Market status and development trend of 1. commercial due diligence consulting

Commercial due diligence consulting is an important branch of the consulting industry and an important source of income for consulting firms. According to the Global Consulting Market Report, the global consulting market reached $160 billion in 2019, with commercial due diligence consulting accounting for about 10%, or $16 billion. In 2020, the global consulting market experienced a 3.9 per cent decline due to the new crown epidemic, but commercial due diligence consulting bucked the trend by 4.2 per cent to $16.7 billion billion. The global commercial due diligence consulting market is expected to reach $23 billion billion by 2025, with an average annual growth rate of 6.6 per cent.

The rapid growth of the commercial due diligence consulting market is mainly driven by the following factors:

The development of globalization and digitalization has made cross-border and cross-industry mergers and acquisitions increasingly frequent, and the demand for commercial due diligence has also increased. According to the Global M & A Market Report, in 2019, the total amount of global M & A transactions reached $3.9 trillion, with cross-border M & A accounting for 36%, or $1.4 trillion, and cross-industry M & A accounting for 28%, or $1.1 trillion. In 2020, despite the impact of the epidemic, global M & A transactions still totaled $3.6 trillion, with cross-border M & A accounting for 38%, or $1.4 trillion, and cross-industry M & A accounting for 30%, or $1.1 trillion. It is estimated that by 2025, the total amount of global M & A transactions will reach $5.2 trillion, of which cross-border mergers and acquisitions will account for 40%, or $2.1 trillion, and cross-industry mergers and acquisitions will account for 32%, or $1.7 trillion. Cross-border and cross-industry M & A activities involve different regions, cultures, laws, policies, technologies, industries and other factors, which greatly increase the difficulty and importance of the commercial due diligence of the target enterprise or project, and require more professional, comprehensive and in-depth consulting services.

The emergence of emerging industries and new technologies has brought new challenges and opportunities for business due diligence, requiring more professional, detailed and innovative consulting services. According to the Global Emerging Industries Report, in 2019, the scale of global emerging industries reached $2.7 trillion billion, with artificial intelligence, cloud computing, Internet of Things, big data, blockchain, biotechnology, new energy, new materials and other fields accounting for a relatively high proportion. In 2020, spurred by the epidemic, the size of the global emerging industry grew by 12.5 percent to $3.1 trillion billion. The size of the global emerging industry is expected to reach $5.6 trillion billion by 2025, with an average annual growth rate of 12.6 per cent. The emergence of emerging industries and new technologies provides new objects and contents for business due diligence, but at the same time, it also brings new problems and risks, such as market uncertainty, fierce competition, diversity of customers, complexity of supply chain, unpredictability of risks, etc., which need more professional, more detailed and more innovative consulting services to help customers grasp opportunities, avoid risks and realize value.

Main contents and methods of 2. commercial due diligence consultation

The main contents and methods of commercial due diligence consulting have differences and characteristics according to different aspects and dimensions, but in general, they all follow the following principles and steps:

Principle 1: Take the customer's needs and goals as the guide, customize the scope and depth of business due diligence, do not do useless work, do not miss the key points, do not repeat work, do not conflict with interests, and do not violate ethics.

Principle 2: Take the market, competition, customers, supply chain, risk and other aspects of the target enterprise or project as the core, comprehensively, deeply and objectively analyze and evaluate its commercial value and potential, without bias, exaggeration, concealment, misleading or damage.

Principle 3: Based on data and facts, collect, organize, analyze, and present the results and suggestions of commercial due diligence scientifically, reasonably and effectively, without speculation, speculation, forgery, tampering, or misuse.

Principle 4: use communication and collaboration as a means to exchange information and feedback with customers, target enterprises or projects, other consultants, etc. in a timely, accurate and clear manner, without concealment, delay, ambiguity, conflict or contradiction.

Step 1: Clarify the purpose and scope of commercial due diligence, sign a commercial due diligence consulting contract with the customer, determine the content, method, time, cost, responsibility and other matters of commercial due diligence, establish a commercial due diligence consulting team, assign commercial due diligence consulting tasks, and formulate a commercial due diligence consulting plan.

Step 2: Collect relevant materials of commercial due diligence, including basic information, financial statements, legal documents, tax records, strategic planning, operation data, human resources, brand assets, social responsibility, etc. of the target enterprise or project, as well as market analysis, competitor analysis, customer analysis, supply chain analysis, risk analysis, etc., through public channels, internal channels, third-party channels, etc, get real, effective and complete information.

Step 3: Analyze the relevant information of business due diligence, and use various methods such as financial analysis, legal analysis, tax analysis, strategic analysis, operation analysis, manpower analysis, brand analysis, social responsibility analysis, etc. to conduct a comprehensive, in-depth and objective analysis and evaluation of the market, competition, customers, supply chain, risks and other aspects of the target enterprise or project, and find out its advantages, disadvantages, opportunities and threats, determine its commercial value and potential, and make recommendations for its improvement and optimization.

