This PPT slide, part of the 63-slide Commercial Due Diligence (CDD) PowerPoint presentation, outlines a critical component of due diligence focused on evaluating the business model of a target company. It emphasizes the need to assess both the robustness and flexibility of this model, which are essential for understanding how the company generates revenue. The objective is clear: to answer the pivotal question of how the target company makes money.

Two main subcomponents are highlighted. The first, "Robustness of the Business Model," involves examining the infrastructure and capabilities necessary to support the business plan. This includes a thorough assessment of the company’s systems and processes, such as research and development productivity and project management effectiveness. Additionally, it requires evaluating the company’s capabilities, particularly the quality of its management and the efficiency of its sales force.

The second subcomponent, "Flexibility of the Business Model," addresses the target company's ability to adapt to market challenges and opportunities. This includes analyzing factors like the rate of innovation, which can be measured by the percentage of new product sales and the number of new products introduced each year.

For potential customers, this slide serves as a reminder of the importance of understanding both the foundational strength and adaptive capacity of a business model. It suggests that a thorough evaluation can reveal insights into the sustainability and future growth potential of the target company. This analysis is crucial for private equity firms and other stakeholders looking to make informed investment decisions.

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