INDUSTRY EXPERTS VS. GENERALIST CONSULTANTS – THE BATTLE FOR MARKET DUE DILIGENCE

The following post includes five presumed benefits of working with industry experts, and the five realities associated with these presumptions. 

 

Presumed Benefit #1:  Industry Experts have all the Necessary Information Readily Available	Reality #1:  Most Industry Experts Conduct Very Little Research; They Have Opinions
Presumed Benefit #2:  The Expert Opinion Must be the Correct Opinion	Reality #2:  Private equity investors forget that their investments are typically in very obscure, niche sub-sectors.  Industry experts cannot focus on narrow, shallow industries because there would not be enough demand for their services.
Presumed Benefit #3: Industry Experts are Quicker than Generalist Consultants	Reality #3:  Industry Experts Are Quick to Opine but Very Slow to Write a Cogent Report
Presumed Benefit #4:  Industry Experts Are Inexpensive	Reality #4:  You Get What You Pay For
Presumed Benefit #5:  Industry Experts Offer Options and Recommendations	Reality #5: Industry Expert Feedback is Rarely Actionable Board Level Feedback

 

Conclusion

Those considering hiring industry expert consultants should consider asking them five questions before doing so:

1.    Will you be conducting any real-time research during this project, or will the project be based purely on opinion?

2.    What are the backgrounds of your experts in the specific niche sector of interest?

3.    What is the timeline before we will receive a written report?

4.    What is the complete cost of the study?

5.    Will you be able to offer analysis, options, and recommendations that would impact our acquisition decision and the positioning of the Company going forward?

Based on the answers to these five questions, hiring an industry expert may make sense for your firm in a particular instance.  However, research-based generalist consultants with a “clean slate” approach are typically more thorough, provide more detailed quantitative and qualitative insights, create more user-friendly reports, offer actionable recommendations, and generally represent a better overall value.

Comments

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