Investment due diligence refers to the comprehensive, in-depth and objective evaluation and analysis of all aspects of the target enterprise or project before making investment decisions to determine its true situation, value and risk, so as to provide basis and support for investment decisions. With the change of market environment and the development of technology, investment due diligence is also facing new challenges and opportunities. This paper systematically combs the definition, content, method and process of investment due diligence, and discusses the future trend and opportunity of investment due diligence with the service case of Shangpu Consulting Group Co., Ltd. (hereinafter referred to as "Shangpu Consulting"), which provides some reference and enlightenment for investors.

Definition of 1. investment due diligence

Investment due diligence (Due Diligence, shortDD) refers to the comprehensive, in-depth and objective evaluation and analysis of the financial, legal, tax, market, technology, environment, society and other aspects of the target enterprise or project before making an investment decision, so as to determine the real situation, value and risk of the target enterprise or project, so as to provide basis and support for the investment decision.

Investment due diligence is an essential part of the equity investment process and a key factor in the success of the investment. Through investment due diligence, investors can discover the strengths and weaknesses of the target company or project, identify potential problems and opportunities, evaluate reasonable valuations and returns, design appropriate cooperation models and exit strategies, and avoid unnecessary risks and disputes.

Content of 2. investment due diligence

The content of investment due diligence can be divided into the following areas:

Financial due diligence: Financial due diligence focuses on the past financial performance of the target enterprise or project, primarily to assess its financial risk and investment value. Financial due diligence mainly includes the following aspects: (1) Review the financial reports related to the target enterprise or project, such as profit statement, balance sheet, cash flow statement, etc; (2) analyze the cash flow, earnings and asset matters of the target enterprise or project, such as operating income, gross profit margin, net profit margin, accounts receivable turnover rate, inventory turnover rate, fixed asset turnover rate, etc; (3) Assess the current accounting policies of the target enterprise or project and their reasonableness, such as revenue recognition principles, cost accounting methods, inventory valuation methods, etc; (4) Forecast the future value of the target enterprise or project and its influencing factors, such as revenue growth rate, cost control level, profit level, etc.

Legal due diligence: Legal due diligence is designed to comprehensively assess the compliance of the target enterprise or project assets and business and the legal risks that may arise after contracting. Legal due diligence mainly includes the following aspects: (1) Review the establishment and historical evolution of the target enterprise or project, such as industrial and commercial registration information, articles of association documents, minutes of shareholders' meetings, etc; (2) Verify the major shareholders of the target enterprise or project, such as equity structure, shareholder background, shareholder agreement, etc; (3) Check the major creditor's rights and debt documents of the target enterprise or project, such as loan contracts, guarantee contracts, bond issuance documents, etc; (4) Review major contracts of the target enterprise or project, such as supply contract, sales contract, lease contract, technology contract, etc; (5) Investigate major litigation, arbitration and administrative punishment documents of the target enterprise or project, such as judgments, awards, fines, etc; (6) Evaluate the tax and government preferential policies of the target enterprise or project, such as tax registration information, tax returns, tax preferential certificates, etc.

Business due diligence: Business due diligence is to gain an in-depth understanding of the operating conditions of the target enterprise or project and the development trend of the industry in which it operates. Operational due diligence mainly includes the following aspects: (1) Analyze the basic situation of the target enterprise or project, such as business scope, organizational structure, management team, personnel size, etc; (2) Research the products or services of the target enterprise or project, such as product type, product quality, product price, product competitiveness, etc; (3) Investigate the market situation of the target enterprise or project, such as market capacity, market share, market demand, market competition, etc; (4) Evaluate the customer and supplier situation of the target enterprise or project, such as customer number, customer distribution, customer satisfaction, supplier number, supplier quality, supplier relationship, etc; (51) Discuss the technical situation of the target enterprise or project, such as technical level, technical innovation capability, technical protection measures, and the possibility of technology transfer.

Other due diligence: In addition to the above three aspects, other aspects of due diligence may be involved, such as environmental due diligence, social due diligence, human resources due diligence, etc., depending on the purpose and target of the investment. Environmental due diligence is to assess the impact of the target enterprise or project on the environment and its environmental responsibility, including environmental impact assessment report, environmental permit certificate, environmental monitoring report, etc. Social due diligence is to evaluate the impact of the target enterprise or project on society and its social responsibility, mainly including social responsibility report, social public welfare activity record, public opinion feedback and so on. Human resources due diligence is to assess the human resources status of the target enterprise or project and its potential problems, including employee files, labor contracts, compensation and benefits system, training and development plans, etc.

