1.Commercial due diligencePurpose

The purpose of commercial due diligence is to help investors or counterparties make an accurate and comprehensive assessment of the commercial value of the target company or project before making a major transaction such as an investment or merger and acquisition, so as to set a reasonable transaction price and terms, avoid potential risks and maximize value. The purpose of commercial due diligence can be specified from the following three aspects:

Verify the authenticity and legitimacy of the target company or project. Commercial due diligence can confirm the real existence and legitimate operation of the target company or project by investigating and verifying the market position, competitive advantage, customer relationship, supply chain management, quality control, intellectual property rights, compliance and other aspects of the target company or project, so as to prevent investors or counterparties from being misled by false or illegal information and causing unnecessary losses.

Assess the sustainability and growth of the target company or project. Commercial due diligence can evaluate the current and future performance and development potential of the target company or project by analyzing and predicting the market demand, industry trend, competitive environment, innovation ability, profit model, risk factors, etc. of the target company or project, and judge whether the target company or project has sustainable competitiveness and growth, And whether it meets the strategic objectives and expected returns of investors or counterparties.

Determine the value and trading conditions of the target company or project. Commercial due diligence can determine the reasonable value and transaction price of the target company or project by reviewing and calculating the financial status, assets and liabilities, cash flow, profitability, valuation methods, etc. of the target company or project, as well as related transaction terms and conditions, Such as equity ratio, payment method, margin, compensation liability, exit mechanism, etc., provide a basis for investors or counterparties to conduct effective negotiations and decisions.

2.Commercial due diligenceContent

The content of commercial due diligence refers to the content that needs to be investigated and analyzed in all aspects of the target company or project when conducting commercial due diligence. The contents of commercial due diligence include the following aspects:

Market analysis. Market analysis refers to the analysis of the size, structure, demand, growth, segmentation and competition of the market in which the target company or project is located in order to understand the market positioning and market potential of the target company or project. The main elements of the market analysis include:

Market size and growth rate. Market size and growth rate refer to the overall sales and sales growth of the market in which the target company or project is located, reflecting the level and speed of market development. Market size and growth rates can be estimated from both supply-side and demand-side perspectives, as well as through the analysis of historical data and future forecasts to derive the current state and trends of the market.

Market structure and competitiveness. Market structure and competitiveness refers to the number, type, scale, share and geographical distribution of participants in the market in which the target company or project is located, reflecting the degree of competition and competitive pattern of the market. Market structure and competitiveness can be assessed through the analysis of market segmentation and concentration, as well as through the use of tools such as the Porter's Five Forces model to derive market strengths and weaknesses.

market needs and preferences. Market demand and preference refers to the demand, demand characteristics, purchase behavior, purchase motivation and satisfaction of consumers or customers in the market in which the target company or project is located, reflecting the demand potential and demand changes in the market. Market needs and preferences can be analyzed through surveys and interviews with consumers or customers, as well as through the identification of key buying factors (KBFs) and performance drivers (KPIs) in the market to derive market opportunities and challenges.

Industry analysis. Industry analysis refers to the analysis of the development history, development stage, development trend, development driving force and development obstacle of the target company or project in order to understand the industry background and industry prospect of the target company or project. The main contents of the industry analysis include:

Industry development process and stage. The course and stage of industry development refers to the development process and stage of the industry in which the target company or project is located from birth to maturity, reflecting the growth and stability of the industry. The history and stage of industry development can be determined by analyzing the history and current situation of the industry, as well as by using tools such as industry life cycle models to determine the characteristics and problems of the industry.

Industry trends and forecasts. Industry trends and forecasts refer to the direction and pace of development of the industry in which the target company or project is located over a period of time, reflecting the forward-looking and attractive nature of the industry. Industry trends and forecasts can be assessed by analyzing the industry's macro environment, policies and regulations, technological innovation, social culture and other influencing factors, as well as by using tools such as PEST analysis models to assess the opportunities and threats of the industry.

Industry development drivers and barriers. Industry development drivers and obstacles refer to the promotion factors and constraints of the development of the industry in which the target company or project is located, reflecting the advantages and disadvantages of the industry. Industry development drivers and barriers can be identified by analyzing the industry's supply and demand, value chain, profitability, risk factors, and by using tools such as SWOT analysis models to identify the industry's strengths and weaknesses.

