What Is Commercial Due Diligence? Process, Report and Example Workplan

The business plan promises 12% market growth a year, and management insists customers love the product. With the deal closing in four weeks, commercial due diligence is how you find out whether any of that is true before you sign.

TL;DR: Commercial due diligence (CDD) checks whether a company's market, competitors and customers support the price a buyer is about to pay. It answers four questions:

• Is the market attractive?
• Can the company win in it?
• Do customers value what it sells?
• Is the business plan realistic?

A typical CDD takes a few weeks, starting with the buyer's key questions and ending with a report of findings and red flags.

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What is commercial due diligence?

Commercial due diligence is an independent review of a company's market position, carried out before someone buys or invests in it. Its goal is to test whether the growth story in the business plan holds up against real evidence about the market, competitors and customers.

It sits alongside financial due diligence, which looks at the quality of earnings, cash flow and financial risk. Commercial due diligence asks a different question: can the company keep growing the way the seller says it will?

CDD is most common in:

• Private equity, where the investment case depends on growth over the holding period.
• Corporate M&A, where a buyer needs to know whether a target fits its strategy and markets.
• Growth and minority investments, where investors want an outside view before committing capital.

Who does it? It is usually done by a strategy consulting firm or a specialist advisory team hired by the buyer. In some sales, the seller commissions a vendor commercial due diligence report in advance and shares it with all bidders. Bidders often still run their own shorter review to test its conclusions.

Commercial due diligence vs financial due diligence

Buyers usually run several due diligence workstreams at once, and each one answers a different question.

Put simply, financial due diligence (FDD) tests the quality of the numbers, while commercial due diligence (CDD) tests the market and customers that drive future revenue. The two meet at the business plan. FDD gives a reliable starting point for earnings and cash, and CDD tests whether the forecast growth is believable.

A note on terms: in banking and compliance, "CDD" also stands for customer due diligence, which means the identity checks required by anti-money laundering rules. That is a completely different process.

What commercial due diligence covers

Most CDD work falls into four areas.

1. Market

• How big is the market the company actually serves, as opposed to the biggest market it could claim?
• How fast is it growing, and what is driving that growth?
• Which segments are growing and which are shrinking?
• Could regulation, new technology or pricing pressure change the picture?

For example: a plan claims a $5 billion market, but the company only sells to mid-sized hospitals in two regions. The market it can realistically win is a fraction of that, and so is its room to grow.

2. Competitive position

• Who are the main competitors, and how is market share split between them?
• Why do customers choose this company over the others?
• How easy is it for new competitors to enter?
• Could AI tools replace this product or service, or push its prices down?

For example: management describes the company as the premium choice, but customer interviews show that most buyers chose it because it was the cheapest. That means a lower-cost competitor is a bigger threat than the plan assumes.

3. Customers

• How concentrated is revenue, and how badly would losing the top few customers hurt?
• How loyal are customers, and why do the ones who leave decide to go?
• What are customers likely to buy more of, and what might they cut?

For example: revenue grew 20% last year, but 40% of it came from just two customers. One of them plans to move part of that spend in-house next year.

4. The business plan

• Do the revenue assumptions match what the market, competitor and customer work found?
• Which assumptions carry most of the forecast growth?
• What does a realistic downside case look like?

For example: the forecast assumes a 5% price increase every year, yet customers in interviews say they would look at other suppliers at that level. That doesn't prove they would leave. It does mean the assumption should be tested against past price rises and churn before anyone relies on it.

How to do commercial due diligence, step by step

Step 1: Turn the deal thesis into key questions

Start with the reasons the buyer wants the deal, such as "the market is growing at 10% a year" or "the company can expand into nearby segments". Then break each reason into questions that evidence can prove or disprove. A hypothesis tree is a useful way to do this, because it keeps every later piece of work tied to a question that matters for the price.

Step 2: Review the data room and do desk research

Begin with what the seller has provided, such as the management presentation, business plan, customer lists, sales data and pricing history. Then add outside sources like industry reports, competitors' public filings, trade data and news. As you go, note every gap between what management says and what the outside sources show. Our guide to market research with AI explains how to turn desk research into findings you can defend.

Step 3: Size the market

Estimate the market the company serves in two ways:

• Top-down: start from a total market figure and narrow it down by segment, region and customer type.
• Bottom-up: count the potential customers and multiply by what each one realistically spends.

If the two estimates are far apart, find out why before relying on either. Growth forecasts built on the wrong market size are one of the most common problems CDD uncovers. Our guide to market sizing walks through both methods with a worked example.

Step 4: Interview customers and experts

Interviews are usually the most valuable part of CDD, because they give you evidence the data room can't. Speak to:

• Current customers about why they buy, how satisfied they are and what they plan to spend.
• Former customers about why they left.
• Competitors' customers about why they chose someone else.
• Industry experts about where the market is heading.

Use the same interview guide each time so the answers can be compared. Record every interview in a consistent format, so each finding can be traced back to who said it.

The quality of the sample matters as much as the number of calls. Where you can, choose interviewees yourself rather than relying only on a list from management, and make sure each important customer segment is covered. It also helps to check what customers say they will do against what they have actually bought.

Step 5: Map the competitive landscape

Build a picture of the main competitors, covering their size, growth, positioning, pricing and strengths. Then compare the target against them on the things customers said matter most in the interviews. Our guide on how to build a competitor landscape with AI walks through the method step by step.

Step 6: Test the business plan

Go through the revenue forecast line by line. For each major assumption, note whether the evidence supports it, partly supports it or contradicts it. Then build an adjusted forecast that reflects what you found. Buyers often use this directly in valuation and negotiation.

