Investment due diligence is a 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 the investor has reached an initial cooperation intention with the target enterprise. As a professional third-party organization, consulting companies can provide investors with objective, professional and efficient due diligence services. From the perspective of consulting firms, this paper introduces the important role of business analysis in the due diligence process, and how consulting firms use the methods and tools of business analysis to provide investors with valuable insights and suggestions. This paper also combines some successful cases of Shangpu Consulting Group Co., Ltd. (referred to as "Shangpu Consulting") to show the due diligence practice of consulting companies in different industries and fields.

Investment due diligence is an essential part of the investment decision-making process, which can help investors comprehensively assess the value and risk of the target enterprise, avoid potential legal disputes and business problems, and improve the return on investment. However, investment due diligence is also a complex and tedious task, which requires the collection, collation, analysis and verification of a large amount of data, in-depth research on the industry, market and competitors, and effective communication with the management, shareholders, customers and suppliers of the target enterprise. These jobs not only consume time and energy, but also require professional knowledge and skills.

As a result, many investors choose to entrust a professional consulting firm to make their investment due diligence. As an independent third-party organization, consulting firms can provide investors with objective, professional and efficient due diligence services. Consulting companies have rich industry experience and data resources, according to the needs and objectives of investors, to develop appropriate due diligence plans and methods, the organization of professional due diligence team, the implementation of rigorous due diligence process, the output of high-quality due diligence report.

Business analysis is a core element of the due diligence services provided by consulting firms. Business analysis refers to the use of data analysis and statistical methods to analyze the previous business performance of a company, so as to predict and guide future business strategies through the analysis of the results. Business analysis can help consulting firms conduct a comprehensive and in-depth assessment of the target company from multiple perspectives, identify problems and opportunities, and propose targeted recommendations and solutions.

Depending on the desired purpose, business analytics can be divided into four types: descriptive analytics, diagnostic analytics, predictive analytics, and prescriptive analytics. These four types are interrelated and appear at different stages of the same project due diligence.

Descriptive analysis is about understanding what happened. The first stage of business analysis is to make descriptive analysis of the data. Descriptive analysis can provide a clear picture of the business history and current situation. This allows the consulting firm to better understand the strengths and weaknesses of the target company and to develop a development strategy for optimization based on this information. At this stage, consulting firms often need to adopt data mining and data integration techniques, and also require practitioners to have the ability to visualize the analysis results.

Diagnostic analysis is to find out the cause of the problem. After descriptive analysis, the consulting company can simply understand the problems of the target enterprise. But it's not enough to just know what the problem is, the consulting firm also needs to understand what's causing the problem. Diagnostic analysis of the data can help the consulting firm analyze the cause of the problem. Diagnostic analytics tools such as business intelligence dashboards can help consulting firms gain insight into segmented data to isolate the root cause of problems. At this stage, the consulting firm also requires practitioners to have the basic ability to perform logical analysis, comparative analysis, and correlation analysis.

Predictive analysis is based on this trend, what will happen in the future? In the third stage of the due diligence, the past problems have been sorted out, the influencing factors have been clarified, and the next step is to make predictions about what will happen. At this stage, statistical models and machine learning play a very important role. Predictive models make full use of a variety of variable data to predict future business needs, which is a very important part of business analysis.

Normative analysis is the development of analytical models. The normative analysis will eventually produce a complete model of the project's due diligence. Such a model helps investors make the best action decision by understanding the project, analyzing what may happen in the future, and why it happens. Such decisions are not a single act, but rather an integration of previous analysis.

In order to better use business analysis for investment due diligence, consulting firms also need to master a variety of business analysis methods and tools. For example:

Data collection and collation: The consulting company needs to collect data and documents related to the target company through various channels, and perform operations such as cleaning, verification, and conversion to make the data meet the analysis requirements.

Data visualization: Consulting companies need to present data to investors in an intuitive and beautiful form through charts, dashboards, maps, etc., to help them quickly understand the meaning behind the data.

Data mining: Consulting companies need to extract valuable information and patterns from large amounts of data through clustering, classification, association rules and other techniques, and discover potential relationships and patterns.

Data modeling: Consulting firms need to build mathematical or statistical models through regression, time series, neural networks, etc., to describe the relationships and influencing factors between data, and to make predictions and inferences.

Data optimization: Consulting firms need to find optimal or near-optimal solutions to maximize or minimize objective functions or constraints through linear planning, integer planning, random planning, etc.

In order to master these methods and tools, consulting firms need to have the following capabilities:

Business knowledge: Consulting companies need to have basic knowledge of economics, finance, accounting, marketing, etc., and be able to understand the business model, value chain, profitability, competitive advantage, etc. of the target company.

Industry knowledge: Consulting companies need to have professional knowledge of the industry to which the target enterprise belongs, and be able to analyze the development trend of the industry, market size, competition pattern, policies and regulations, etc.

Technical knowledge: Consulting firms need to have knowledge of data analysis and statistics, and be able to use a variety of data analysis software and tools, suchExcel、SPSS、SAS、R、Pythonand other data processing and modeling.