Company analysis. Company analysis refers to the analysis of the business model, business strategy, organizational structure, human resources, quality management, customer satisfaction, brand image, innovation ability and other aspects of the target company or project to understand the internal situation and core competitiveness of the target company or project. The main elements of the company analysis include:

business model and business strategy. Business model and business strategy refers to the value proposition, revenue source, cost structure, profit margin, market positioning, competitive advantage, development goals and other aspects of the target company or project, reflecting the target company or project's business philosophy and business direction. Business models and business strategies can be described by analyzing the vision, mission, goals, strategies, action plans, etc. of the target company or project, as well as by using tools such as the business model canvas to derive the strengths and weaknesses of the target company or project.

Organizational structure and human resources. Organizational structure and human resources refer to the organizational form, organizational culture, management, number of employees, quality of employees, employee motivation, employee mobility, etc. of the target company or project, reflecting the organizational efficiency and organizational climate of the target company or project. Organizational structure and human resources can be evaluated by analyzing the organization chart, job responsibilities, compensation and benefits, training development, performance appraisal, etc. of the target company or project, as well as by using tools such as human resource evaluation models to derive the strengths and weaknesses of the target company or project.

Quality management and customer satisfaction. Quality management and customer satisfaction refers to the quality standards, quality control, quality improvement, customer feedback, customer loyalty, customer complaints and other aspects of the products or services of the target company or project, reflecting the quality level and customer relationship of the target company or project. Quality management and customer satisfaction can be measured by analyzing the quality system, quality index, quality cost, quality award, customer survey, customer analysis and other aspects of the target company or project, as well as by using quality management tools and customer satisfaction index and other tools to obtain the advantages and disadvantages of the target company or project.

Brand image and innovation ability. Brand image and innovation ability refer to the brand name, brand identity, brand positioning, brand communication, brand loyalty, innovation concept, innovation project, innovation effect and other aspects of the target company or project, reflecting the brand value and innovation potential of the target company or project. Brand image and innovation ability can be evaluated by analyzing the brand strategy, brand equity, brand evaluation, innovation strategy, innovation process, innovation evaluation and other aspects of the target company or project, as well as by using tools such as brand pyramid model and innovation management model to obtain the strengths and weaknesses of the target company or project.

Financial Analysis. Financial analysis refers to the analysis of the financial position, financial performance, financial risk, financial forecast, etc. of the target company or project to understand the financial value and financial stability of the target company or project. The main elements of financial analysis include:

Financial position analysis. Financial position analysis refers to the analysis of the assets, liabilities, equity and other aspects of the target company or project to understand the financial structure and financial strength of the target company or project. Financial position analysis can be carried out by analyzing the balance sheet of the target company or project, as well as by using tools such as financial ratio analysis to evaluate the target company or project's asset quality, debt level, capital structure, solvency and other indicators.

Financial performance analysis. Financial performance analysis refers to the analysis of the revenue, cost, profit, cash flow and other aspects of the target company or project to understand the financial efficiency and financial growth of the target company or project. Financial performance analysis can be analyzed by analyzing the profit statement and cash flow statement of the target company or project, as well as by using tools such as financial ratio analysis to evaluate the target company or project's operating income, gross margin, net margin, surplus growth rate, operating cash flow, free cash flow and other indicators.

Financial risk analysis. Financial risk analysis refers to the analysis of the authenticity, integrity and compliance of the financial statements of the target company or project to understand the financial risks and financial controls of the target company or project. Financial risk analysis can be carried out by analyzing the audit opinions, accounting policies, accounting differences, accounting adjustments, financial litigation and other aspects of the financial statements of the target company or project, as well as by using financial risk assessment models and other tools to evaluate, in order to obtain the target company or project's financial statement quality, financial fraud risk, financial compliance risk and other indicators.

Analysis of financial forecasts. Financial forecasting analysis refers to the prediction and analysis of the financial position, financial performance, financial risk, etc. of the target company or project over a period of time in order to understand the financial prospects and financial sustainability of the target company or project. Financial forecasting analysis can be used to analyze the historical financial data and future financial assumptions of the target company or project, as well as to evaluate the future revenue, profit, cash flow, financial ratios and other indicators of the target company or project by using tools such as financial forecasting models and financial sensitivity analysis.

3.Commercial due diligenceMethod

The method of commercial due diligence refers to the method of data collection and data analysis that needs to be used in commercial due diligence. Commercial due diligence methods include the following:

Desktop research. Desktop research refers to the review and analysis of public information and third-party information of the target company or project, such as official websites, annual reports, news reports, industry reports, market research, expert opinions, etc., to obtain information about the basic situation and external environment of the target company or project. The advantages of desktop research are a wide range of information sources, low acquisition cost, and fast acquisition speed, but the disadvantage is that the information may be incomplete, inaccurate, untimely, and inconsistent.

