1.Commercial due diligencePurpose

The purpose of commercial due diligence is mainly in the following areas:

Verify the authenticity and legitimacy of the target enterprise or project. Through the verification of the registration information, business license, equity structure, financial statements, tax records, contract agreements, intellectual property rights, litigation disputes and other aspects of the target enterprise or project, to confirm whether there are false, illegal, fraudulent and other issues, to avoid losses or risks to investors.

Assess the value and benefits of the target business or project. Through the analysis of the market size, competitive advantage, profitability, cost structure, cash flow and growth potential of the target enterprise or project, determine its reasonable valuation and expected return, and set the appropriate investment price and conditions for the investor.

Identify the risks and challenges of the target enterprise or project. Through the research on the industry environment, policies and regulations, customer needs, supply chain, human resources, technological innovation, quality management, social responsibility and other aspects of the target enterprise or project, it is found that it may face internal and external risks and challenges, and formulate effective risk control and response strategies for investors.

Identify opportunities and room for improvement in the target business or project. Through the evaluation of the development strategy, organizational structure, business processes, product services, market channels, brand image, partners, etc. of the target enterprise or project, identify its strengths and weaknesses, as well as potential opportunities and room for improvement, and provide valuable suggestions and solutions for investors.

2.Commercial due diligenceContent

The content of commercial due diligence can vary and focus according to different investment objectives and targets, but generally includes the following aspects:

The market is adjusted. Market due diligence refers to the investigation and analysis of the industry, market, customers, competitors and other aspects of the target enterprise or project in order to understand its market position, market potential, market risk and so on. The main elements of market due diligence include:

Industry analysis. Industry analysis refers to the analysis of the development history, current situation, trends, scale, structure, characteristics and influencing factors of the industry to which the target enterprise or project belongs, in order to understand the overall situation and development prospects of its industry.

Market analysis. Market analysis refers to the analysis of the demand, supply, distribution, segmentation, characteristics and influencing factors of the market targeted by the target enterprise or project to understand the size and potential of its market.

Customer analysis. Customer analysis refers to the analysis of the number, types, characteristics, needs, preferences, behaviors, satisfaction, loyalty, etc. of existing and potential customers of the target enterprise or project to understand the characteristics and needs of its customers.

Competitor analysis. Competitor analysis refers to the number, type, scale, advantages, disadvantages, strategies, dynamics, etc. of direct and indirect competitors of the target enterprise or project to understand the situation and competitiveness of its competitors.

Financial due diligence. Financial due diligence refers to the investigation and analysis of the financial position, financial management, financial risk and other aspects of the target enterprise or project to understand its financial position and financial value. The main elements of financial due diligence include:

Balance sheet analysis. Balance sheet analysis refers to the analysis of the assets, liabilities and owner's equity of the target enterprise or project to understand the composition, quality, liquidity and profitability of its assets, as well as the source, nature, term and repayment capacity of its liabilities, as well as the changes, distribution and return of its owner's equity.

Income statement analysis. Profit statement analysis refers to the analysis of the operating income, operating costs, operating profit and net profit of the target enterprise or project to understand the source, structure, stability and growth of its income, as well as the composition, level and control of its cost, as well as the level, quality and volatility of its profit.

Cash flow statement analysis. Cash flow statement analysis refers to the analysis of cash inflows and outflows generated by the operating activities, investment activities and financing activities of the target enterprise or project to understand the source, purpose and balance of its cash flow, as well as the stability, abundance and safety of its cash flow.

Financial Ratio Analysis. Financial ratio analysis refers to the calculation of various financial ratios using the financial data of the target enterprise or project, such as asset-liability ratio, current ratio, quick ratio, inventory turnover rate, accounts receivable turnover rate, total asset turnover rate, gross profit margin, net interest rate, sales growth rate, asset growth rate, return on net assets, shareholders' equity ratio, etc., in order to understand all aspects of its financial situation and financial performance.

