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, in order to discover the value and risk of the enterprise and provide a basis for investment decision-making. This paper analyzes the core problems and solutions in investment due diligence from the perspectives of business, finance and law, and demonstrates the professional capabilities and advantages of Shangpu Consulting in the field of investment due diligence, combined with the specific cases of Shangpu Consulting's clients.

Investment due diligence is an essential part of the equity investment process, which involves all aspects of the target company, including business, finance, and law. Through the due diligence of the target enterprise, investors can understand the real situation of the enterprise, discover the value and potential of the enterprise, identify the risks and hidden dangers of the enterprise, and provide the basis for investment decision-making. At the same time, investors can also build trust and communication with the target enterprise through the due diligence process, laying the foundation for subsequent transaction negotiations and cooperation.

So, what are the core issues that should be paid attention to when doing investment due diligence? And how should these issues be resolved? This article will analyze the core issues and solutions in investment due diligence from the perspectives of business, finance and law, and demonstrate the professional capabilities and advantages of Shangpu Consulting in the field of investment due diligence with the specific cases of Shangpu Consulting's clients.

1. business due diligence

Business due diligence refers to the analysis and evaluation of the target enterprise's market, products, customers, competitors, channels, supply chain and so on. Business due diligence is the core of the whole due diligence work, which can help investors understand the key factors such as the business model, competitive advantage and growth potential of the target enterprise. In conducting business due diligence, the following core issues need to be addressed:

What is the development trend of the target enterprise's industry? What is the scale of the industry? How strong is the market demand? What is the influence of regulatory policies? What is the competition pattern of the industry? What is the position of the target enterprise in the industry?

What are the products or services of the target enterprise? What is the quality, performance, function and innovation degree of the products or services? Does the products or services meet the market demands and users' preferences? Does the products or services have obvious differentiation advantages or brand effects?

What are the customers of the target enterprise? What regions and industries are the customers located in? What is the scale and type of customers? What is the customer loyalty and satisfaction? What is the source and acquisition cost of customers? What is the churn rate and renewal rate of customers?

What are the competitors of the target enterprise? What are the scale, product, price, channel and market share of the competitors? What are the advantages and disadvantages of the target enterprise compared with the competitors? How does the target enterprise cope with the competitive pressure?

What are the channels of the target enterprise? How about the coverage and efficiency of the channels? How about the management and maintenance mechanism of the channels? How about the costs and benefits of the channels? How about the stability and dependence of the channels?

What is the supply chain of the target enterprise? What is the quantity, type, quality, price and cooperation relationship of the suppliers? What is the stability, flexibility, efficiency and risk of the supply chain? Does the target enterprise have any alternative or substitute suppliers?

In order to solve these problems, investors need to take the following measures:

Review the relevant documents provided by the target enterprise, including company profile, product introduction, market analysis, customer list, cooperation agreement, sales report, market research report, etc.

Refer to external information, including the Internet, industry magazines, professional organizations, industry associations and other information channels to understand industry trends, market data, competition, etc.

Interviews with relevant personnel, including internal personnel such as management, business departments, and technical departments of the target company, as well as external personnel such as customers, suppliers, and competitors, to obtain first-hand information and feedback.

To conduct on-the-spot investigation of the enterprise, check the production base, R & D center, sales outlets and other physical assets of the target enterprise, and understand the operation status and ability of the target enterprise.

Shangpu Consulting has rich experience and professional team in business due diligence, which can provide investors with comprehensive, in-depth and objective business due diligence services. The following is a specific example of a Champ Consulting Service client:

a certain well-knownVCThe agency invested in a new energy vehicle company and commissioned Shangpu Consulting to conduct business due diligence. Champ Consulting has completed its business due diligence:

Reviewed the company profile, product introduction, market analysis, customer list, cooperation agreement and other documents provided by the target enterprise, and understood the basic situation and development process of the target enterprise.

Referring to the network, industry magazines, professional institutions and other external information, the development trend, market scale, demand characteristics, policy support, competition pattern and so on of the new energy automobile industry are analyzed.

The management, technical team, sales team and other internal personnel of the target enterprise were interviewed to obtain information on the product design concept, technological innovation capability, sales strategy and channel construction of the target enterprise.

The main customers (including individual consumers and enterprise users), major suppliers (including battery suppliers and parts suppliers), major competitors (including traditional automobile manufacturers and new energy automobile manufacturers) and other external personnel of the target enterprise were interviewed to obtain information on customer satisfaction and loyalty, supply chain stability and efficiency, competitive advantages and disadvantages of the target enterprise.

Field visits to the target enterprise's production base (located in Jiangsu Province), R & D center (located in Beijing), sales outlets (distributed throughout the country) and other physical assets, to understand the target enterprise's production capacity and quality control, R & D investment and results transformation, sales scale and effect.

