Private equity due diligence cases are increasingly common, especially at firms with strong PE practices (Bain, L.E.K., OC&C). They combine strategy with financial analysis.
What Is a PE Due Diligence Case?
A PE firm is considering acquiring a company and hires your consulting firm to assess whether the deal makes sense. Your job is to evaluate:
- Is the target a good business?
- Can it grow?
- What are the risks?
- Is the price fair?
The Commercial Due Diligence Framework
1. Market Assessment
- Market size and growth rate
- Key trends and drivers
- Regulatory environment
2. Competitive Position
- Market share and trends
- Sustainable competitive advantages (moats)
- Threat of new entrants and substitutes
3. Customer Analysis
- Customer concentration and retention
- Willingness to pay
- Switching costs
4. Financial Performance
- Revenue growth trajectory
- Margin trends and drivers
- Working capital requirements
- Capital expenditure needs
5. Value Creation Plan
- Revenue growth opportunities
- Cost optimization levers
- Operational improvements
- Potential add-on acquisitions
LBO Basics for Consulting Interviews
You don’t need to build a full LBO model, but understand:
- Entry multiple × EBITDA = Enterprise value
- Debt/Equity split: Typically 60-70% debt
- Value creation: EBITDA growth + multiple expansion + debt paydown
- Target returns: 20-25% IRR over 3-5 year hold period
Practice Tips
- Always start with “why is the PE firm interested?”
- Focus on sustainability of competitive advantages
- Identify both upside opportunities and downside risks
- Provide a clear invest/don’t invest recommendation