Legal due diligence. Legal due diligence refers to the investigation and analysis of the legal status, legal risks, legal protection and other aspects of the target enterprise or project to understand its legal compliance and legal security. The main contents of legal due diligence include:

Corporate law due diligence. Corporate legal due diligence refers to the verification of the company system, articles of association, shareholders' meeting, board of directors, supervisory board, management, equity structure, equity transfer, shareholder agreement, shareholder rights and obligations of the target enterprise or project in order to understand the legality, effectiveness and stability of the company.

Contractual legal due diligence. Contract legal due diligence refers to the verification of the main contracts, agreements, guarantees, mortgages, pledges, licenses, authorizations, etc. of the target enterprise or project to understand the validity, completeness, reasonableness, risk, etc.

Intellectual Property Law. Intellectual property law due diligence refers to the verification of patents, trademarks, copyrights, domain names, trade secrets, etc. of target enterprises or projects to understand the ownership, scope, protection, infringement, and transfer of their intellectual property rights.

Litigation law due diligence. Litigation legal due diligence refers to the verification of litigation, arbitration, mediation, administrative punishment, criminal liability and other aspects involved in the target enterprise or project to understand the cause, process, result and impact of its litigation.

Technical adjustment. Technical due diligence refers to the investigation and analysis of the technical status, technical management and technical risks of the target enterprise or project to understand the level, innovation and reliability of its technology. The main contents of technical due diligence include:

Technical assessment. Technology evaluation refers to the evaluation of the technical products, technical services, technical solutions, technical standards, technical tests and other aspects of the target enterprise or project to understand the function, performance, quality, efficiency, safety and so on of its technology.

technological innovation. Technological innovation refers to the analysis of the technological research and development, technological investment, technological achievements and technological transformation of the target enterprise or project in order to understand its technological innovation ability, innovation level and innovation effect.

Technology management. Technology management refers to the analysis of the technical team, technical documentation, technical training, technical communication, technical collaboration and other aspects of the target enterprise or project to understand its technical management level, management efficiency, management quality and so on.

Technical risks. Technology risk refers to the analysis of the target enterprise or project's technology dependence, technology obsolescence, technology hidden danger, technology competition, technology confidentiality, etc., in order to understand the risk degree, risk source, risk impact of its technology.

Management due diligence. Management due diligence refers to the investigation and analysis of the management status, management risks and management improvement of the target enterprise or project to understand the efficiency, effectiveness and problems of its management. The main contents of management due diligence include:

Organizational structure is adjusted. Organizational structure due diligence refers to the analysis of the organizational structure, organizational functions, organizational relationships, and organizational changes of the target enterprise or project to understand the rationality, adaptability, and flexibility of its organization.

Human resources due diligence. Human resources due diligence refers to the analysis of the personnel size, personnel structure, personnel quality, personnel mobility, personnel motivation, personnel training, personnel evaluation and other aspects of the target enterprise or project to understand the quantity, quality, stability and development of its human resources.

Business process due diligence. Business process due diligence refers to the analysis of the design, execution, monitoring and optimization of the business process of the target enterprise or project to understand the rationality, effectiveness, efficiency and improvement of its business process.

Internal controls are well adjusted. Internal control due diligence refers to the analysis of the objectives, principles, methods, procedures and evaluation of the internal control of the target enterprise or project in order to understand the perfection, effectiveness and risk of its internal control.

3.Commercial due diligencemethod and process

Commercial due diligence methods and processes generally include the following steps:

Determine the goal and scope of due diligence. According to the investment objectives and investment objects of the investors, determine the objectives and scope of due diligence, clarify the key points and difficulties of due diligence, and formulate due diligence plans and arrangements.

Collect due diligence data and information. By collecting the required data and information from the management, employees, customers, suppliers, partners, competitors, industry experts, government agencies, etc. of the target enterprise or project, including written materials, oral information, on-site observation, field visits, etc.