Methods of 3. investment due diligence

The main methods of investment due diligence can be divided into the following:

Review documents: through the company's industrial and commercial registration information, financial reports, business documents, legal contracts and other information review, found abnormal and major problems.

Reference to external information: through the Internet, industry magazines, industry insiders and other information channels, to understand the company and its industry.

Interviews with relevant personnel: full communication with all levels and functional personnel within the enterprise, as well as intermediary agencies.

Enterprise field visit: check the real assets such as plant, land, equipment, inventory, raw materials, etc., and evaluate their authenticity, integrity and effectiveness.. Expert advice: as needed, hire experts in related fields to provide professional advice and recommendations.

4. investment due diligence process

The investment due diligence process can generally be divided into the following stages:

Due diligence preparation: at this stage, the investor and the target enterprise or project sign a confidentiality agreement, determine the scope, content, method, timetable, etc. of the due diligence, set up a due diligence team, assign due diligence tasks, and collect the documents and materials required for due diligence.

Implementation of due diligence: At this stage, the due diligence team adopts various due diligence methods to conduct a comprehensive, in-depth and objective evaluation and analysis of the target enterprise or project in accordance with the due diligence plan, identify problems and risks, and communicate with investors in a timely manner.

At this stage, the due diligence team writes a due diligence report based on the due diligence results, summarizes the strengths and weaknesses, values and risks of the target enterprise or project, makes investment recommendations and comments, and submits a report to investors.

Follow-up: At this stage, the investor decides whether to continue to invest based on the due diligence report, and negotiates with the target company or project, signs an investment agreement, completes the delivery, etc.

Future trends and opportunities for 5. investment due diligence

With the change of market environment and the development of technology, investment due diligence is also facing new challenges and opportunities. This paper explores future trends and opportunities in the following areas, taking into account the case of Champ Consulting's services:

Market research: Market research is an important part of investment due diligence. Through the analysis of the market situation of the target enterprise or project industry, it can provide investors with valuable information and insight. With the application of big data, cloud computing, artificial intelligence and other technologies, market research can obtain and process massive amounts of data more quickly, accurately and comprehensively, and generate more in-depth, detailed and dynamic reports.

For example, Champ Consulting conducted market research on the Chinese market for a European food company and collected more1000Ten thousand pieces of data about Chinese consumers' food categories, brands, channels, etc., are cleaned, classified, aggregated, and mined through artificial intelligence technology, and multiple dimensions including market scale, market structure, market demand, and market competition are generated. Report, and put forward market strategy recommendations for different regions, different groups, and different scenarios.

Investment and financing consulting: Investment and financing consulting refers to providing investors or target enterprises or projects with professional consulting services on investment and financing scheme design, valuation evaluation, transaction structure arrangement, etc. With the innovation and diversification of the financial market, investment and financing consulting also needs to adapt to the new situation and needs, and provide more flexible, efficient and optimized solutions. For example, Shangpu Consulting once conducted investment and financing consultation for an American medical device company in the Chinese market. By using its own professional knowledge and rich experience in the medical industry, as well as good cooperative relations with many financial institutions and investment institutions, it designed a set of investment and financing plans for the company that meet the characteristics of the Chinese market and legal regulations, including the introduction of strategic partners, the establishment of joint ventures, the application of government subsidies, the issuance of convertible bonds and other ways, for the company's development in the Chinese market to provide strong financial support.

IPO listing advisory:IPOListing consulting refers to providing a target enterprise or project with information on an initial public offering in a securities market (Initial Public Offering, shortIPO) of full consulting services. With the competition and changes in the global securities market,IPOListing consultation also needs to constantly adapt to new rules and requirements, and provide more professional, comprehensive and efficient services.

For example, Shangpu Consulting once worked for a Chinese new energy vehicle company in the United States Nasdaq (NASDAQ) MarketIPOListing consultation, through the use of its own in-depth research and analysis in the new energy vehicle industry, as well as close cooperation with local lawyers, accountants, bankers and other professionals in the United States, provides the company with full consultation services from the preparation stage to the listing stage, including the formulation of listing strategies, the selection of underwriters, the preparation of prospectuses, roadshow promotion, and the determination of the issue price, for the company's successful listing in the U.S. market and get a good market response.

6. epilogue

Investment due diligence is an important work that investors must do before making investment decisions, and it is also a key factor in the success of investment. This paper systematically combs the definition, content, method and process of investment due diligence, and discusses the future trend and opportunity of investment due diligence with the service case of Shangpu Consulting, which provides some reference and enlightenment for investors.