Go-To-Market Due Diligence
Why Go-To-Market due diligence (GTM DD)?
Organic growth has never been a more important consideration for Private Equity investments. The last 10-15 years have been characterised by a wave of successful global PE exits enabled by rising asset prices and cheap leverage, with multiple expansion a key driver of returns. During this time, value creation capabilities were an important asset, but only one part of underwriting an investment and delivering a fund return.
Fast-forward to the last few years: a tough macro backdrop, an under-pressure consumer, higher inflation, higher interest rates, and an unpredictable outlook. Deals have been harder to do: there has been growing competition for assets and more expensive debt significantly impacted deal economics and the potential for bolt-on M&A. Deal flow has been hard to come by, with only the higher quality assets that continue to command the valuation premiums coming to market. Funds are feeling the pressure: to deploy their accumulated dry powder, and to find ways of delivering the returns promised to their Limited Partners (LPs) on their portfolio.
In recognition of the increasing necessity to find organic growth to deliver this return, not only is Private Equity accumulating value creation talent; that talent is now also increasingly being deployed in a pre-deal context. As of 2024, 60% of UK PE firms now have in-house value creation teams, with an average of 8 value creation FTEs per fund.
Based on our deep-dive interviews with 20+ UK PE value creation leaders, representing a cross-section of the mid-market and large cap funds: “[there is a] clear and unanimous direction of travel that the value creation team is being used more and more on pre-deal activities.” Increasingly, value creation professionals are seen working with investment teams, planning the detailed value creation initiatives, underwriting the plan targets in the investment case, and even making the case for deals at investment committees.
We have witnessed several UK funds turning to trusted partners to assist them with evaluating the value creation opportunity associated with a potential investment in recent years. There are clearly a range of value creation levers on the table for a potential target. However, if you look at the functional specialisms within PE value creation teams, data, technology, and customer acquisition are by far and away the most significant.
At Coppett Hill, it is our Go-to-market (GTM) expertise which has become the basis of the value creation due diligence (DD) support work we have undertaken with our clients in recent years. We see GTM DD as an emerging, high value DD workstream, championed by value creation colleagues; because customer growth is such a structurally important feature of a PE investment decision.
"Sentiment has shifted meaningfully—from “we have to do sales DD” to “we want GTM DD because it shapes the growth plan.”"
– Richard Haynes, Partner - LDC
What's included in GTM DD?
There are 4 key pillars of the GTM DD scope that Coppett Hill typically deploys: strategic choices; operational execution; data/systems; and organisational capabilities/structure.
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Strategic choices answers questions on how well the business is set up to capture addressable opportunities, from a product, channel, pricing perspective. How effective has a business been at identifying, targeting and reaching its ICPs (ideal customer profiles) with its proposition?
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Operational execution reviews and assesses the overall effectiveness of a business’ GTM activity. How good is the target at finding prospects and filling the funnel? At progressing and converting leads? At retaining, upselling, and cross-selling to customers? Is the organisation set up to do this in a repeatable and scalable way? Are budgets deployed in the best way to drive efficient growth?
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Data and systems covers how well the business is enabling and tracking its GTM activity. What marketing and CRM tools are in place, and how effectively are they used? What visibility does the business have of its sales and marketing performance?
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Organisational capabilities and structure reviews the sales and marketing organisation, its leadership, the effectiveness of key teams & third parties, and the appropriateness of internal targets and incentives in driving performance.
Our GTM DD reporting uses a detailed assessment of the key sales and marketing growth levers to surface:
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Analysis of internal marketing and sales operational data;
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A review of enablers against our best practice benchmarks;
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A set of actionable GTM value creation opportunities;
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An assessment of the achievability of the revenue growth plan.
Example questions answered by GTM DD
Comparisons to other forms of DD
For seasoned buyers of due diligence services, this combination of questions will be distinct. Some buyers may expect some of these to be covered as part of other forms of DD - including Commercial due diligence (CDD), Operational due diligence (ODD), Digital due diligence (DDD) work, and likely supplemented by in-house value creation support. But we often undertake GTM DD alongside these other DD workstreams - particularly CDD - because of key differences in scope, approach and objectives.
CDD is there to give a view on the revenue plan, but from a fundamentally different perspective to GTM DD. Its scope is focused on the market and competitive context of a target. It is outside-in: relying predominantly on external third party data analysis to drive its conclusions. And its primary objective is as a downside risk assessment; providing comfort to investors and lenders on a point-in-time investment decision.
"CDD answers: Is the market large and attractive enough, and does the company have product-market fit? GTM Due Diligence (DD) asks: How well equipped is this business to find, win, retain, and grow customers—today and at scale? You need both. A great market won’t help if execution is weak; and strong execution won’t save a declining market. Increasingly we’re aligning CDD and GTM DD so they work in tandem and avoid gaps between the two."
- Richard Haynes, Partner - LDC
Digital DD is less common, but we tend to see scopes orientated towards discrete digital marketing channel performance analysis, as opposed to the overall target GTM activity as per GTM DD; and offering a view on a target’s digital strategy based on externally benchmarkable insights, including: website UX, search visibility, social media effectiveness.
Key takeaways from GTM DD
GTM DD has proven valuable to investors because it focuses on the factors that most impact the achievability of growth in a business: the customer acquisition activities, processes, systems and people. Key to the success of making an investment return is understanding up front how well a target performs in these areas, and how it might improve. Given its focus on this, GTM DD is useful in reducing the margin for error on an investment evaluation, because these are the levers that directly influence a target’s growth.
In this respect, GTM DD produces a series of practical, actionable value creation recommendations for a target. This contrasts to other forms of DD that are inherently risk / downside focused. It is not a coincidence that we have gone on to be involved in post-deal support work in the majority of deals we have worked on – because GTM DD identifies the next best things for Management to do.
To deliver this, unlike other forms of DD, our work is primarily “inside and working-out, rather than outside-in.” Our teams build insights from internal marketing and sales datasets - and we are often analysing prospect and customer datasets that aren’t commonly part of Management’s reporting. We also bring first-hand experience as commercial operators alongside our consulting toolkit.
"The best outcomes happen when we play back the GTM findings pre-exchange—to our investment team and to management teams. Early alignment prevents friction later. Post-investment we run a mobilisation phase (roughly the first six months) with a mix of in-house work (e.g., pricing) and partner-led execution."
– Richard Haynes, Partner - LDC
Clients also observe the style we adopt as being distinct: GTM DD is by nature cooperative and collaborative – working with Management to answer what would need to be true to deliver the plan, rather than giving a more binary view about whether it is achievable or not. The deployment of GTM DD sends a strong signal to Management about the growth mindset and positive intent of the investor who commissions it; based on the feedback we receive.
Example value creation recommendations
When describing the outcome of GTM DD work, Management should feel it is useful, not just interesting - because it has a direct and applicable set of recommendations for driving organic growth and performance improvement.
"On most engagements, there are one or two decisive insights that influence the investment structure, focus, or early initiatives. Examples include sharpening Ideal Customer Profiles or pipeline focus to lead to in-process wins, and clarifying leadership needs in the commercial function. The work is practical and impact-oriented, not academic."
– Richard Haynes, Partner - LDC
GTM DD today represents a small but growing part of the diligence service market: Coppett Hill is one of the first consultancies to offer it as a defined service to investor clients.
Given the broader PE context, and GTM DD’s points of difference and identifiable value to investors and Management teams, we expect it to grow significantly over the next few years.
If you would like to learn more about the work we are doing with investors on Go To Market due diligence, please get in touch.
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