Analysis of due diligence data and information. Through the use of various analytical methods and tools, the collected due diligence data and information are collated, summarized, compared, verified, evaluated, etc., in order to obtain due diligence.Conclusionand recommendations.

Prepare due diligence reports and comments. According to the objectives and scope of due diligence, prepare due diligence reports and opinions, including the purpose, methods, process, results, problems, risks, opportunities, suggestions, etc., as well as relevant attachments, charts, data, etc., to provide investors with a reliable basis for decision-making.

4. utilizationCommercial due diligenceresults in investment decisions and subsequent management

The results of commercial due diligence can provide investors with the following aspects of investment decision-making. The investor may, based on the results and recommendations of the due diligence, make a comprehensive evaluation and judgment of the target enterprise or project to determine whether to invest, how much to invest, when to invest, how to invest, etc., in order to achieve the purpose and effect of the investment.

Investment Agreement. The investor and the target enterprise or project may, on the basis of the results and recommendations of the due diligence, formulate and sign an investment agreement, specifying the price, conditions, manner, duration, rights, obligations and guarantees of the investment, so as to ensure the legality and effectiveness of the investment.

Investment implementation. The investor and the target enterprise or project may, in accordance with the investment agreement, implement specific operations of the investment, such as payment of investment funds, transfer of equity, registration of changes, completion of delivery, etc., in order to complete the process and results of the investment.

Investment management. The investor and the target enterprise or project can carry out the follow-up management of the investment, such as supervising the operation, providing support, coordinating and communicating, solving problems, etc., according to the results and recommendations of the due diligence, so as to improve the return and value of the investment.

5. Champ ConsultingCommercial due diligence case

Shangpu Consulting is a professional business due diligence consulting company with many years of business due diligence experience and a professional business due diligence team, providing high-quality business due diligence services to all kinds of investors. Here are some of the business due diligence cases from Champ Consulting:

Case 1: A food and beverage company invests in a dairy company. Shangpu Consulting provides comprehensive commercial due diligence services for the food and beverage company, including in-depth investigation and analysis of the market, finance, law, technology, management and other aspects of the dairy company, and evaluates the value, risk, potential, etc. of the dairy company, as well as the feasibility, rationality and profitability of the investment. The business due diligence report and recommendations of Shangpu Consulting helped the food and beverage company make the right investment decision, successfully acquired the dairy company, and realized business expansion and synergy.

Case 2: An Internet company invests in an e-commerce platform. Shangpu Consulting provides professional business due diligence services for the Internet company, including systematic investigation and analysis of the market, finance, law, technology, management and other aspects of the e-commerce platform, and evaluates the value, risks, opportunities, etc. of the e-commerce platform, as well as the necessity, advantages and challenges of investment. The business due diligence report and recommendations of Shangpu Consulting helped the Internet company make wise investment decisions, successfully took a stake in the e-commerce platform, and realized the sharing and complementarity of resources.

Case 3: A manufacturing company invests in a new energy project. Shangpu Consulting provides professional business due diligence services for the manufacturing company, including a comprehensive investigation and analysis of the market, finance, law, technology, management and other aspects of new energy projects, and evaluates the value of new energy projects. Risks, prospects, etc., as well as the suitability, conditions and methods of investment. The business due diligence report and recommendations of Shangpu Consulting helped the manufacturing company make reasonable investment decisions, successfully participated in new energy projects, and realized the transformation and upgrading of the industry.

Conclusion

Commercial due diligence is an indispensable and important work before investment, which can provide investors with comprehensive, accurate and objective information and suggestions, help investors make correct investment decisions, reduce investment risks and improve investment returns. As a professional business due diligence consulting company, Shangpu Consulting has rich experience in business due diligence and excellent business due diligence team. It provides efficient, high-quality and high-value business due diligence services for all kinds of investors. It is the best partner for investors.