1.Commercial due diligencepurpose and significance

The purpose of commercial due diligence is to protect the interests of all parties involved in a transaction or cooperation, avoid or reduce potential risks, and improve the success rate of a transaction or cooperation. The significance of commercial due diligence lies in:

Through a comprehensive evaluation of the target enterprise or project, its advantages and disadvantages can be found, its value and potential can be determined, and the basis can be provided for the pricing, negotiation and agreement of the transaction or cooperation;

Through the in-depth analysis of the target enterprise or project, we can understand the market environment, benchmark enterprises, customer needs, laws and policies, etc., and provide guidance for the strategy, plan and execution of the transaction or cooperation;

An objective review of the target business or project can identify its problems and risks, such as goodwill, liabilities, litigation, compliance, etc., and provide solutions for risk control, response, and remediation of transactions or partnerships.

2.Commercial due diligenceBasic process and content

The basic process of commercial due diligence generally includes the following steps:

Preparation stage: In this stage, the due diligence party needs to clarify the goal, scope, time, resources, etc. of the due diligence, formulate the due diligence plan and plan, sign a confidentiality agreement with the due diligence party, and obtain the information and materials required for the due diligence;

Implementation phase: at this stage, the due diligence party needs to collect, sort out, analyze and verify the information and data of the due diligence party according to the due diligence plan and scheme, and form due diligence reports and suggestions;

Communication stage: At this stage, the due diligence party needs to communicate and communicate with the due diligence party, solve the problems and questions found in the due diligence process, confirm the results and conclusions of the due diligence, and prepare for the next steps of the transaction or cooperation.

The content of commercial due diligence generally includes the following aspects:

Business model: refers to the business philosophy, strategic objectives, organizational structure, business processes, sources of income, cost structure, profitability, etc. of the party to be transferred;

Market competitiveness: refers to the market positioning, market share, market growth, competitive advantage, competitive strategy, competitive barriers, benchmarking enterprises, etc. of the party to be adjusted;

Financial position: refers to the financial statements, financial indicators, financial policies, financial risks, financial forecasts, etc. of the party to be transferred;

Legal risk: refers to the legal status, legal liability, legal disputes, legal compliance, legal protection, etc. of the party to be transferred;

Other aspects: According to different industries and scenarios, it can also include the technical capabilities, human resources, supply chain management, customer relations, social responsibility, environmental impact, etc.

3.Commercial due diligenceCommon Methods and Tools

The methods and tools of commercial due diligence refer to the methods and means of data collection, data analysis and data presentation used by the due diligence party in carrying out due diligence, mainly including the following:

Document review: refers to that the adjusting party understands the basic information and important matters of the adjusted party by reading and analyzing all kinds of documents, reports, agreements, certificates, etc. provided by the adjusted party;

Research visit: refers to the internal operation and external relationship of the due diligence party through face-to-face or remote communication with the management, employees, customers, suppliers and partners of the due diligence party;

On-site inspection: refers to the on-site observation and inspection conducted by the adjusting party in person or by entrusting a third party to the factory, warehouse, office and other places of the adjusted party to understand the actual situation and potential problems of the adjusted party;

Data analysis: refers to the use of statistics, economics, finance and other theories and methods to quantify, compare, summarize, infer, etc. the data of the due party, and obtain the data characteristics and data laws of the due party;

Report presentation: refers to the due diligence party through the use of charts, images, text and other forms, the due diligence process, results, conclusions, recommendations and other systematic collation and display, to form a due diligence report and presentation.

With the development of technology, commercial due diligence methods and tools are constantly innovating and optimizing, mainly in the following aspects:

Data source: in addition to traditional documents, research, investigation and other methods, the mediating party can also use the Internet, social media, big data, blockchain and other technologies to obtain more open, transparent, real-time and credible data;

Data processing: In addition to regular statistical, economic, and financial analysis, the best adjustment party can also use artificial intelligence, machine learning, deep learning and other technologies to conduct deeper data mining, identification, prediction, and optimization;

Data display: In addition to simple charts, images, text and other forms, the best party can also use animation, video, audio, virtual reality and other technologies to present and demonstrate data in a more vivid, intuitive and interactive way.

4.Commercial due diligenceTypical cases and lessons learned

Commercial due diligence cases and lessons learned refer to the success or failure of the due diligence party in conducting due diligence, as well as the useful insights and lessons learned from them, mainly in the following categories:

Success story: refers to the value and potential of the due diligence party through effective due diligence, which lays the foundation for the success of the transaction or cooperation, such:

Shangpu Consulting Co., Ltd. provided commercial due diligence services for an internationally renowned e-commerce platform, helping it to evaluate the business model, market competitiveness, financial status, legal risks, etc. of a leading online travel platform in Asia, and provided a reliable basis and suggestions for its strategic investment of up to US $2 billion;

Champu Consulting provided commercial due diligence services to a leading European automaker to help it analyze the technical capabilities, human resources, supply chain management, customer relations, etc. of an innovative American electric vehicle manufacturer, and provided effective guidance and solutions for its M & A of up to US $5 billion;

Failure case: refers to the failure of the transaction or cooperation due to the lack or imperfect due diligence of the due diligence party, ignoring the problems and risks of the due diligence party, such:

A well-known Internet search engine company in the United States failed to fully consider the regulatory and policy environment when conducting commercial due diligence on a well-known Internet portal in China, resulting in significant obstacles and setbacks in its expansion in the Chinese market;

A well-known electronics manufacturer in Japan failed to adequately validate its claimed technology patents and market share in the commercial due diligence of a well-known electronics manufacturer in South Korea, resulting in the discovery of significant post-acquisition goodwill impairments and competitive market pressures;

5.Commercial due diligenceFuture prospects and challenges

The future prospects and challenges of commercial due diligence refer to the opportunities and developments expected by the due diligence parties in the face of future commercial transactions or cooperation, as well as the difficulties and problems they face, mainly in the following categories:

Opportunities and development: refers to the use of new technologies, new models, new markets, etc., to enhance the level and value of due diligence, such:

The best adjustment party can use artificial intelligence, big data, blockchain and other technologies to realize the automation, intelligence, and security of the best adjustment, and improve the efficiency and quality of the best adjustment;

The best tuning party can use the Internet, social media, virtual reality and other technologies to achieve online, social, and interactive best tuning, and improve the convenience and experience of best tuning;

The due diligence party can make use of emerging industries, emerging markets and emerging consumers to achieve innovation, diversification and personalization of due diligence, and improve the adaptability and competitiveness of due diligence;

Difficulties and problems: refers to the technical, legal, ethical and other obstacles and confusions that the Investigating Party needs to solve, such:

The best adjustment party needs to solve the technical problems in data acquisition, processing, display and other aspects, such as data quality, integrity, security, visualization and so on;

The due diligence party needs to address legal issues related to the use, sharing, and protection of data, such as data ownership, licensing, privacy, and intellectual property rights;

The due diligence party needs to solve the ethical dilemma of data analysis, prediction and optimization, such as the authenticity, fairness, rationality and responsibility of the data.

Conclusion

Business due diligence is an important business activity and a complex business skill. The due diligence party needs to master the purpose, process, content, methods, tools, etc. of commercial due diligence, as well as cases, experiences, lessons, etc. of commercial due diligence, in order to provide strong support for the success of the transaction or cooperation. At the same time, due diligence parties also need to pay attention to the frontiers and trends of commercial due diligence, as well as the opportunities and challenges of commercial due diligence, in order to adapt to changes in the market environment and technological development, and improve their own level and value.