2nd St Strategy
Insights · Commercial Due Diligence

Commercial due diligence for middle-market private equity.

What CDD actually is, what a good CDD report looks like, and how 2nd St Strategy runs the work.

What commercial due diligence is

Commercial due diligence is the body of work a private equity sponsor commissions to validate the commercial thesis behind an acquisition. It is the answer to four questions, in order of importance.

  1. How big is the market and how is it changing.
  2. Why do customers buy this product over the alternatives.
  3. How defensible is the target's position in that market.
  4. What are the realistic levers for growth post-close.

CDD is distinct from financial due diligence, legal due diligence, and operational due diligence. Those look inside the company. CDD looks at the market and the customer. The artifact a sponsor cares about is a verdict on the thesis grounded in primary research, not a description of the market with hedged conclusions.

What a good CDD report looks like

At 2nd St Strategy, every CDD deliverable opens with the verdict. One page, sometimes two. The thesis as the sponsor articulated it, broken into testable sub-theses, with a green / yellow / red verdict on each and the headline evidence behind the call. The rest of the deck is the evidence trail.

The evidence is layered:

  • Customer voice. Structured interviews with current, former, and lost customers. The honest answer to “why did you choose this vendor” lives in those conversations. Where the population supports it, we also run B2B or B2C surveys to size the patterns from the interviews.
  • Competitive landscape. Not a logo slide. A structured comparison of how each meaningful competitor wins, loses, and prices. Sourced from customer calls, expert calls, channel partner calls, and competitor interviews where possible.
  • Market sizing. Top-down and bottom-up, with assumptions exposed. For location-based businesses, we work at the MSA level using our own software platform, PinpointIQ. For other categories, we build the model in the deal context.
  • Channel and partner perspective. Distributors, resellers, integrators, brokers. Whoever sits between the target and the end customer almost always knows more about the dynamics than either side.
  • Topical experts. Former executives at adjacent companies, retired industry leaders, regulatory experts where relevant. We use expert networks plus our own bench.

How 2nd St Strategy runs the work

Every engagement is principal-led by James Agres. No hand-offs to analysts the sponsor has never met. The person you hire is the person who runs the work, draws the conclusions, and presents to the investment committee.

A typical buy-side CDD on a middle-market deal runs about four weeks on the following arc.

  1. Week 1 — scope and design. Align with the sponsor on the core diligence questions. Identify decision makers, competitor set, survey panel where applicable. Draft interview guides. Build the secondary data framework. Design any custom analytics or scraping needed.
  2. Weeks 2–3 — fieldwork and analysis. Customer interviews, channel calls, expert calls, surveys. Run desktop research, build the TAM/SAM model, run any custom AI analytics tooling. Pattern-match against prior engagements in the same category.
  3. Week 4 — synthesis and IC deck. Draft the verdict, build the supporting deck, deliver an IC-ready document. Then sit with the deal team through IC and answer follow-ups.

How AI changes the work

AI is not a replacement for primary research. The honest answer about why a customer switched vendors does not live in any dataset. But AI meaningfully accelerates everything that happens around the conversation.

2nd St has built a stack of internal tools across 200+ CDD engagements. We use them for interview transcription and theme extraction, web-scale competitive scraping and benchmarking, dynamic TAM modeling with what-if scenarios, and pattern matching across deals. For location-based services categories, PinpointIQ gives every engagement an MSA-level market sizing and competitive landscape on day one.

The combination is what the deal teams we work with want. Primary research depth, with the synthesis and benchmarking accelerated to a modern pace.

When to call

Pre-LOI when you want a 360 read on a market before going firm. Post-LOI confirmatory work when you have a thesis and want it pressure tested. Sell-side when you want a defensible commercial story in the data room. Portfolio strategy when an existing holding needs growth levers identified.

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FAQ

Common questions.

What is commercial due diligence?

Commercial due diligence (CDD) is the body of work a private equity sponsor commissions to validate the commercial thesis on an acquisition. It answers four questions: how big is the market, how is it changing, why do customers buy this product over alternatives, and how defensible is the target's position. CDD is distinct from financial, legal, and operational due diligence, which look inside the company. CDD looks at the market and the customer.

How long does a typical CDD engagement take?

On an LOI-to-close timeline, a buy-side CDD typically runs three to six weeks. Confirmatory work after an exclusive can compress to two weeks. Sell-side CDD prepared for a process usually runs four to eight weeks and lives in the data room.

How much does commercial due diligence cost?

Pricing depends on scope, timeline, geography, and the volume of primary research required. Middle-market CDD engagements typically run in the low to mid six figures. A bigger driver of value than fees is whether the firm running the work is principal-led and brings real pattern recognition, or whether the engagement is staffed with junior analysts the sponsor never met.

What is the difference between CDD and market research?

Market research describes a market. Commercial due diligence answers an investment question. A CDD report leads with a verdict on the thesis, then shows the evidence behind that verdict. A market research report describes size, segmentation, and trends without taking a position.

What makes a good commercial due diligence firm?

Three things. First, the engagement is run by senior people with pattern recognition from many similar deals, not handed off to junior staff. Second, primary research is real: dozens of customer, former customer, channel, and expert calls, plus quantitative surveys where the population supports it. Third, the deliverable lands with a clear investment verdict on the thesis, not a hedged description of the market.

Does 2nd St Strategy work on add-on diligence too?

Yes. 2nd St runs platform CDD, add-on CDD, and confirmatory CDD across roll-up programs. For location-based roll-ups, we frequently pair the qualitative work with our own software platform, PinpointIQ, which provides MSA-level market sizing, competitive density, and white-space mapping across 900+ U.S. markets.

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