Every potential acquisition, investment, alliance, partnership, or joint venture presents both opportunities and risks. However, the pressures of time and “deal excitement” often prevent the type of disciplined, forward-looking analysis that is necessary to identify what is truly important, how value can best be created, and what key actions are required to realize value.
Due Diligence Support for Communications, Technology and Media Investments
CSMG regularly supports investors in assessing deals in the communications, technology, and digital media markets. We have supported numerous private equity, venture capital, and commercial lenders, as well as service providers and vendors globally. Typically, we supplement an existing deal team and provide industry, market, product or service analysis relevant to the key investment theses driving the potential investment. These projects usually involve extensive review of a company’s strategy, business plan and business case, and often incorporate market analysis of customers, competing products, technologies and ecosystems. Areas of focus include:
- Strategic and Operational Due Diligence: Evaluate the business plan to assess market, competition, technology and external forces (e.g. regulation) to develop a 360-degree sense of the market forces facing the target company. What are the market dynamics, revenue drivers and cash flows of the target company’s business? What is the nature of the operational, IT and technical platforms, and the associated network and capital expenses?
- Critical Risk Assessment: Perform a "red flag" assessment of the key assumptions of the target company’s model. Assess the impact of expected changes on their forecast or revenues, operating expenses, and capital needs.
- Financial Modeling: Bottom-up analysis of the economics of the target company’s business operations, focusing on revenue forecasts and underlying drivers of growth, operational costs and capital investments to assess reasonableness and consistency with industry practices and benchmarks.
- Sensitivities and Scenario Development: In any business plan, a select few assumptions and scenarios likely determine success or failure of the enterprise. Given our extensive experience with business plans in the sector, we are uniquely qualified to identify and "stress test" key sensitivities and scenarios in order to asses returns to investors and coverage ratios for lenders.
- Business Case Modeling: Develop a detailed and robust model of revenues, cash flows, investments and returns for executive decision-making. Incorporate 3-5-10 year revenue, cash flow, and investment horizons.
- Valuation Support: Can the target truly generate the revenue, growth, cost savings, profit, and cash flow required to justify the purchase price / valuation and market assumptions / expectations?
- Negotiation Support: Deal team support (competitor analyses, supplier analyses, customer / channel analyses, regulatory analyses, etc.) designed to provide your team with detailed and relevant factual insights.