it can be painful. They are like homeowners who think thier house is worth way more than it is actually worth, that the market is 10X the size that is actually is, etc. They are never happy. As a result, the DD runs past the target finish date that we all need to meet to start the pitch book and the deal running process. The deck and model get iterated a thousand times and 3 weeks easily turns into 6 weeks. Then, you are part of the road show. It is fun a few times, but then it is just time consuming. Each call is an hour and you could end up doing 20 of them, and these always occur months later when you are on another case and if you are really lucky, the person who built the model has left the firm for b-school. Party.
CDD are very fast, more hours than VDD, but have a definite endpoint. VDD are a bit slower pace, you get C-suite and I-Bank interactions, but they always drag out endlessly.
That's a good description of the side of the table. At each side of the table you then have commercial due diligence (top line growth and market size , e.g. Bain, McKinsey, LEK), operational due diligence (bottom line operational improvement, e.g. AlixPartners, Strategy&, Bain), financial due diligence (verify financials/QoE, auditors effectively, e.g. KPMG, Deloitte), legal due diligence (i.e. done by actual law firms) and sometimes IT due diligence (how good are the systems, what upgrades are needed at what cost, e.g. EY, PwC)
All of this is done from both the sell-side and the buy-side. They then need to bridge their valuation gaps somehow to come to a final price or transaction structure. Each side has their own set of advisors and certain firms are known to play more on one side than the other, as well as places within the ticket sizes (e.g. Oliver Wyman is mostly sell-side, LEK is mostly MM buy-side, Bain is mostly UMM to large cap buy-side etc.)
Thanks for filling in the ODD, ITDD, LDD and FDD peices of the puzzle. Aside from some ODD work, I haven't done the others.
The part about VDDs for founders is spot on. Having been on both DD sides, some of the figures that we see, typically market sizes and growth, can completely off.
To add/ rephrase some of what was said above: basic difference in approach is that a CDD will look at the target with suspicion and be conservative while and VDD will offer a rosy perspective and be more bullish on the company and its potential.
This guy DDs
Lol, I DD a lot.
Quibusdam asperiores temporibus facere molestiae voluptas doloribus iusto. Dolores reprehenderit et cum aspernatur.
Consequatur sunt voluptatem sapiente qui ab. Voluptatem reprehenderit cumque consequatur in ut et.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...