1. crisis identification

Crisis identification refers to the timely detection and identification of the existence or potential crisis situation in the process of investment due diligence, so that corresponding measures can be taken. The key to crisis identification is to have keen observation and judgment, as well as adequate information collection and analysis capabilities. In actual operation, the crisis can be identified in the following ways:

Conduct a comprehensive background investigation of the target enterprise or project, including its history, organizational structure, equity relationship, main business, financial situation, market position, competitive advantage, legal risk, etc., to understand its basic situation and potential problems.

Verify and review the information provided by the target enterprise or project, including its financial statements, contract documents, license materials, market data, etc., to check its authenticity and compliance, and to find possible defects or hidden dangers.

On-site inspections and interviews of the target enterprise or project, including its production and operation premises, equipment and facilities, workforce, management system, customer suppliers, etc., to observe its actual operation and internal and external relations, and to compare and analyze with the information provided.

Conduct in-depth research on the industry environment and market trends of the target company or project, including its industry size, growth rate, competitive landscape, policies and regulations, etc., to assess its development prospects and potential risks.

Case 1: A private equity fund plans to make equity investment in a new energy vehicle company and entrusts Shangpu Consulting to make investment due diligence. In the background investigation stage, Shangpu Consulting found that although the company claimed to have a number of independently developed core technologies and patents, it did not find relevant records on the website of the State Intellectual Property Office, and the personnel composition and The academic background does not meet the level of its publicity. At the stage of information verification, Shangpu Consulting found that there were many abnormalities in the financial statements provided by the enterprise, such as the mismatch between the substantial increase in income and profit and the low level of costs and expenses, the inconsistency between the high level of inventory and accounts receivable and the inefficiency of sales and collection, and the inconsistency between the long-term loans and bills payable in the balance sheet and the loan repayment and bill payment in the cash flow statement. During the on-site inspection and interview stage, Shangpu Consulting found that the company's production workshop was empty, the equipment and facilities were outdated, the number and quality of employees were low, the management was chaotic, and the customer-supplier relationship was weak and unstable, which was quite different from the information it provided. In the industry research stage, Shangpu Consulting found that the new energy vehicle industry in which the company is located has fierce competition, frequent changes in policies and regulations, uncertain market demand, rapid technological update and iteration, and high requirements for the company's comprehensive strength and innovation capabilities. Based on the above findings, Shangpu Consulting judged that the company had a serious crisis of information opacity and data fraud, and promptly reported the due diligence results and risk warnings to the client.

2. crisis assessment

Crisis assessment refers to the analysis and judgment of identified crisis situations in the process of investment due diligence to determine the extent of their impact on investment decisions and possible consequences. The purpose of crisis assessment is to prioritize crisis situations so that appropriate measures can be taken. The criteria for crisis assessment are to consider the nature, scope, extent, cause, impact and other factors of the crisis situation. In practice, the crisis can be assessed in several ways:

Qualitative analysis of the crisis situation, that is, according to its nature, it is divided into different types, such as information, data, legal, competition, etc., and according to its causes into internal or external causes, and according to its impact into direct or indirect effects.

Quantitative analysis of crisis situations, I .e., they are classified into different levels according to their scope and extent, such as minor, general, serious, extremely serious, etc., and quantified into specific values or proportions according to the losses or risks they may cause.

A comprehensive evaluation of the crisis situation, that is, based on the results of qualitative and quantitative analysis, and combined with the investor's objectives, strategies, risk appetite and other factors to classify it as acceptable, adjustable, transferable or unacceptable.

Case 2: A real estate developer plans to make a merger and acquisition investment in a hotel management company and entrusts Shangpu Consulting to make investment adjustments. At the information verification stage, Champ Consulting found that the company operated a hotel management company in a certain area to make M & A investments and entrusted Champ Consulting to make investment due diligence. In the information verification stage, Shangpu Consulting found that the company operated a number of hotels in a certain area, but the land use right certificate and construction land planning permit of one of the hotels were missing and expired, which threatened the legitimacy and safety of the hotel. During the crisis assessment phase, Champ Consulting conducted the following analysis:

Qualitative analysis: The crisis situation is a legal crisis and is caused by external reasons. The direct impact on investors may lead to the seizure or demolition of the hotel, and the indirect impact on investors may affect the company's brand image and market reputation.

Quantitative analysis: the crisis situation belongs to the serious level. According to the operating income and profit margin of the hotel, as well as the land price and demolition compensation standard in the area, it is estimated that the possible loss or risk caused by the crisis situation is about5000Ten thousand yuan.

Comprehensive evaluation: This crisis situation is an unacceptable category because the possible losses or risks it may cause exceed the investor's risk tolerance and expected returns, and it is difficult to resolve and requires consultation and communication with relevant departments and parties.

3. crisis management

Crisis management refers to the process of investment due diligence, taking appropriate measures to the crisis situation that has been assessed in order to eliminate or mitigate its adverse impact on investment decisions. The principle of crisis management is to select appropriate handling methods and methods according to the category, level and evaluation of the crisis situation, and to implement and follow up in a timely manner. In actual operation, the crisis can be handled in the following ways:

Acceptable categories of crisis situations can be ignored or tolerated, I .e., they are not intervened or changed, but rather used as a consideration in investment decisions and the losses or risks they may entail are borne to a reasonable extent.

Adjustable categories of crisis situations can be modified or optimized by making necessary adjustments or improvements to improve their compliance or efficiency and to reduce their possible losses or risks within a controllable range.

