Strategic Diligence of a Broking Company

Background and Challenge

The company was based in India and focused on private equity funds, providing growth financing to small and medium companies. It had an opportunity to invest in a Mumbai based financial services firm, engaged in the business of retail and institutional brokerage and equities arbitrage. It sought assistance in conducting a due diligence before investing in the brokerage firm, which covered the following:

  • The marketing strategy for franchisee and customer acquisition
  • Ability to retain their franchisees
  • Ability to retain their customers
  • How are they placed vis-à-vis competition
  • The hurdles the company will face in scaling up
  • The kinds of products and services that will lead to customer loyalty and higher spend per customer (asset management services, mutual funds etc.)

Approach and Recommendations

To conduct the strategic diligence, UC adopted the following approach:

  • Built a context to analyse the brokerage industry in India, for example -

    1) Emergence of the Indian economy and equity markets

    2) Trends in asset classes and future of the asset classes

    3) Broking models followed in India

    4) Key success factors of each of the models

  • Conducted an assessment of the financial service firm vs. the competitors in the market on various parameters, for example -

    1) Financial assessment covering the key ratios like profitability and leverage ratios, revenue contribution by channel, by customer and by asset class

    2) Operational assessment covering the current operational model, presence across the country, delivery channels, new initiative and risk management

    3) The top management and second in-line people in the organisation

    4) Future path of evolution

  • Arrived at a future earning scenario based on the competitive landscape, operational and management capabilities of the firm, customer and franchisee acquisition strategy, and the likely trend going ahead in the various asset classes
  • A ‘Go’ or ‘No Go’ decision was based on the returns achievable based on the scenarios in an optimistic equity market and a flat equity market


UC delivered all the components of the research on the brokerage firm, such as details on its strategy, customers, competition and other relevant information.