Field trips. Field visits refer to personal visits and observations of the target company or project's production and business premises, equipment and facilities, product displays, employee work, etc., in order to obtain information about the internal situation and actual operations of the target company or project. The advantage of field investigation is that the information is intuitive, real, specific and comprehensive, but the disadvantage is that the information is difficult to obtain, the acquisition time is long, and the acquisition cost is high.

Interview visits. Interviews refer to communication and communication with the management, employees, customers, suppliers, partners, competitors and other relevant parties of the target company or project to obtain first-hand and in-depth information about the target company or project. The advantage of interview is that the information is detailed, in-depth, flexible and targeted, but the disadvantage is that the information may be biased, inconsistent, unreliable and unverifiable.

Data analysis. Data analysis refers to the collation, processing, analysis and interpretation of the collected data through the use of various data analysis methods and tools to draw valuable information and conclusions. The advantage of data analysis is that the information is objective, scientific, quantitative and comparable, but the disadvantage is that the information may be erroneous, incomplete, inaccurate and not timely.

4.Commercial due diligenceCase

A case of commercial due diligence is a specific instance of commercial due diligence in an actual investment or transaction. The case of commercial due diligence can help investors or counterparties understand the process and effects of commercial due diligence, as well as the importance and value of commercial due diligence. Here are a few examples of commercial due diligence:

Champ Consulting's commercial due diligence for a private equity fund. Champu Consulting is a professional commercial due diligence consulting firm that provides commercial due diligence services to a wide range of investors and counterparties. Shangpu Consulting has conducted a commercial due diligence for a private equity fund. The target company is a company engaged in the research and development, production and sales of medical devices. The private equity fund plans to acquire it. The business due diligence team of Shangpu Consulting used desktop research, field visits, interview visits and data analysis to conduct a comprehensive and in-depth assessment and analysis of the market, industry, company and financial aspects of the target company, providing the following key findings and recommendations for private equity funds:

In terms of the market, the target company is located in a large medical device market with high growth rate and stable demand, but the competition is fierce, the market concentration is low, the market segmentation is obvious, the market demand and preference are constantly changing, and the market risk is high. It is recommended that private equity funds further verify and evaluate the market positioning and market potential of the target company, as well as further optimize and improve the market strategy and market execution of the target company.

In terms of industry, the medical device industry in which the target company is located has good development prospects, clear development trends, and strong development drivers, but there are many obstacles to development, such as policies and regulations, technological innovation, social and cultural factors. It is recommended that private equity funds further understand and grasp the industry background and industry prospects of the target company, as well as further identify and respond to the industry advantages and industry threats of the target company.

In terms of the company, the business model and business strategy of the target company are relatively clear, the organizational structure and human resources are relatively reasonable, the quality management and customer satisfaction are relatively excellent, and the brand image and innovation ability are relatively prominent, but there are also some problems and deficiencies, such as the source of income. Relatively single, more complex cost structure, relatively low profit margin, relatively vague market positioning, relatively weak competitive advantage, relatively conservative development goals, etc. It is suggested that private equity funds should further confirm and evaluate the internal situation and core competitiveness of the target company, and further strengthen and improve the advantages and disadvantages of the target company.

In terms of finance, the target company's financial status is relatively stable, its financial performance is relatively good, its financial risk is relatively low, and its financial forecast is relatively reasonable, but there are also some risks and uncertainties, such as relatively general asset quality, relatively high debt level, relatively unreasonable capital structure, relatively weak solvency, relatively volatile operating income, relatively low gross profit margin and net interest rate, and relatively insufficient operating cash flow and free cash flow. It is recommended that private equity funds further verify and calculate the financial value and financial stability of the target company, as well as further optimize and enhance the financial structure and financial efficiency of the target company.

Based on the above findings and recommendations, Champ Consulting provides a reasonable range of trading prices and trading conditions for private equity funds, as well as a feasible trading plan and trading steps, which provides strong support and guarantee for the investment decision-making and transaction implementation of private equity funds.

