{"id":472,"date":"2016-12-28T21:04:07","date_gmt":"2016-12-28T21:04:07","guid":{"rendered":"https:\/\/mattersgraph.com\/?post_type=insight&p=472"},"modified":"2026-04-09T01:27:18","modified_gmt":"2026-04-09T01:27:18","slug":"when-things-arent-quite-what-they-seem-distressing-commercial-due-diligence-close-calls","status":"publish","type":"insight","link":"https:\/\/mattersgraph.com\/ja\/insights\/when-things-arent-quite-what-they-seem-distressing-commercial-due-diligence-close-calls\/","title":{"rendered":"006: When Things Aren\u2019t Quite What They Seem – Distressing Commercial Due Diligence Close-Calls"},"content":{"rendered":"

Often, we encounter situations in Commercial Due Diligence<\/a> that may be surprising to our clients, some may even seem negative.<\/p>\n\n

With a thoughtful approach, the information can contribute to the Value Gen plan. Here we share a few scenarios we’ve encountered.<\/p>\n\n

    \n
  1. \u201cIt\u2019s just secular headwinds [and bad performance].\u201d<\/strong> Turns out that market turn-downs sometimes hide problems rather than reveal them. We found a components manufacturer to large construction equipment manufacturers (\u201cheavy iron\u201d) who had \u2013 unbeknownst to management \u2013 let in several low-cost import suppliers to their top-notch, but consolidated manufacturing base. When the market turned back up, sales were unlikely to follow.<\/li>\n\n\n\n
  2. \u201cRevenue is growing [and mix is changing].\u201d<\/strong> Some investors use \u201cconstant margins assumptions\u201d to simplify revenue to earnings projections at least until later in diligence. We looked at an oilfield service company with growing revenues in a growing market; it turned out that the projects on the horizon were going to be in a category whose EBITDA margins were half those of the current projects. Once the \u201cconstant margins\u201d assumptions were removed for the valuation, the haircut on value was substantial.<\/li>\n\n\n\n
  3. \u201cIt\u2019s an engineer\u2019s decision [or at least it used to be].\u201d<\/strong> Component suppliers love it when product selection happens to be \u201cthe engineer\u2019s decision.\u201d This statement suggests that engineers will compel procurement to purchase the higher-priced, higher-quality product. We recently looked at a pipe manufacturer that had the leading brand in the industry, and was using technology that was widely perceived as the \u201cstrongest and best.\u201d Unfortunately, as engineers retired from their customers, customers began outsourcing decision-making to contractors. These new decision-makers preferred to work with an alternative technology that they perceived as more efficient to install and safer for their crews. With the bulk of engineers reaching retirement age, a more material shift was likely to occur soon.<\/li>\n\n\n\n
  4. \u201cWe are a one-stop shop [kind of like a convenience store].\u201d<\/strong> Revenue synergies from horizontally integrating the supply base are a common value driver for a platform-and-add-on play. In the best-case scenario, broad portfolios can allow for value-adding bundles. In a recent building materials project, however, most tradesmen making the purchases wanted best-of-breed rather than the \u201cintegrated system\u201d management imagined as part of the integrated portfolio. We also found that the answer differed dramatically by country \u2013 whether it be Russia, Germany, France or the U.S., all exhibited unique characteristics.<\/li>\n<\/ol>\n\n

    No one likes to find negative news in their due diligence, but always better today than tomorrow \u2013 especially if it can inform the value creation plan, rather than kill a deal. I focused on Industrials for this time around, but we plan to share examples from other sectors.<\/p><\/div>","protected":false},"excerpt":{"rendered":"

    Often, we encounter situations in Commercial Due Diligence that may be surprising to our clients, some may even seem negative. With a thoughtful approach, the information can contribute to the …<\/p>","protected":false},"author":[39],"featured_media":0,"template":"","meta":{"featured_image_background_position":"","promoted":false,"promoted-priority":0,"footnotes":""},"sector":[],"topic":[53,65,66,57,67],"audience":[],"insight-category":[139],"class_list":["post-472","insight","type-insight","status-publish","hentry","topic-best-practices","topic-economic-cycle","topic-profit-margin","topic-purchasing-decisions","topic-value-development-generation","insight-category-risk-mitigation","author-mark-stein"],"yoast_head":"\n006: When Things Aren\u2019t Quite What They Seem - Distressing Commercial Due Diligence Close-Calls - GRAPH Strategy LLC<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/mattersgraph.com\/ja\/insights\/when-things-arent-quite-what-they-seem-distressing-commercial-due-diligence-close-calls\/\" \/>\n<meta property=\"og:locale\" content=\"ja_JP\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"006: When Things Aren\u2019t Quite What They Seem - Distressing Commercial Due Diligence Close-Calls - GRAPH Strategy LLC\" \/>\n<meta property=\"og:description\" content=\"Often, we encounter situations in Commercial Due Diligence that may be surprising to our clients, some may even seem negative. 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