Can Commercial Due Diligence Boost UK Valuations by 20%?

 

Due Diligence Services

In the evolving world of mergers and acquisitions the strategic importance of commercial due diligence cannot be overstated and many corporate leaders and investors now ask a pivotal question: Can commercial due diligence boost UK valuations by 20 percent? The short answer in many situations is yes when done properly. Commercial due diligence is an informed, analytical investigation that goes far beyond checking records. It helps buyers and sellers understand the realistic growth prospects and unearth hidden risks before entering into a transaction. Professional due diligence consultants bring specialised expertise that clarifies market dynamics and can materially impact valuation negotiations.

The scope of commercial due diligence ranges from assessing customer retention trends to validating revenue models and growth trajectories. Experienced due diligence consultants bring rigor and confidence into the valuation process and the evidence from 2025 M and A market activity in the UK supports this view. According to PwC research overall UK deal values increased by approximately twelve per cent in 2025 compared with 2024 even as deal volume fell significantly. Transaction numbers declined from around 3,411 in 2024 to about 2,991 in 2025, yet total valuations climbed from £117 billion to £131 billion over the same period. This signals that buyers are willing to pay a premium for quality assets that have been properly evaluated in advance.

Despite market volatility and macroeconomic uncertainty, UK deal values have been resilient largely because thorough due diligence builds buyer confidence. In sectors where commercial outlooks are reshaped by structural trends such as artificial intelligence adoption or digital infrastructure investment, valuation premiums have been especially visible. The improved deal confidence is underscored by the significant rise in average deal size that moved up nearly twenty eight percent from £34 million to £44 million in 2025 compared with 2024.

This article explores how commercial due diligence can influence enterprise valuations, examines specific areas where it creates value, analyses real world data from recent UK transactions and explains why incorporating rigorous due diligence can lead to valuations increasing by twenty percent or more under the right circumstances.

What is Commercial Due Diligence and Why It Matters

Commercial due diligence is a comprehensive review of a target company’s business prospects, typically undertaken by buyers before completing a transaction. Unlike financial due diligence which focuses on historical accounts and balance sheets, commercial due diligence scrutinises business model sustainability, competitive dynamics, customer behavior and market growth forecasts. The goal is to translate qualitative insights into quantitative evidence that supports confident valuation.

At its core commercial due diligence answers three pivotal questions for acquirers:

1. Is the business plan credible in reflecting future sales growth

2. Are market forces supportive of the forecast trajectory and valuations

3. What are the key risks that could materially impact earnings post acquisition?

The answers to these matters can materially alter both the buyer’s willingness to engage and the premium they are prepared to pay. For example a robust commercial due diligence may reveal an addressable market growing at ten percent annually which validates a higher valuation multiple. Conversely a shallow competitive moat or weakening customer base could justify a valuation discount.

One survey shows commercial due diligence is frequently cited as the most important non-financial diligence area with significant influence on value decisions going forward. In the M A survey of diligence priorities commercial due diligence was cited by almost twenty eight percent of respondents as a critical focus area ahead of other workstreams.

How Commercial Due Diligence Drives Valuation Uplift

Increased Buyer Confidence Leads to Premium Offers

Buyers often allocate capital strategically when they feel confident about the sustainability of future earnings. A commercial due diligence report that clearly projects growth backed by market data can reduce uncertainty and narrow the valuation gap between buyers and sellers.

A valuation gap exists when a seller’s view of future value differs substantially from what buyers believe a business is realistically worth. Commercial due diligence narrows this gap by providing evidence based analysis on growth assumptions, customer loyalty and competitive positioning.

In markets experiencing structural change such as the UK where digital transformation sectors have seen heightened investor interest, commercial due diligence helps buyers confirm that these trends are real and sustainable. That confirmation can convert cautious bids into aggressive offers frequently reflected in higher valuation multiples.

Identification of Value Enhancers, Not Just Risks

Reduced risk is only part of the story good commercial due diligence also identifies drivers of upside. For example better than expected performance in customer acquisition costs or higher projected retention rates can boost projected cash flows and justify a higher enterprise value.

This is greatly appreciated in sectors such as technology and business services where intangible assets and growth momentum dominate enterprise value. When commercial due diligence identifies strategic levers that can be exploited after acquisition it strengthens the buyer’s belief they will achieve those synergies. That in turn can close valuation gaps and produce offers that are twenty percent above initial bids where justified.

Quantitative Evidence from UK M and A Market in 2025 and Outlook for 2026

The latest M and A data highlights how a premium is being placed on quality assets in the UK market. In 2025 overall deal values climbed by twelve percent to about £131 billion compared with £117 billion in 2024 even as the number of deals contracted by twelve percent. 

