Investment due diligence is a comprehensive and in-depth review of all aspects of the enterprise after the investor has reached an initial cooperation intention with the target enterprise to assess the value, risk and investment feasibility of the enterprise. This paper introduces the purpose, scope, process, methods and considerations of investment due diligence, and shares the best practices and experiences of investment due diligence in the light of the actual case of Champ Consulting Group.

What is investment due diligence?

Investment due diligence refers to the comprehensive and in-depth review of the historical data and documents of the enterprise, the background of managers, market risk, management risk, technical risk and capital risk after reaching an initial cooperation intention with the target enterprise, so as to evaluate the value, risk and investment feasibility of the enterprise.

What is the purpose of investment due diligence?

The purpose of investment due diligence is threefold:

Value discovery: through the analysis of the enterprise's financial situation, business model, market prospects, competitive advantage, etc., to determine the true value and growth potential of the enterprise, to provide a basis for investment pricing.

Risk discovery: Through the inspection of the legal compliance, financial soundness, operational efficiency, technological innovation, etc., the various risks that exist or may exist in the enterprise are found to provide reference for investment decision-making.

Investment feasibility analysis: through the evaluation of the enterprise's strategic planning, management team, equity structure, financing needs, etc., analyze the fit and synergy between investors and enterprises, and provide support for the formulation of investment agreements.

What is the scope of investment due diligence?

Investment due diligence generally involves the following aspects:

Business due diligence: pay attention to the basic situation of the enterprise, management team, products/Services, Markets/Customer/Competitors, financing use, risk analysis, etc.

Financial due diligence: focus on corporate financial reporting/Data/Policy/Forecast/Audit/Taxes, etc.

Legal due diligence: focus on business registration/Change/Equity/Creditor's Rights and Debts/Contract/litigation arbitration/Administrative penalties, etc.

Technical due diligence: focus on enterprise technology research and development/Innovation/Protection/Transfer/Authorization, etc.

Human resources due diligence: focus on the organizational structure of the enterprise/Staff size/Recruitment Training/Salary and welfare/labor contract/Social security provident fund, etc.

Environmental Social Responsibility: Focus on the Environmental Impact of Enterprises/Social responsibility/Ethics, etc.

According to the characteristics of different industries and different stages, there can be other aspects of due diligence, such as brand due diligence, supply chain due diligence, logistics due diligence, etc.

What are the investment due diligence processes?

Investment due diligence generally includes the following processes:

Develop a due diligence plan: determine the due diligence objectives, scope, methods, time, personnel, costs, etc., and clarify the division of work and responsibilities for due diligence.

Investigation and data collection: collect and verify all information of the enterprise and identify problems and risk points by reviewing documents, referring to external information, interviewing relevant personnel, and conducting field investigations.

Drafting due diligence report: based on the information collected, analyze the value, risk and investment feasibility of the enterprise, and form a due diligence report, including due diligence conclusions, recommendations and annexes.

Internal review: Internal review of the due diligence report to ensure completeness, accuracy and reasonableness of the report, and to correct or supplement deficiencies or errors in the report.

Design investment plan: according to the due diligence report, design the investment plan, including the investment amount, valuation, equity ratio, exit method, etc., and negotiate and sign the investment agreement with the enterprise.

What are the methods of investment due diligence?

There are several common ways to invest in due diligence:

Desktop research: through the network, database, industry reports and other channels, collect and analyze the relevant information of enterprises and their industries, to understand the basic situation of enterprises and market environment.

Field visits: by visiting the company's office space, production base, sales outlets and other places, to view the company's physical assets, products/Service quality, operating conditions, etc., intuitively feel the strength and potential of the enterprise.

Interviews and exchanges: Through interviews and exchanges with senior managers, core employees, customers, suppliers, competitors and other relevant personnel of the company, we can understand the company's strategic planning, management model, market competitiveness, etc., and obtain first-hand information and feedback.

