Customer Due Diligence

March 30, 2024

by a searcher from Indiana University at Bloomington in Carmel, IN, USA

Curious how others have approached customer due diligence especially when there are 5-10 key customers? I think it can always be a challenge to get good customer feedback while maintaining confidentiality for the seller.

In our latest acquisition, we worked with our board member, Bruce Kidd, to do old fashioned customer interviews. Bruce was "hired" by the seller to conduct customer experience and loyalty discussions, as well as anecdotal market analysis based on the customer's commentary. Bruce talked to 14 customers and found 13 of them to be "Truly Loyal" to our acquisition target. This gave us a ton of confidence to proceed with the acquisition.

Bruce does this work for PE firms too and I thought it might be worth sharing that this type of service is available, whether it is with Bruce or not. Here is his video about the service: https://vimeo.com/###-###-#### /da541932d6?share=copy

Reply by a searcher
from Northwestern University in Dallas, TX, USA

When there is heavy customer concentration, and a few dozen customers really matter, then framing it as you have is correct. Company can do the warm outreach under the guise of customer experience and continuous improvement. You most likely will need to hire a neutral person (as you mentioned) or firm to give it legitimacy and let the customer open up.

You can find quality single shingle consultants to conduct the customer interviews on Catalant.

For bigger deals you can leverage the third party networks like GLG, Thirdbridge and Guidepoint, but those get expensive very very quickly and don’t have a lot of LMM or Middle Market people on the platform.

Reply by a searcher
from Columbia University in Fairfax, VA, USA

Thanks for sharing, Chris - checked out Bruce's services, seems super helpful. I'll engage Bruce when I'm ready for that part of diligence.

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