Customer Due Diligence for B2B Acquisitions

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We retained WHIZDOM for their expertise in M&A transactions that involve B2B Customers, their independent, unbiased and objective approach and the high value insights and recommendations they offer during the Due Diligence process. We were pleased with their excellent work product.

Alex Gelman

Managing Partner, Heritage Point Partners

Overview

Acquirers of B2B companies in the lower middle market (LMM) retain WHIZDOM to conduct B2B Customer Due Diligence to mitigate risk and obtain vital information from the target Company’s Business Customers.

Who We Serve

Serving Companies that acquire B2B Companies in the lower middle market (LMM) including:

  • PE Firms
  • Independent Sponsors
  • Search Funds (Traditional and Self-funded)
  • Private Investment Firms
  • Family Offices

Benefits

  • Obtain feedback from a Company’s most valuable asset: Their Business Customers
  • Learn vital information from the perspective of the target Company’s Business Customers about its products, its touchpoints (e.g., tech support, customer service, etc.), and more.

Obtain insights into how the Company’s Business Customers use the Company’s products in their business and how they plan to use them in the future (e.g., desired new features and functionality), gauge loyalty, reasons they might switch to a competitor, and more.

  • We act as an independent, objective, unbiased service provider with no skin-in-the-game
  • WHIZDOM often obtains information during conversations with a Company’s Business Customers that they may be unwilling to share with the Company itself.
  • WHIZDOM developed proven, successful strategies and methodologies to obtain confidential contact information for a Company’s Business Customers from Sellers.

Buyers can start thinking about ways to grow the target Company post-acquisition by:

  1. knowing how a company became a Business Customer of the Company being acquired;
  2. why they remain a Customer;
  3. why they might switch to a competitor
  4. obtaining other vital information from a target Company’s Business Customers

Why Retain Us

WHIZDOM has extensive experience conducting B2B Customer Due Diligence for PE Firms and Search Funds.

WHIZDOM has discovered Sellers may balk at allowing an Acquirer to contact their Business Customers.

We also know that a Seller may simply refuse to share with an Acquirer the confidential contact information of their Customers.

However, as an independent third-party with no skin-in-the-game WHIZDOM has successfully obtained Business Customer contact information from Sellers.

In addition, WHIZDOM has successfully collaborated with Sellers to have them invite their Company’s Business Customers to attend phone meetings with Ivy Millman, WHIZDOM’s CEO.

Ivy Millman, WHIZDOM’s CEO, personally conducts conversations with a target Company’s Business Customers’ executives, product end-users, decision makers, etc.

Ivy brings decades of experience to the table building rapport and engaging in thought-provoking conversations with business executives at myriad companies in many different industries.

See Ivy’s Bio

WHIZDOM provides Acquirers with a comprehensive Quality of Customer (“QofC”) Report with:

  • Individual Customer findings
  • Aggregate Customer findings
  • Identification of patterns and trends
  • Analyses and recommendations

FAQs

An Acquirer might delay starting B2B Customer Due Diligence until after QoE is completed.

However, WHIZDOM recommends starting after an LOI has been submitted to a Seller instead.

Conducting B2B Due Diligence involves several time-consuming process steps:

  • Collaborate with the Acquirer to determine what information they would like to discover from the target Company’s Business Customers; and
  • Strategize with the Acquirer and the Seller with regard to interviewing the target Company’s Business Customers; and
  • Obtain the target Company’s Business Customers’ contact information from the Seller; and
  • Collaborate with the Seller to obtain buy-in from the target Company’s Business Customers to attend discussions; and
  • Schedule phone meetings for the Business Customers discussions; and
  • Analyze the findings from the discussions conducted; Aggregate results from the findings; Identify patterns and trends; and
  • Develop and deliver a comprehensive B2B Customer Due Diligence Report

Due diligence usually needs to be completed in a brief window of time. 

Completing the above identified B2B Customer Due Diligence tasks can take more time that expected to complete. (Note: Scheduling the Business Customer discussions often takes more time than expected).

Based on years of experience conducting B2B Customer Due Diligence WHIZDOM knows what information would be beneficial for Acquirers to know about B2B Companies before acquiring them.

WHIZDOM collaborates with Acquirers to determine what additional information they would like WHIZDOM to also obtain from the target Company’s Business Customers prior to starting a B2B Customer Due Diligence engagement.

Sample Types of Information WHIZDOM Obtains From Business Customers:

  • How the Company acquired a Business Customer and how long they have been a Customer
  • How the Customer uses the Company’s product in their business operations and the benefits they obtain from them
  • What new features or functionality a Customer might want or need the Company’s products to include in the future
  • What might cause a Customer to switch to one of the Company’s competitors
  • Key performance indicators feedback such as:
    • Likelihood of customer retention
    • Sustainability of revenues and cash flow post-acquisition

For each B2B Customer Due Diligence engagement WHIZDOM develops a customized Interview Discussion Guide it uses as a starting point for open-ended conversations with a target Company’s Business Customers.

Our thinking about this sensitive issue:

  • It is unlikely an Acquirer would ask a Seller for permission to obtain information they need to complete Legal or Financial Due Diligence for an acquisition
  • Most Sellers consider their Company’s Business Customers’ contact information to be highly confidential. It may be difficult, or impossible, for an Acquirer to this obtain the needed contact information
  • Lastly and most importantly, an Acquirer might wish to avoid causing any unnecessary friction in their delicate relationship with the Seller during the due diligence process

Notwithstanding the above, WHIZDOM recommends Acquirers should think about Customer Due Diligence in exactly the same way as they think about Legal or Financial Due Diligence 

  • WHIZDOM developed a methodology that can make it more palatable for a Seller to enable an Acquirer to conduct Customer Due Diligence by interviewing their Company’s Business Customers
  • An Acquirer just needs to introduce Ivy Millman, WHIZDOM’s CEO, to the Seller as the person who will be contacting the Company’s Business Customers
  • Once introduced WHIZDOM will work with the Seller to schedule discussions with the Company’s Business Customers and oversee all the tasks needed to complete Customer Due Diligence