Beckway Insights: 2024 – Diligence Meets AI

In the current financial landscape, deal activity has intensified, particularly within the realm of financial sponsorship where competition is fierce and substantial funds remain unallocated. This dynamic necessitates buyers to swiftly identify potential risks while also pinpointing opportunities for value creation, ensuring the confidence needed to submit a competitive bid.

Although the concept of value creation has always been integral to due diligence, its significance has grown, especially for financial sponsors seeking to execute new platform investments. Ensuring confidence in potential value creation extends beyond merely quantifying potential gains. It involves gaining clarity on crucial factors such as the timing of operational changes and their reflection in financial statements and cash flow, as well as understanding the costs associated with implementing and sustaining these improvements.

Artificial intelligence (AI) plays a vital role in this diligence process, acting as a crucial facilitator. However, it is not a standalone solution. Experienced professionals with industry and functional expertise remain essential for effective due diligence. For example, Beckway utilizes AI solutions to analyze large datasets more efficiently, providing deeper insights with reduced manual effort. This efficiency facilities more thorough analysis and allows industry and functional experts to have a more complete picture when evaluating the target against operational experience and trivial knowledge. The result is having greater confidence in diligence assumption, post close value drivers, and ultimately the how to bid the business.

Relying solely on benchmarking against best practices or company-specific trends is insufficient. Detailed insights into a business’s scalability require examination of various aspects including talent, processes, data maturity, technology adoption, and infrastructure.

Outlined below are some best practices for due diligence in this competitive environment:

  • Time management is critical in due diligence as there is always a sense of urgency and data may never be perfect. Prioritizing research and activities are essential to ensure efficiency. Organizing the initial phase of analysis enables teams to start quickly and adjust their approach based on initial findings.
  • It is crucial to expand the scope of risk assessment to include both challenges to scalability and potential downside threats. Dedicated sessions early in the process help focus on areas where the target company may face limitations in scaling.
  • Scenario planning is valuable for envisioning future growth scenarios. Involving functional experts in discussions about potential stress points and adjusting insights based on different growth velocity assumptions can provide a more comprehensive perspective.

In conclusion, as deal activity continues to intensify and competition remains fierce, it is imperative to leverage every advantage in due diligence. Beckway stands ready to provide the expertise and AI-driven solutions necessary to navigate this landscape effectively. Our blend of technology and experienced professionals ensures a thorough understanding of potential risks and opportunities for value creation.

For more information on how Beckway can support your due diligence needs and enhance your confidence in bidding, contact James Castrataro, MBA.