CDD has one job: tell the deal team whether the revenue projections are believable, and on what conditions. Everything else is in service of that question.

Most teams commission it too late and scope it too broadly. Both mistakes are avoidable.

Structure every CDD around five areas

The Five-Area CDD Framework

  • Market: size and structure of the segment the target actually competes in, defined precisely, not by the broad industry label
  • Competition: how differentiated the position is and how durable that differentiation will be over the hold period
  • Revenue quality: recurring vs. transactional, true churn rate, and the gap between reported and economic performance
  • Customer relationships: who owns them, what the switching cost is, and what a new owner needs to do to retain them post-close
  • Commercial model: whether the sales motion, pricing structure, and growth plan are executable or aspirational

Revenue quality and customer relationships are where material issues most often surface. Both require primary research. Desk analysis alone will not find them.

Customer interviews are not optional

Any CDD that does not include direct conversations with current customers, former customers, and lost prospects is incomplete. Published data tells you what a market looks like. Customers tell you who actually wins and why. The two are not interchangeable, and substituting one for the other is where CDD most commonly understates risk.

Commission before exclusivity, not after

By the time you are in exclusivity, the price is largely set and the thesis is fixed. CDD at that stage can only confirm or create problems. It cannot reshape the deal.

A focused sprint at the indicative offer stage, two weeks on the two or three thesis assumptions that carry the most valuation risk, is more valuable than a comprehensive report delivered after the LOI.

Lead the output with a verdict, not the analysis

Red, amber, or green on each of the five areas, with the key risk stated in one sentence per area. Supporting analysis sits behind that. If the conclusion requires fifty pages of context before it can be stated, the work has not been synthesised.

Be explicit about what was not possible to verify, and why. Honest uncertainty is more useful to a deal team than false confidence.