Communication skills: Consulting companies need to have good communication skills, be able to communicate effectively with investors and relevant personnel of the target company, obtain the required information, and express their views and suggestions.

Logical skills: Consultants need to have strong logical skills, be able to think clearly and systematically about complex business issues, and construct reasonable and persuasive arguments.

In actual due diligence projects, how do consulting firms use business analysis to provide valuable insights and suggestions to investors? Here we take Shangpu Consulting Group Co., Ltd. (referred to as "Shangpu Consulting") as an example to introduce some successful cases.

Shangpu Consulting provides strategic, operational, organizational, technical, and financial consulting services to clients in a variety of industries to help them achieve superior business results. Shangpu Consulting also has rich experience and excellent performance in the field of investment due diligence, and has provided high-quality due diligence services for many well-known investment institutions and enterprises.

Here are some examples of how Champ Consulting uses business analysis when investing in due diligence in different industries and sectors:

In the e-commerce industry, Champ Consulting provides investment due diligence services to one of Europe's largest online fashion retailers. The retailer plans to acquire one of Asia's largest online fashion platforms to expand its presence in the Asian market. Through descriptive analysis of the historical data of the two companies, Shangpu Consulting found that there are significant differences between the two companies in terms of user size, revenue growth rate, and gross margin.

Through the diagnostic analysis of the market in which the two enterprises are located, it is found that the two enterprises are facing different degrees of competitive pressure and market potential. Through the predictive analysis of the future development of the two enterprises, it is found that the two enterprises have different degrees of risks and opportunities in terms of income growth rate and market share. Through the normative analysis of the acquisition scheme, it is found that there are different degrees of challenges and obstacles in the aspects of acquisition price, acquisition mode and post-acquisition integration. In the end, Champ Consulting provided the client with a detailed acquisition proposal and integration plan to help the client achieve the acquisition target.

In the education industry, Champ Consulting provides investment due diligence services to one of the largest online education platforms in the United States. The platform plans to acquire one of China's largest online education platforms to enter the Chinese market. Through descriptive analysis of the historical data of the two companies, Shangpu Consulting found that there are obvious differences between the two companies in terms of curriculum types, user groups, and teaching models.

Through the diagnostic analysis of the market of the two enterprises, it is found that the two enterprises are facing different policies and regulations and user needs. Through the predictive analysis of the future development of the two companies, it is found that the two companies have different levels of risks and opportunities in terms of user growth rate, revenue growth rate, and profitability. Through the normative analysis of the acquisition scheme, it is found that there are different degrees of challenges and obstacles in the aspects of acquisition price, acquisition mode and post-acquisition integration. In the end, Champ Consulting provided the client with a detailed acquisition proposal and integration plan to help the client achieve the acquisition target.

In the healthcare industry, Champ Consulting provides investment due diligence services to one of the world's largest medical device companies. The company plans to acquire an innovative company focused on AI healthcare to boost its competitiveness in AI healthcare. Through descriptive analysis of the historical data of the two companies, Shangpu Consulting found that there are obvious differences between the two companies in terms of product type, technology level, and market share.

Through the diagnostic analysis of the market of the two enterprises, it is found that the two enterprises face different technical risks and market potential. Through the predictive analysis of the future development of the two companies, it is found that the two companies have different levels of risks and opportunities in terms of technological innovation, market expansion, and profitability. Through the normative analysis of the acquisition scheme, it is found that there are different degrees of challenges and obstacles in the aspects of acquisition price, acquisition mode and post-acquisition integration. In the end, Champ Consulting provided the client with a detailed acquisition proposal and integration plan to help the client achieve the acquisition target.

These are some of the examples of the use of business analysis by Shangpu Consulting in investment due diligence, and it can be seen that business analysis plays a vital role in investment due diligence, providing valuable insights and suggestions to investors. Of course, business analysis is not a fixed model or method, but a flexible and changeable way of thinking and skills. Consulting firms need to be flexible in using business analysis methods and tools to create solutions that meet customer needs and goals, depending on the project and client.

Summary:

Investment due diligence is a 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 the investor has reached an initial cooperation intention with the target enterprise. As a professional third-party organization, consulting companies can provide investors with objective, professional and efficient due diligence services. Business analysis is a core element in the provision of due diligence services by consulting firms. Business analysis refers to the use of data analysis and statistical methods to analyze the previous business performance of a company, so as to predict and guide future business strategies through the analysis of the results.

Business analysis can help consulting firms conduct a comprehensive and in-depth assessment of the target company from multiple perspectives, identify problems and opportunities, and propose targeted recommendations and solutions. Business analytics can be divided into four types: descriptive analytics, diagnostic analytics, predictive analytics, and prescriptive analytics. These four types are interrelated and appear at different stages of the same project due diligence. In order to better use business analysis for investment due diligence, consulting firms also need to master a variety of business analysis methods and tools, as well as the relevant capabilities and qualities. Taking Shangpu Consulting Group Co., Ltd. (referred to as "Shangpu Consulting") as an example, this paper introduces some successful cases and shows the due diligence practice of consulting companies in different industries and fields.