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Pricing diligence answers one question: how much pricing upside is real, and how much the current team can capture. Pricing Insight answers it in two to three weeks from six defined questions, then turns the answer into a 12-week plan after completion: a signed baseline, controls, and quick wins released under agreed guardrails.
You are three weeks from a signing decision. The information memorandum promises margin expansion, and nobody has tested whether the business can price.
Where does pricing change the investment case?
Price is usually the least examined line in a diligence pack and the first lever a private equity (PE) operating partner reaches for after completion. This paper covers the two windows where pricing work changes the investment case: two to three weeks of diligence before signing, and the first 100 days after completion. The companion paper, Pricing in the PE Hold Period, covers why price carries more weight than volume or cost across the hold and how the exit multiple capitalises a durable gain.
A diligence conclusion that the pricing upside is small is stated as directly as one that it is large. One Australian private equity firm reports a 20% incremental lift in earnings before interest, tax, depreciation and amortisation (EBITDA) in an investee company from price modelling, and continues to use Pricing Insight for due diligence and 100-day plans.
Why write the hypotheses before the data arrives?
Each hypothesis is written down before any data is seen, together with the exact fields needed to test it. That discipline stops the analysis drifting towards whatever the data room happens to contain, and it tells the vendor precisely what to supply.
What can three weeks of diligence answer?
Six questions. Each has a defined evidence source and a defined output.
- How much revenue is under the business's control on price? Evidence: customer contracts, fixed-price terms and escalation clauses. Output: addressable revenue in A$.
- Do comparable customers pay comparable prices? Evidence: 12 to 24 months of invoice lines by customer and stock-keeping unit (SKU). Output: price dispersion within customer cohorts.
- Did the last price increase hold? Evidence: announcement dates and rates against invoice prices. Output: realisation rate, announced against realised.
- Are rebates earned before they are paid? Evidence: rebate agreements against the general ledger. Output: unverified thresholds and expired conditions, in A$.
- Who can give price away? Evidence: the discount authority matrix and override logs. Output: override rate and value by approver.
- Can the team run pricing? Evidence: management interviews, and a capability survey where access allows. Output: capability gaps ranked by earnings exposure.
The capability evidence across Pricing Insight diagnostics shows where to look first. Across five diagnostics and 663 respondents, a centralised database of competitor pricing was the weakest capability measured, averaging 44.8%, with four of five clients below 55%. A clearly defined and published pricing strategy averaged 52.9%, again with four of five below 55%.
What data should be requested?
- Invoice-line transactions for 12 to 24 months, with customer, SKU, quantity, list price, invoice price and cost
- Product and customer hierarchies
- Rebate, trading-term and promotion agreements, with accruals and payments
- Price lists and the dates of the last two price changes
- The discount authority matrix and any override reports
- Customer contracts carrying fixed prices or escalation clauses
What happens in the first 100 days?
Twelve weeks, three stages.
Weeks 1 to 4
Baseline agreed and signed by Finance. Discount authority confirmed. Expired rebate and trading conditions removed. The board receives the signed baseline and the controls in place.
Weeks 5 to 8
Quick wins released under guardrails: long-tail SKUs priced below their range, price-list corrections, and cost increases not yet passed through. The board receives each quick win with its annualised value and its expected value within the period.
Weeks 9 to 12
A roadmap for price optimisation, governance and sales capability across the hold. The board receives a staged plan with decision points and the first report of realised against annualised benefit.
The distinction in the second stage carries the program's credibility through its first board review. A quick win carrying an indicative A$500,000 annualised EBITDA benefit delivers a fraction of that inside the quarter it is released. Stating both figures from the start keeps the board's expectations matched to the cash.
Next step
Before your next signing, ask Ron Wood for the hypothesis list and data request for the target's sector. Ron's number is +61 410 534 099.
Capability scores are from the Pricing Insight cross-client statistics workbook (five diagnostics, 663 respondents, 2019 to 2025), with clients identified by sector only. The private equity result is as reported in a published client testimonial. The A$500,000 example is illustrative.
