Confirmatory Diligence: Competitive Analysis

Written for acquirers of Lower-Middle-Market (LMM) software companies: Private Equity, holding companies, and strategic buyers.

Executive Summary

Confirmatory diligence protects you from paying for strengths that only exist in the CIM / deck / data room, and improves your chances of understanding what post-close execution will be most powerful. In this post we'll look at the competitive analysis portion of that diligence stage. The highest‑return steps:

1. Expand the seller’s curated disclosure of relevant competitors, revealing the real battlefield (direct, latent, legacy, upstarts).
2. Broaden the feature/capability taxonomy to delineate between feature parity, fragile differentiation, and defensible advantage.
3. Validate every claimed advantage with observable evidence tiers before it enters your valuation or growth model.

1. The Cost of a Shallow Competitive View

Seller-provided competitor lists are inevitably narrative devices. Natural (not malicious) bias filters out crowded adjacency, quiet legacy stickiness, and low-cost upstarts. As an acquirer, you have clear Risk & Mitigation dynamics to consider:

• Buyer Risk: You over-credit defensibility, justify a premium, and later discover pricing pressure or feature parity post-close.
• Mitigation: Seize the moment during confirmatory diligence to ndependently reconstruct the competitor universe, while valuation and deal structure are still flexible.

2. How Seller Framing Shapes Perception

Expect three inclusion patterns:

1. Mandatory Incumbents – Leaving them out would damage credibility.
2. Beatable / Weakening Players – Chosen to anchor your perception of target superiority.
3. Adjacent Tools – Different ICPs that make the target’s focus look sharper.

What’s missing:

1. Volume of Similarly Positioned Entrants – In one analysis we surfaced nearly fifty feature-parity players the deck ignored.
2. Lean Upstarts – Minimal revenue today, but low sunk cost + clean cap tables can enable disruptive pricing or vertical focus.
3. Sticky Legacy Platforms – Entrants that the seller may dismiss as “non-factors”, underestimating the strategic power of entrenched integrations or contractual inertia.

As an acquirer, you have clear Risk & Mitigation dynamics to consider:

• Buyer Risk: Modeling growth against an artificially thinned battlefield, creating dubious growth expectations that percolate into everything from your IRR and MOIC assumptions, to your chosen CEO's compensation plan.
• Mitigation: Systematically expand categories (feature-keyword crawling, integration ecosystem scans, job posting tech mentions, conference sponsor lists).

Need leverage? In SuiteCompete you seed with 2–3 competitors and receive suggested additions you can accept or decline:

3. Broadening the Capability Surface

Starting from the seller’s feature list is fine; stopping there is costly. A narrow taxonomy hides silent parity. Expand into:

• Core transactional features
• Workflow extensions / automation layers
• Data enrichment / analytics depth
• Integration surface (CRMs, ERPs, payment, identity)
• Admin / governance / compliance controls
• Differentiators claimed verbally but not shown

Iterative expansion inside SuiteCompete mirrors competitor growth: seed → suggest → curate.

• Buyer Risk: Overvaluing “unique” capabilities that are actually table stakes.
• Mitigation: Use Harvey Balls to track your evaluation of relative strength of competitors on each feature/capability.

4. Building an Evidence Matrix (Competitors × Features)

Raw claims arrive dressed as Harvey balls. You need substantiation before they inform valuation or integration sequencing.

Common current-state (unspoken): junior team + late nights + ad hoc Google queries + manual screenshot archiving. Hidden labor yields fragile conclusions.

We built this to collapse the first 70% of effort:

Focus areas:

1. Automated surface scan per (Competitor, Capability)
2. Structured tabular summary for fast pattern extraction
3. Click-through evidence artifacts (docs, UI captures, integration listings)
4. Fully editable evidence dialog (add / remove / override) for analyst judgment

Evidence Quality Ladder

Tier	Description	Reliability Impact
0	Marketing claim only	Extremely fragile
1	Claim + static screenshot	Low
2	Claim + interactive docs / API reference	Moderate
3	Claim + third-party integration listing / partner validation	High
4	Claim + customer-verifiable usage metric	Very high

Prioritize elevating Tier 0–1 cells; they are where valuation inflation hides.

• Buyer Risk: Paying for unverified differentiation; misallocating integration resources post-close.
• Mitigation: Force every “moat” claim to earn ≥ Tier 2 before it influences price or strategic prioritization.

5. Before vs After Snapshot

Dimension	Shallow Diligence	Expanded & Validated
Competitor Count	6–10 curated	35–50 mapped (+ latent)
Feature Taxonomy	12–18 seller-selected	60–90 categorized (core/diff/parity)
Evidence Coverage	30% screenshots	80%+ tiered validation
Analyst Hours	80+ manual	25–35 leveraged (automation + targeted deep dives)
Strategic Clarity	Narrative-dependent	Fact-based priority roadmap
Negotiation Leverage	Reactive	Proactive (data-backed challenge of claims)

6. Converting Insight into Negotiation & Integration

Once the matrix is credible:

• Challenge inflated differentiation respectfully (anchors price corrections).
• Detect feature clusters that drive real stickiness (informs post-close retention focus).
• Sequence integration: shore up parity-threat gaps first; accelerate true differentiators second.
• Prepare management meeting questions tied to Tier 0/1 gaps (“Walk us through a live workflow where X drives measurable expansion”).

7. Week 1 Checklist

1. Extract seller competitor + feature lists.
2. Run expansion pass (keywords, integrations, conferences, hiring signals).
3. Categorize entrants (Direct / Latent / Legacy / Upstart).
4. Define feature taxonomy & tag Core / Differentiator / Parity-Threat.
5. Auto-generate initial matrix; elevate Tier 0–1 cells.
6. Draft 5 gap-driven management questions.
7. Summarize validated differentiation vs assumed.

8. Tool Assist (Optional Leverage)

SuiteCompete accelerates matrix construction by automating discovery, evidence surfacing, and iterative curation—the heavy lift before human judgment. Seed → Suggest → Verify → Challenge.

9. Closing: Competitive Clarity Compounds

Each verified cell lowers post-close surprise, sharpens integration sequencing, and fortifies your investment case. Build it before you own the assumptions. Want a guided expansion session? Visit SuiteCompete.com.