Expert consultation: By hiring professional accounting firms, law firms and other third-party institutions to conduct professional audits and evaluations of corporate financial data, legal documents, etc., to identify and resolve potential problems and risks.

What are the considerations for investment due diligence?

Investment due diligence has the following considerations:

Maintain objectivity and fairness: investment due diligence should be based on facts, not affected by subjective emotions or external interference, objective and fair evaluation of the enterprise, and avoid blind optimism or excessive pessimism.

Pay attention to the depth of details: investment should pay attention to all aspects of the enterprise, do not ignore any details that may affect the investment decision-making, to dig deep into the value and risk of the enterprise, do not just stay on the surface or form.

Protection of commercial secrets: investment due diligence should abide by business ethics and legal provisions, do not disclose or abuse commercial secrets or sensitive information provided by enterprises, sign confidentiality agreements with enterprises, and properly keep relevant information.

Maintain communication and cooperation: Investment due diligence should maintain good communication and cooperation with enterprises, timely feedback on the progress and results of due diligence, solve possible problems and contradictions, and lay the foundation for the signing of subsequent investment agreements.

What are the best practices and experiences of Champ Consulting in investment due diligence?

Shangpu Consulting Group Co., Ltd. (referred to as "Shangpu Consulting") is one of the most leading and authoritative comprehensive consulting service organizations in China, focusing on providing customers with market research,IPOConsulting, investment and financing consulting and other professional services. Shangpu Consulting has an excellent team composed of industry experts, senior consultants, senior analysts, etc., as well as a strong network covering all parts of the country, which can provide customers with comprehensive, efficient and high-quality consulting services.

Champu Consulting has extensive experience and successful cases in investment due diligence. Here are some of them:

A well-known Internet companyIPOPrevious investment due diligence: Shangpu Consulting provided the company with comprehensive investment due diligence services, including business due diligence, financial due diligence, legal due diligence, technical due diligence, etc., and evaluated the company's market position, competitive advantage, Profitability, risk control and other aspects have provided strong support for the company's successful listing on Nasdaq in the United States.

Investment due diligence on the acquisition of an online education platform by a well-known education group: Shangpu Consulting provides professional investment due diligence services for the group, including market research, financial analysis, legal review, etc., analyzes the user scale, growth potential, profit model, compliance and other aspects of the platform, and provides an effective reference for the group to successfully complete the acquisition transaction.

A well-known medical device company introduced the investment due diligence of a venture capital institution: Shangpu Consulting provided the institution with professional investment due diligence services, including technical evaluation, market forecast, financial evaluation, etc., and evaluated the company's technological innovation capabilities, Market competitiveness, financial stability and other aspects provide a reliable basis for the institution to successfully invest in the company.

The above cases show that Champ Consulting has the following advantages in investment due diligence:

Professionalism: Champu Consulting has many years of industry experience and professional knowledge, and can conduct in-depth and detailed analysis and evaluation of enterprises in different industries and different stages, and discover the value and risks of enterprises.

Objectivity: Champ Consulting maintains an objective and impartial position, is not affected by any external factors, and provides customers with true and credible information and suggestions based on facts.

Efficiency: Champ Consulting has a strong resource and network to quickly collect and process large amounts of data and information to provide customers with timely and efficient services.

Accountability: Champ Consulting abides by business ethics and legal regulations, protects clients' commercial secrets and interests, maintains good communication and collaboration with clients, and achieves the best investment results for clients.

Summary

Investment due diligence is an important link for investors to conduct a comprehensive and in-depth review of the enterprise after reaching an initial cooperation intention with the target enterprise to assess the value, risk and investment feasibility of the enterprise. Investment due diligence involves many aspects, including business, finance, law, technology, human resources, environmental and social responsibility, etc., it is necessary to formulate a reasonable due diligence plan, adopt effective due diligence methods, pay attention to due diligence considerations, form a complete due diligence report, and design an appropriate investment plan.