Step 7: Report findings and red flags

Finally, bring the work together in a report that answers the key questions from step 1. Lead with the conclusions and back each one with evidence, following the report structure below.

Commercial due diligence example: a sample 4-week workplan

Timelines vary by deal, but a focused CDD often follows a structure like this.

The weeks overlap on purpose. Interview findings often change the market model, and the business plan review depends on everything that comes before it.

What goes in a commercial due diligence report

A clear CDD report usually follows this order:

1. Executive summary. A short answer to each key question, the overall view of the business plan and the main red flags. Many readers stop here, so it has to stand on its own. Our executive summary guide shows how to write one.
2. Market overview. The market's size, growth, segments and drivers, with both sizing methods shown.
3. Competitive position. The competitor landscape, market share and the target's strengths and weaknesses.
4. Customer findings. Themes from the interviews, along with satisfaction, loyalty and concentration.
5. Business plan assessment. Each major assumption rated against the evidence, plus an adjusted forecast.
6. Risks and red flags. What could go wrong and how likely it is.
7. Appendix. The interview list, data sources and methodology.

Every figure in the report should trace back to a named source, because buyers and lenders will ask.

Commercial due diligence timelines and cost drivers

CDD is measured in weeks rather than months. How long it takes depends on:

• The deal timetable. In a competitive sale, bidders often have a fixed window.
• Scope. A focused review of the main growth assumptions is faster than a full market study.
• Market complexity. Each extra segment, region or customer type needs its own work.
• Interview coverage. Good evidence needs every important customer segment covered by well-chosen interviewees, and that takes time to arrange.
• The quality of the data room. Missing data means more outside research.

Cost depends on the same factors, as well as the adviser chosen and whether a vendor CDD report already exists. Buyers usually pay for their own CDD. In a vendor CDD the seller pays, and bidders typically receive the report, sometimes with the right to rely on it formally.

Red flags to look for

• Customer concentration, where a large share of revenue depends on a handful of customers.
• A shrinking core market hidden behind growth in a small new segment.
• Growth that depends on one channel, product or contract.
• A market defined too broadly, which understates the company's current share and overstates its room to grow.
• Interview evidence that contradicts management, such as customers planning to cut spend while the plan assumes growth.
• Price increases the market won't accept built into the forecast.
• Rising churn hidden by new customer wins.
• Growth that depends on work AI is likely to automate, such as manual services customers may soon handle themselves with AI tools.

How investors should read a commercial due diligence report

If you are receiving a CDD report, especially one commissioned by the seller, check:

• Who was interviewed. Were customers chosen independently, or picked by management?
• Whether figures can be traced back. Every market size and growth rate should have a source.
• Whether the conclusions follow from the evidence. Strong claims should rest on more than one source.
• How the business plan was tested. Look for an adjusted forecast, not just comments on management's version.
• What is missing. Segments, regions or competitors that were left out can matter as much as what was covered.

Commercial due diligence in 2026: what's changing

AI exposure is now a core question

Buyers increasingly ask two questions about AI. The first is whether AI could replace or cheapen what the company sells. A business built on manual research, content or support work may face falling prices even if its market looks healthy today. The second is how the company itself uses AI, and whether its claims hold up. Both questions belong in the market and competition work rather than being left to the end.

CDD is starting earlier

Entry prices are high. McKinsey reports that buyout entry multiples reached a record average of 11.8x EBITDA in 2025, which leaves less room for a wrong growth assumption. That is one reason some private equity firms now start outside-in commercial research while they are still screening a deal, rather than waiting until terms are agreed. By the time exclusivity begins, the key questions are sharper and the full CDD can focus on testing them.

AI is speeding up the research, but not replacing judgement

Due diligence is where AI adoption in private equity has gone furthest. In S&P Global Market Intelligence's 2026 private equity survey, 31% of GPs said AI was somewhat or fully integrated into due diligence, more than in any other area.

Teams increasingly use AI for parts of the first pass, such as reading the data room, summarising interviews and drafting sections. The decisions that shape the deal still need people. Someone has to choose who to interview, weigh conflicting evidence and decide what a finding means for the price.

Tools for commercial due diligence, and where AI helps

CDD teams typically rely on market databases, expert interview networks and survey tools, along with spreadsheets for the market model and slides for the final report. The hardest part is usually keeping it all connected. Data room files, interview notes, the market model and draft findings tend to end up in different places, and the source behind a number gets lost along the way.

AI helps most with specific parts of the work:

• Summarising data room documents and pulling figures into tables, with the source next to each number.
• Organising interview notes by theme, so patterns across customers are easier to spot.
• Drafting first versions of report sections from findings that have already been checked.
• Challenging conclusions by asking for the strongest counter-argument to each finding.

Every AI output still needs checking against its source. Our guide to AI due diligence shows how to review deal documents with AI without losing the source trail.

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Frequently asked questions

What is commercial due diligence in simple terms?

It is a check, made before buying or investing in a company, that its market, competitors and customers support the growth the seller is promising.

What is commercial due diligence in consulting?

In consulting, CDD is a type of project where a firm is hired to assess a target company's market and business plan within a short deal timetable. The client is usually a private equity fund or a corporate buyer.

What is the difference between FDD and CDD?

Financial due diligence (FDD) looks at earnings quality, cash flow, working capital and financial risk. Commercial due diligence (CDD) tests whether the market, competitors and customers support the growth in the business plan.

What is vendor commercial due diligence?

It is a CDD report that the seller commissions before a sale and shares with potential buyers. It speeds up the process, but buyers should check how independent it is.

Who pays for commercial due diligence?

The buyer usually pays for its own CDD. In a vendor CDD, the seller pays.

How long does commercial due diligence take?

It usually takes a few weeks, depending on the deal timetable, the scope and the interview coverage needed.