Step 4: Present the relevant results of commercial due diligence, prepare a commercial due diligence consultation report, including the purpose, scope, methods, results, recommendations and other contents of commercial due diligence, and clearly, accurately and completely display the process of commercial due diligence in the form of text, charts, attachments, etc.Conclusion，与客户进行商业尽调咨询报告的交流和讨论，解答客户的疑问和反馈，提供商业尽调咨询的后续服务和支持。

Key challenges and opportunities for 3. business due diligence consulting

The development and opportunities of business due diligence consulting are also accompanied by some challenges and risks. Consulting companies need to continuously improve their professional capabilities and service quality to adapt to market changes and customer needs. Here are some of the key challenges and opportunities for business due diligence consulting:

Challenge 1: The objects and contents of business due diligence are becoming more and more complex and diverse, and more professional, detailed and innovative consulting services are needed. How to make a comprehensive, in-depth and objective analysis and evaluation of the market, competition, customers, supply chain and risk of the target enterprise or project within the limited time and resources, find out its business value and potential, and put forward suggestions for its improvement and optimization, is an important challenge for business due diligence consulting. Especially for the target enterprises or projects of some emerging industries and new technologies, such as artificial intelligence, cloud computing, Internet of things, big data, block chain, biotechnology, new energy, new materials, etc., due to the uncertainty of the market, the intensity of competition, the diversity of customers, the complexity of the supply chain, the unpredictability of risks, etc., the requirements for business due diligence are higher, and more professional, detailed and innovative consulting services are needed, to help customers seize opportunities, avoid risks and realize value.

Opportunity 1: The objects and contents of commercial due diligence are becoming more and more complex and diverse, which also provides consulting companies with a broader market space and more diversified service contents. They can meet the needs of customers and provide more professional, detailed and innovative consulting services by continuously improving their professional ability and service quality and cooperating with other consultants. For example, consulting companies can improve the efficiency and quality of business due diligence by introducing and cultivating more professional talents, establishing and perfecting more professional databases, and developing and applying more professional tools; consulting companies can also improve the efficiency and quality of business due diligence through cooperation with other consulting parties, such as financial consulting, legal consulting, tax consulting, strategic consulting, operation consulting, manpower consulting, brand consulting, social responsibility consulting, etc, cooperation and exchanges to expand the scope and content of commercial due diligence and form a more comprehensive and multi-dimensional commercial due diligence system.

Challenge two: the data and information of commercial due diligence are becoming more and more large and complex, and more scientific, reasonable and effective methods of collection, collation, analysis and presentation are needed. How to screen out real, effective and complete data from massive data and information, how to find key factors and indicators in complex data and information, and how to display clear, accurate and complete results and recommendations in a variety of data and information is an important challenge for business due diligence consulting. Especially for some data and information related to sensitivity, privacy, confidentiality, etc., such as financial data, legal documents, tax records, strategic planning, operational data, human resources, brand equity, social responsibility, etc., how to ensure data and information Under the premise of safety and compliance, effective collection, sorting, analysis, and presentation are an important challenge for business due diligence consulting.

Opportunity 2: The data and information of commercial due diligence are becoming more and more large and complex, which also provides consulting companies with richer data sources and more diverse analysis methods. Through the continuous introduction and application of more advanced data technologies and analysis tools, As well as cooperation and exchanges with other data parties, to improve the efficiency and quality of commercial due diligence, and provide more scientific, reasonable and effective consulting services. For example, consulting companies can improve the speed and accuracy of data collection, sorting, analysis, and presentation by introducing and applying new technologies such as artificial intelligence, cloud computing, Internet of Things, big data, and blockchain; consulting companies can also cooperate and communicate with other data parties, such as open channels, internal channels, and third-party channels, to obtain more real, more effective and more complete data and information.

Challenge 3: Commercial due diligence communication and collaboration are becoming more frequent and complex, requiring more timely, accurate and clear information exchange and feedback. How to keep information synchronization and agreement with customers, target enterprises or projects, other consultants and so on in multi-party communication and cooperation, how to avoid information conflict and opinion contradiction with customers, target enterprises or projects, other consultants and so on in multi-party communication and cooperation, how to communicate and cooperate with multi-party, improving the efficiency and quality of information with clients, target enterprises or projects, other consultants, etc., is an important challenge for commercial due diligence consulting. Especially for some cross-border and cross-industry M & A activities, how to effectively communicate and collaborate under the influence of different regions, cultures, laws, policies, technologies, industries and other factors is an important challenge for business due diligence consulting.

Opportunity 3: The communication and collaboration of business due diligence are becoming more frequent and complex, and it also provides consulting companies with a wider range of partners and more diverse forms of services. Through continuous establishment and improvement of more efficient communication and collaboration mechanisms, and Cooperation and exchanges with other communication and collaboration parties can improve the efficiency and quality of business due diligence, and provide more timely, more accurate and clearer consulting services. For example, consulting companies can improve the efficiency and quality of internal communication and collaboration of business due diligence by establishing and improving business due diligence consulting teams, assigning business due diligence consulting tasks, and formulating business due diligence consulting plans; consulting companies can also exchange information and feedback opinions with customers, target enterprises or projects, other consulting parties, etc, to improve the efficiency and quality of external communication and collaboration for business due diligence.