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I recently attended an ACG webinar on M&A due diligence. My expectations were that we’d spend a lot of time on spreadsheets and legalities. Boy was I wrong!

In a presentation led by people from Walker (, within the first few minutes they said that 30% of most businesses value is in the assets and yet most buyers put in 80% of their due diligence efforts on financial, legal and technical. They went on to say that 80% of the time should be put into researching customers.

Their position is that buyers need to engage the customers to determine the company’s competitive position, understand the competitive advantage and how to leverage them.

The above is extremely similar to what I tell my clients.

  1. Concentrate on the people – customers, employees and vendors.
  2. Competitive advantage is what the company has that allows customers to pay what they do so the company profits.
  3. You grow by leveraging your competitive advantage.

I especially liked their “Loyalty Matrix,” which you can get from their website, along with a full explanation, at, and a copy of which is below.

Customer Loyalty Matrix from Walker

The example they used asked how you would feel about a company that had 80% of their customers as truly loyal and only 15% as high risk? Of course there’s a catch; the high risk have 50% more volume than the truly loyal and at a lower gross margin. The matrix is important at all levels and you must pay attention to the big picture, with all factors considered.

The presentation also covered value drivers and compared the seller’s view with the customers view. Of course, as with all studies of this type, there was a disconnect between what the company thought were the top reasons for customer loyalty and what the customers thought. Very important because all buyers want to scale their acquisition and this knowledge allows them to serve the customers better.


The last point reminds me of entrepreneurs and founders (of startups) in that they are so close to their product that they forget to look at it from the perspective of the customer. The customer wants a problem solved at a fair price. Just like the computer I’m writing this on, about which I’m sure a tech expert could tell me all the things I could do on it but I only want to do those things that improve my efficiency and productivity. When we improve our customers situation, they’ll buy more. When business understand why customers buy, they get a better understanding of the company should feel more comfortable.

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