Through the above methods, Shangpu Consulting provides investors with a detailed business due diligence report. The report analyzes the position and potential of the target company in the new energy vehicle industry, evaluates the product advantages and disadvantages of the target company, analyzes the customer needs and satisfaction of the target company, evaluates the supply chain management and efficiency of the target company, and compares the differentiation and competitiveness of the target company and its competitors, summarizes the business risks and opportunities of the target enterprise. The report also puts forward some investment suggestions and improvement measures, which provide valuable reference for investors' investment decision-making.

2. Financial due diligence

Financial due diligence refers to the analysis and evaluation of the financial situation, financial management and financial forecasting of the target enterprise. Financial due diligence is an important part of the whole due diligence work, which can help investors determine the true value and profitability of the target enterprise, identify the financial problems and risks of the target enterprise, and provide the basis for investment pricing and terms. In conducting financial due diligence, the following core issues need to be addressed:

Are the financial statements of the target enterprise true, complete, accurate and compliant? Are the financial statements audited or verified? Do the financial statements reflect the real business situation of the target enterprise?

What are the main financial indicators (such as revenue, profit, gross profit margin, net profit margin, cash flow, asset-liability ratio, etc.) of the target enterprise? What are the changing trends and reasons of the main financial indicators? How do the main financial indicators compare with the industry average level and the level of competitors?

What about the core assets of the target enterprise (such as fixed assets, intangible assets, inventory, accounts receivable, etc.)? What about the value, cost and recovery period of the core assets? Are there any problems such as expiration, loss, depreciation and impairment of the core assets?

What about the main liabilities of the target enterprise (such as short-term loans, long-term loans, accounts payable, prepayments, etc.)? What about the amount, term, interest rate, guarantee method, etc. of the main liabilities? Are there any problems such as overdue, default, litigation, etc. of the main liabilities?

What are the major transactions (such as mergers and acquisitions, investment, cooperation, guarantee, etc.) of the target enterprise? What are the purposes, conditions, effects, etc. of the major transactions? Does the major transactions have hidden or potential risks or obligations?

What are the financial forecasts (such as revenue forecast, profit forecast, cash flow forecast, etc.) of the target enterprise? Are the assumptions and methods of the financial forecasts reasonable? Are the financial forecasts consistent with historical data and market conditions?

In order to solve these problems, investors need to take the following measures:

Review the relevant documents provided by the target enterprise, including financial statements (including balance sheet, profit statement, cash flow statement, etc.), audit reports or capital verification reports, tax reports or certificates, bank statements or certificates, etc.

Refer to external information, including information channels such as the Internet, industry magazines, and professional organizations, to understand benchmark data such as industry averages and competitor levels.

Interviews with relevant personnel, including the financial department of the target enterprise, accounting firms, banking institutions and other internal and external personnel, to obtain first-hand information and feedback.

Conduct a field survey of the enterprise to view the core assets, major liabilities, major transactions and other physical or documentary evidence of the target enterprise to understand the financial position and capabilities of the target enterprise.

Shangpu Consulting has rich experience and professional team in financial due diligence, which can provide investors with comprehensive, in-depth and objective financial due diligence services. The following is a specific case of a Champ Consulting Service client:

a certain well-knownPEThe agency invested in an Internet education company and commissioned Champ Consulting to conduct financial due diligence. Champ Consulting completed the financial due diligence:

Reviewed the financial statements (including balance sheet, profit statement, cash flow statement, etc.), audit reports, tax reports and other documents provided by the target enterprise to understand the financial position and operating status of the target enterprise.

Referring to the network, industry magazines, professional institutions and other external information, the development trend of the Internet education industry, market size, profit model, cost structure and so on are analyzed.

Interviews with internal and external personnel such as the financial department, auditor's firm, banking institution, etc. of the target enterprise were conducted to obtain information on the financial management and control, financial risks and responses, financial forecasts and assumptions of the target enterprise.

Field visits to the target enterprise's core assets (e. g., teaching equipment, course content, user data, etc.), major liabilities (e. g., loans, accounts payable, etc.), major transactions (e. g., mergers and acquisitions, investments, partnerships, etc.) and other physical or documentary evidence to understand the target enterprise's financial position and capabilities.

Through the above methods, Shangpu Consulting provides investors with a detailed financial due diligence report, which analyzes the main financial indicators and trends of the target enterprise, evaluates the core assets and major liabilities of the target enterprise, discovers the significant transactions and potential risks of the target enterprise, and summarizes the financial risks and opportunities of the target enterprise. The report also puts forward some suggestions on investment pricing and terms, which provides valuable reference for investors to make investment decisions.

3. legal due diligence

Legal due diligence refers to the analysis and evaluation of the legal situation, legal risks and legal compliance of the target enterprise. Legal due diligence is an important part of the whole due diligence work, which can help investors determine the legality and compliance of the target enterprise, identify the legal problems and risks of the target enterprise, and provide the basis for the contract and terms of the investment transaction. In conducting legal due diligence, the following core issues need to be addressed:

Are the corporate structure and ownership structure of the target enterprise reasonable? Are the shareholders, directors, supervisors and senior executives of the target enterprise legal? Are the articles of association, resolutions of the shareholders' meeting and resolutions of the board of directors of the target enterprise effective?

