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Customer Due Diligence – Lesson 1: Start with Good Lists

Customer due diligence can be a powerful exercise that can add value not only during the negotiation and purchase of an organization, but also during the subsequent integrations (where most acquisitions begin to fall short of expectations.)

My colleague Phil Bounsall recently blogged on how to do customer due diligence the right way. Having reflected on the programs we have conducted for customers, I wanted to add to this narrative by providing a list of lessons we have learned. There are six themes that are prevalent that I would advise clients to consider if they really want to maximize the value of their investment in customer due diligence. This is the first of six.

Lesson 1: Acquiring the right list of customer contacts is critical (and hard)

Over the last twenty years, I have yet to see a customer listening program in which acquiring the customer list was not an issue. As CRM and other centralized databases become more common, the barriers to data are slowly coming down (thank goodness we don’t get customers records on paper anymore; I am not kidding when I say that early in my career I received some customer data written on the back of a napkin!).

However, in spite of centralized databases, there is a world of difference between having access to data vs. good customer information. The M&A process adds some additional wrinkles – for example, the target wants to protect this sensitive information from the acquirer, the target wants the potential deal to be on a need-to-know basis only (which can impact who in the target organization is involved with the program), and so on.

Our guidance to customers is to use Walker as a resource – as an independent third party, we can help navigate this terrain in a way that keeps the target comfortable; moreover, by leveraging this initiative as a customer listening program, we minimize the opportunities for the pending deal to leak to customers and employees.

In addition, expect that this process will be more complex than you would expect, but resist the temptation to cut corners – it is simply too important to not give this the attention it requires. The level of risk that the acquirer assumes is inversely proportional to the quality of the customer database; stated differently – garbage in = garbage out.

This is the first in a series of lessons learned conducted advanced customer due diligence. Watch my blog in the coming weeks for other key lessons.

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