Crisis situations in the transferable category can be transferred or diversified, I .e., transferred to a third party or spread to multiple parties, to mitigate their concentrated impact on investment decisions and to share their potential losses or risks to an acceptable extent.

Unacceptable types of crisis situations can be abandoned or terminated by abandoning the intention to invest in the target enterprise or project or terminating the investment due diligence process and withdrawing the resources and funds invested in a timely manner.

Case 3: A pharmaceutical company plans to make a strategic investment in a biotechnology company and entrusts Champ Consulting to make the investment due diligence. During the on-site inspection and interview stage, Shangpu Consulting found that the company's core technology is a new anti-cancer therapy based on gene editing, but the technology is still in the clinical trial stage and has not yet been approved by the National Medical Products Administration. The ethical and legal issues involved in the technology are also controversial. During the crisis assessment phase, Champ Consulting conducted the following analysis:

Qualitative analysis: the crisis situation belongs to the data and legal crisis, which is caused by internal reasons. The direct impact on investors is that the technology can not be approved or banned, and the indirect impact on investors is that it may affect the company's core competitiveness and market prospects.

Quantitative analysis: the crisis situation belongs to the extremely serious level, according to the research and development costs and expected benefits of the technology, as well as the approval process and standards of the State Drug Administration, it is estimated that the possible losses or risks caused by the crisis situation are about.1billion yuan.

Comprehensive evaluation: This crisis situation is an unacceptable category because the possible losses or risks it may cause far exceed the investor's risk tolerance and expected returns, and it is difficult to resolve and requires communication and coordination with relevant departments and experts.

In the crisis management stage, Champ Consulting advised investors to abandon their investment intentions in the company and terminate the investment due diligence process in a timely manner.

4. crisis prevention

Crisis prevention refers to the development and implementation of a series of norms and measures to avoid or reduce the occurrence or development of crisis situations in the process of investment due diligence. The focus of crisis prevention is to establish and improve an effective risk management system, including risk identification, risk assessment, risk control, risk monitoring and other links. In practice, crises can be prevented in the following ways:

Formulate reasonable investment due diligence plans and programs, clarify investment objectives, strategies, scope, standards, processes, time, resources and other elements, and make dynamic adjustments and optimizations based on actual conditions.

Establish a professional investment due diligence team and mechanism, select personnel with relevant experience and abilities to form a team, and clarify their respective responsibilities, authority, tasks, communication methods, etc., and regularly report, exchange, and evaluate.

The use of multiple investment due diligence methods and tools, combined with the characteristics and needs of the target enterprise or project, the use of a variety of data sources, information channels, analysis methods, evaluation models, etc., in order to improve the comprehensiveness and accuracy of investment due diligence.

Establish an effective investment due diligence supervision and feedback mechanism, timely discover, record, report and deal with problems or abnormal situations in the process of investment due diligence, and make improvements and improvements according to the feedback results.

Case 4: An e-commerce enterprise plans to make strategic cooperative investment in a logistics service company and entrusts Shangpu Consulting to make investment due diligence. In order to prevent possible crisis situations, Champ Consulting has taken the following measures:

A detailed investment due diligence plan and program has been formulated, including a comprehensive due diligence on the financial, operational, technical, market and legal aspects of the target company, and has been flexibly adjusted and optimized according to the requirements of investors and the feedback of the target company.

A professional investment due diligence team and mechanism has been established, with the senior partner of Shangpu Consulting as the project leader, from market research, investment consulting,IPOConsulting and other departments have selected personnel with rich experience and professional ability to form a team, and clarified their respective responsibilities, authorities, tasks, communication methods, etc., and regularly report, exchange, and evaluate.

It adopts diversified investment due diligence methods and tools, combines the characteristics and needs of the target company, and uses a variety of data sources, information channels, analysis methods, evaluation models, etc., such as obtaining the basic information and financial data of the target company through the official data platforms such as the National Bureau of Statistics, the Bureau of Industry and Commerce, and the Tax Bureau, etc., and obtaining the market situation and competitive advantages of the target company through online search, industry reports, expert interviews, etc, through financial analysis, valuation analysis, sensitivity analysis and other methods to assess the target company's operating conditions and investment value, through.SWOTanalysis,PESTAnalysis, five-force analysis and other models to analyze the target company's internal and external environment and potential risks, etc., in order to improve the comprehensiveness and accuracy of investment due diligence.

An effective investment due diligence supervision and feedback mechanism has been established to detect, record, report and deal with problems or abnormal situations in the process of investment due diligence in a timely manner, and improve and perfect them according to the feedback results. For example, at the information verification stage, it is found that the target company has an outstanding tax dispute in a certain area, report it to the project leader in a timely manner, communicate with the target company, ask it to provide relevant supporting materials, assess its impact, and give feedback to investors, and deal with it according to the opinions of investors.

Through the above measures, Champ Consulting successfully completed the investment due diligence of the target company and provided investors with professional investment advice and risk tips.

5. epilogue

Investment due diligence is an important means of investment risk control, but in the process of investment due diligence, various crisis situations may be encountered, which may affect investors' judgment and decision-making, and even lead to investment failure. Therefore, investors need a set of effective crisis response strategies and a professional crisis response team to detect, handle and resolve crisis situations in a timely manner to ensure the smooth progress of investment due diligence and the realization of investment goals. This paper analyzes the crisis response methods and techniques of investment due diligence from the four aspects of crisis identification, crisis assessment, crisis management and crisis prevention, combined with the specific cases of Shangpu consulting service clients. I hope this article can help and inspire investors.