Is the business license and qualification of the target enterprise complete? Does the target enterprise comply with the laws, regulations and standards of relevant industries? Does the target enterprise have any behavior or situation that violates laws, regulations or administrative rules?

Is the target enterprise's intellectual property rights (such as trademark, patent, copyright, domain name, etc.) valid? Does the target enterprise own or authorize to use the relevant intellectual property rights? Does the target enterprise have any behavior or situation that infringes or is infringed upon the intellectual property rights?

Is the labor relationship of the target enterprise in compliance with regulations? Does the target enterprise sign legal labor contracts with its employees? Does the target enterprise pay social insurance and provident fund in full and on time? Does the target enterprise have any behavior or situation that violates labor law or employees' rights and interests?

Are the main contracts of the target enterprise (such as sales contracts, purchase contracts, lease contracts, loan contracts, guarantee contracts, etc.) valid? What are the contents, conditions and effects of the main contracts? Are there any problems such as breach of contract, disputes and litigation in the main contracts?

What is the litigation and arbitration situation of the target enterprise? Is there any ongoing or possible litigation or arbitration in the target enterprise? What is the cause, process and result of the litigation or arbitration? What is the impact and risk of the litigation or arbitration on the target enterprise?

In order to solve these problems, investors need to take the following measures:

Review the relevant documents and materials provided by the target enterprise, including company licenses, equity certificates, articles of association, meeting resolutions, business licenses and qualification certificates, intellectual property certificates, labor contracts and social security provident fund certificates, major contracts and attachments.

Refer to external information, including information channels such as the Internet, industry magazines, and professional institutions, to understand the laws, regulations and standards of relevant industries, as well as public information on litigation or arbitration cases involving the target company.

Interviews with relevant personnel, including the legal department of the target enterprise, external law firms, judicial organs and other internal and external personnel, to obtain first-hand information and feedback.

To conduct on-the-spot investigation of the enterprise, to check the company license, intellectual property certificate and other physical or documentary evidence of the target enterprise, to understand the legal status and ability of the target enterprise.

Shangpu Consulting has rich experience and professional team in legal due diligence, which can provide investors with comprehensive, in-depth and objective legal due diligence services. The following is a specific case of a Champ Consulting Service client:

a certain well-knownVCThe institution invests in an e-commerce platform enterprise and entrusts Shangpu Consulting to conduct legal due diligence. Champ Consulting completed the legal due diligence:

Reviewed the documents and materials provided by the target enterprise, such as company license, equity certificate, articles of association, meeting resolution, etc., and understood the corporate structure and equity structure of the target enterprise.

Reviewed the business license and qualification certificate and other documents provided by the target enterprise, and understood the business scope and compliance of the target enterprise.

Reviewed the intellectual property certificate and other documents provided by the target enterprise, and understood the intellectual property status and protection of the target enterprise.

Reviewed the labor contract and social security provident fund certificate and other documents provided by the target enterprise, and understood the labor relations and compliance of the target enterprise.

Reviewed the main contracts and attachments provided by the target enterprise and other documents to understand the main transactions and cooperation of the target enterprise.

With reference to external information such as the Internet, industry magazines and professional institutions, the laws, regulations and standards of the e-commerce platform industry are analyzed, as well as the public information of litigation or arbitration cases involved in the target enterprise.

Interviews with internal and external personnel such as the legal department, external law firms, and judicial organs of the target enterprise were conducted to obtain information on the legal risks and responses, legal forecasts and assumptions of the target enterprise.

Field visits to the target enterprise's company licenses, intellectual property certificates and other physical or documentary evidence, to understand the legal status and capabilities of the target enterprise.

Through the above methods, Shangpu Consulting provides investors with a detailed legal due diligence report, which analyzes the corporate structure and equity structure of the target enterprise, evaluates the business license and qualification of the target enterprise, discovers the intellectual property problems and risks of the target enterprise, summarizes the labor relations and compliance of the target enterprise, and evaluates the main contracts and transactions of the target enterprise, the litigation and arbitration situation of the target enterprise is analyzed. The report also puts forward some suggestions on the contract and terms of investment transactions, which provides valuable reference for investors to make investment decisions.

4. epilogue

Investment due diligence is a work that investors must do before making equity investments, which can help investors gain a comprehensive and in-depth understanding of all aspects of the target enterprise and provide effective information and basis for investors. Investment due diligence involves many areas, including business, finance, law, etc., and each area has its core problems and solutions. Investors need to adopt a variety of methods when conducting investment due diligence, including reviewing documents, reference information, interviewing personnel, field surveys, etc., in order to obtain true, complete, accurate and objective data and information.