Champ Consulting's commercial due diligence for a public company. Shangpu Consulting also conducted a commercial due diligence for a listed company. The target company is a company engaged in education and training services, and the listed company plans to make strategic investments in it. The business due diligence team of Shangpu Consulting used desktop research, field visits, interview visits and data analysis to conduct a comprehensive and in-depth assessment and analysis of the target company's market, industry, corporate and financial aspects, and provided the listed company with the following key findings and recommendations:

On the market side, the target company is located in a small education and training market with low growth rate, unstable demand, fierce competition, high market concentration, less obvious market segmentation, changing market demand and preferences, and high market risk. It is recommended that listed companies conduct careful verification and evaluation of the market positioning and market potential of the target company, as well as close supervision and guidance of the target company's market strategy and market execution.

In terms of industry, the education and training industry in which the target company is located has general development prospects, unclear development trends, weak development drivers, and many development obstacles, such as policies and regulations, and technological innovation.

In terms of finance, the target company's financial situation is relatively unstable, its financial performance is relatively poor, its financial risk is relatively high, its financial forecast is relatively unreliable, and there are many risks and uncertainties, such as poor asset quality, high debt level, unbalanced capital structure, weak solvency, unstable operating income, low gross profit margin and net interest rate, negative operating cash flow and free cash flow, and low quality of financial statements, the risk of financial fraud is higher and the risk of financial compliance is higher. It is recommended that listed companies strictly verify and calculate the financial value and financial stability of the target company, as well as thoroughly optimize and enhance the financial structure and financial efficiency of the target company.

Based on the above findings and recommendations, Shangpu Consulting provides listed companies with a range of lower investment prices and investment conditions, as well as a more conservative investment plan and investment steps recommendations, for listed companies to invest in decision-making and investment implementation provides the necessary warning and guidance.

Champ Consulting's commercial due diligence for a start-up company. Shangpu Consulting also conducted a commercial due diligence for a startup company. The target company is a company engaged in the research and development, production and sales of smart home equipment. The startup company plans to conduct strategic cooperation with it. The business due diligence team of Shangpu Consulting used desktop research, field visits, interview visits and data analysis to conduct a comprehensive and in-depth assessment and analysis of the target company's market, industry, company and financial aspects, providing the following key findings and recommendations for startups:

In terms of market, the target company is located in a large smart home equipment market with high growth rate, stable demand, low competition, high market concentration, obvious market segmentation, consistent market demand and preference, and low market risk. It is recommended that the start-up company actively verify and evaluate the market positioning and market potential of the target company, as well as actively support and assist the target company's market strategy and market execution.

In terms of industry, the development prospect of the smart home equipment industry in which the target company is located is very good, the development trend is very clear, the development driving force is very strong, and there are few obstacles to development, such as policies and regulations, technological innovation, social culture and other influencing factors. It is recommended that startups fully understand and grasp the industry background and industry prospects of the target company, as well as fully identify and utilize the industry advantages and industry opportunities of the target company.

In terms of the company, the business model and business strategy of the target company are relatively clear, the organizational structure and human resources are relatively excellent, the quality management and customer satisfaction are relatively high, and the brand image and innovation ability are relatively strong, but there are also some problems and deficiencies, such as income sources. More concentrated, higher cost structure, lower profit margin, higher market positioning, more high-end, more dependent competitive advantage, more radical development goals, etc. It is suggested that the start-up company should fully confirm and evaluate the internal situation and core competitiveness of the target company, and reasonably strengthen and improve the advantages and disadvantages of the target company.

In terms of finance, the target company's financial status is relatively good, financial performance is relatively good, financial risks are relatively low, and financial forecasts are more credible, but there are also some risks and uncertainties, such as relatively general asset quality, relatively high debt level, and capital structure Relatively unreasonable, relatively weak solvency, relatively volatile operating income, relatively low gross profit margin and net interest rate, and insufficient operating cash flow and free cash flow. It is recommended that startups carefully verify and calculate the financial value and financial stability of the target company, as well as optimize and improve the financial structure and financial efficiency of the target company.

Based on the above findings and suggestions, Champ Consulting provides start-up companies with a suitable range of cooperation prices and conditions, as well as a feasible cooperation plan and suggestions on cooperation steps, which provides strong support and guarantee for start-up companies' cooperation decision-making and cooperation implementation.

Conclusion

Commercial due diligence is an important pre-investment or transaction evaluation and analysis that can help investors or counterparties gain a comprehensive and in-depth understanding of the business value of the target company or project to support investment decisions or transaction implementation. The purpose of commercial due diligence is to verify the authenticity and legitimacy of the target company or project, assess the sustainability and growth of the target company or project, and determine the value and trading conditions of the target company or project. The content of commercial due diligence includes market analysis, industry analysis, company analysis and financial analysis.