This PPT slide, part of the 63-slide Commercial Due Diligence (CDD) PowerPoint presentation, delineates the distinctions between two approaches to due diligence: Outside-in and Inside-in. Each method relies on different sources of information, which significantly impacts the evaluation process.

Outside-in due diligence focuses on external data. The information is gathered from the market, relying on insights obtained at ground level. This method does not utilize internal data from the company being evaluated, instead depending on publicly available reports and company teasers. It is typically employed during the initial screening phases and preliminary due diligence exercises. This approach may limit the depth of understanding regarding the company’s internal operations and financial health.

Conversely, Inside-in due diligence involves information shared directly by the company under consideration and its advisors, including management consultants, lawyers, and investment bankers. This method encompasses a comprehensive array of data, including financial, legal, and regulatory aspects. At this stage, the company usually opens a Data Room, which serves as a repository for all pertinent information accessible to potential buyers. This approach allows for a more thorough assessment, as it provides insights that are not available through external sources.

The key takeaway here is the importance of understanding the source and type of information used in due diligence processes. The Outside-in method may offer a broader market perspective,, but lacks the granularity of internal insights that the Inside-in approach provides. For potential buyers, this distinction is crucial in determining the accuracy of valuations and the overall assessment of the investment opportunity.

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