This divergence suggests that buyers are more selective but willing to pay more for assets with strong commercial profiles. This trend has been reinforced by the rise in average deal size from £34 million in 2024 to £44 million in 2025 which represents an approximate increase of twenty eight percent year over year. 

Sector patterns are also worth noting. Financial services deal value climbed forty four percent in 2025 with major consolidation transactions driving that momentum. Technology, Media and Telecommunications deals, particularly in digital infrastructure and AI related businesses, recorded higher valuations as strategic buyers competed for leading assets. 

The outlook for 2026 remains cautiously optimistic. Recent surveys of deal professionals indicate that most anticipate transactional activity to rise in 2026 following slower volumes in 2025. Almost two thirds of advisers expect deal activity across major transaction types to improve with valuations holding broadly stable underpinned by due diligence work and rigorous pre deal preparation.

These trends reinforce the role of commercial due diligence not only in risk mitigation but as a driver of valuation confidence.

Case Examples: When Commercial Due Diligence Added Value

Consider a hypothetical acquisition of a mid sized UK technology firm focused on cloud services. Without commercial due diligence a buyer might only look at trailing revenue growth and recent contracts. But a detailed commercial due diligence could reveal deeper insights such as ahead of competitor adoption rates, high switching costs among existing clients and strong retention metrics. Those insights translate into a forecast model with higher sustainable growth assumptions.

In another scenario a private equity buyer assessing a mature services business may uncover latent demand in adjacent market segments that were not fully priced into the seller’s forecasts. Integrating that insight into valuation could justify a bid that is ten to twenty percent higher than an initial offer if accompanied by clear execution plans. These qualitative insights once quantified become powerful arguments during negotiation.

Effective commercial due diligence also addresses operational questions that can impact future earnings. For example identifying risk around supply chain dependencies or customer concentration can inform price adjustments or contractual protections that protect the buyer post acquisition.

Best Practices for Maximising Valuation Through Due Diligence

Start Early and Integrate Across Workstreams

Starting commercial due diligence early and involving financial legal and operational diligence teams in a collaborative way ensures a holistic view of the target. Many successful transactions commence integrated diligence reviews that align assumptions across teams.

Avoid Confirmation Bias

A rigorous commercial due diligence process should test assumptions rather than seek to confirm internal beliefs. Independent validation of market size, competitor threats and growth opportunities prevents over optimistic forecasts that can derail negotiations.

Leverage External Expertise Where Necessary

Engaging experienced professionals such as due diligence consultants at the right time is critical. These individuals bring specialist analytical frameworks and industry benchmarks that internal teams may lack. Their objectivity and domain expertise can often make the difference in supporting valuation arguments.

Translate Insight Into Actionable Evidence

Valuation uplift comes from quantifiable insights. Commercial due diligence should translate qualitative analysis into robust models tied to key performance indicators. This enables buyers to defend valuation premiums with credible data and improves their negotiating position.

Challenges and Limitations to Consider

Despite these benefits, commercial due diligence is not a silver bullet. Comprehensive diligence requires time and resources which may extend deal timelines. In 2025 it was noted that average deal completion timelines increased as regulatory scrutiny and multi layered diligence became more common.

Moreover not all deals will see valuation uplift. In highly commoditized markets or distressed situations commercial due diligence may simply confirm low growth or risk issues which justify discounted valuations. The impact on valuation is heavily dependent on the market context and specific business dynamics.

So can commercial due diligence boost UK valuations by twenty percent? The answer is context specific but backed by recent deal data and market trends it is clear that rigorous, well executed commercial due diligence materially improves the likelihood of higher valuations. By reducing uncertainty, enhancing buyer confidence and uncovering new growth opportunities it can justify a valuation premium that might otherwise remain elusive.

In the current UK environment where 2025 saw a significant increase in deal values alongside rising average transaction size and where many deal professionals are optimistic about transactional activity in 2026 the strategic role of proper due diligence continues to grow. For this reason engaging specialised due diligence consultants remains one of the most effective strategies for sellers and buyers striving to maximise valuation and secure successful transaction outcomes.

Incorporating commercial due diligence early, integrating its insights across the decision making process and translating qualitative assessments into quantifiable forecasts can be a game changer for deal valuation. It not only brings clarity to complex commercial realities but creates value directly on the negotiation table.

For UK transactions in 2025 and beyond this makes commercial due diligence a critical frontier in achieving valuation uplift and execution excellence through informed decision making by due diligence consultants.