1. CommercialDue diligence consultationThe definition and meaning

Business due diligence consulting (CommercialDueDiligence,CDD) refers to a comprehensive, in-depth and objective analysis and evaluation of the business model, market environment, competitive advantage, risk challenges and other aspects of the target company or project before making investment, merger and acquisition, cooperation and other business decisions, so as to support decision makers to make reasonable judgments and choices. The purpose of commercial due diligence consulting is to discover the true value and potential risks of the target, improve investment returns and reduce investment risks.

The significance of commercial due diligence consulting is mainly reflected in the following aspects:

Help decision makers to fully understand the business situation of the target, including the feasibility of its business model, market attractiveness, competitive advantage, customer satisfaction, supply chain stability, operational efficiency, innovation ability, etc., so as to judge the core competitiveness and growth potential of the target.

To help decision makers accurately assess the value of the target, through the analysis of the target's historical performance, current situation and future forecasts, combined with industry benchmarks and trends, using reasonable valuation methods and assumptions, to calculate the intrinsic value and market value of the target, to provide decision makers with a reference basis.

Help decision makers to identify and avoid the risks of the target, through the analysis of the internal and external environment of the target, find out the risks that the target may face in terms of policy, law, finance, technology, market, competition, management, etc., and put forward corresponding countermeasures and suggestions for decision makers, or suggest decision makers to give up or adjust investment plans when necessary.

Help decision makers to formulate and implement the integration and optimization of objectives, and provide decision makers with strategies and solutions for the integration and optimization of objectives through the analysis of the target's business model, organizational structure, human resources, business processes, information systems, etc., in order to achieve investment synergies and value enhancement.

2. CommercialDue diligence consultationGeneral process and framework

The process of business due diligence consulting is a systematic, structured, dynamic and iterative process, which requires the development of appropriate methods and tools according to different industries, goals and objectives, focusing on core issues and indicators, collecting and analyzing effective data and information, and forming clear conclusions and recommendations. The general process and framework of commercial due diligence consulting is shown in the following figure:

The general process and framework for commercial due diligence consulting includes the following steps:

Project start-up: In the project start-up phase, it is mainly to communicate with the customer the basic requirements such as the purpose, scope, time and budget of the project, clarify the objectives and deliverables of the project, determine the team and division of labor of the project, formulate the plan and method of the project, sign the contract and confidentiality agreement of the project, etc.

Data collection: in the data collection stage, the internal and external data and information of the target company or project are mainly collected through various channels and methods, including financial statements, business plans, organizational structures, customer lists, contract agreements, etc. provided by the target company, as well as through market research, expert interviews, competitor analysis, industry reports, policies and regulations, etc, obtain data and information on target industries and markets.

Data analysis: in the data analysis stage, it is mainly to sort out, verify, summarize and analyze the collected data and information, and use various analysis tools and models to conduct in-depth analysis and evaluation of the target's business model, market environment, competitive advantage, risk challenges and other aspects from different dimensions and angles, so as to form preliminary analysis conclusions and suggestions.

Report writing: in the stage of report writing, the business due diligence consulting report is mainly written according to the analysis conclusions and suggestions. The content and form of the report should be customized according to the needs and preferences of customers, generally including the following parts: summary, target overview, industry analysis, market analysis, competition analysis, business model analysis, risk analysis, valuation analysis, integration and optimization suggestions, etc, the report may be in the form of a written report, a PPT report, an oral report, etc.

Report delivery: In the report delivery stage, the main purpose is to submit the business due diligence consultation report to the customer, communicate and discuss with the customer, answer the customer's questions and feedback, modify and improve the report according to the customer's opinions and suggestions, and finally form a business due diligence consultation report that meets the customer's satisfaction to provide support for the customer's business decision.

Project summary: in the project summary stage, it is mainly to summarize and evaluate the process and results of the project, summarize the harvest and experience of the project, evaluate the quality and effect of the project, feedback the problems and suggestions of the project, and provide reference and improvement for future projects.

3. CommercialDue diligence consultationCore Questions and Key Skills

The core issues and key skills of business due diligence consulting depend on the characteristics and trends of the target industry and market, as well as the needs and expectations of the client. In general, commercial due diligence consulting needs to focus on the following core issues and key skills:

Industry analysis: Industry analysis is the basis and premise of business due diligence consulting. It is necessary to conduct a comprehensive analysis of the scale, structure, growth, profit, driving factors, influencing factors, development stage, future trend, etc. of the target industry to understand the attractiveness and competitiveness of the industry, as well as the position and role of the target in the industry. The core questions of industry analysis include: What is the definition and division of industry? What is the size and growth of the industry? What is the structure and concentration of the industry? How are the profits and costs of the industry allocated? What are the driving and influencing factors of the industry? What are the development stages and future trends of the industry? What are the opportunities and challenges in the industry? The key skills of industry analysis include: using PESTEL, five forces model, life cycle model, Porter diamond model and other analysis tools, combined with the history, current situation and future of the industry, from the macro and micro perspective, to systematically analyze all aspects of the industry, and pay attention to distinguish different market segments and fields of the industry, as well as different regions and countries of the industry, so as to avoid too general or biased conclusions.

Market analysis: Market analysis is the focus and core of business due diligence consulting. It is necessary to conduct in-depth analysis on the demand, supply, distribution, segmentation, positioning, price, channel, promotion, brand, satisfaction, loyalty, switching cost, etc. of the market faced by the target, so as to understand the potential and dynamics of the market, as well as the market share and market position of the target. The core questions of market analysis include: What is the demand and supply of the market? What is the distribution and segmentation of the market? What is the market position and price? How are the channels and promotions in the market? What is the brand and satisfaction of the market? What is the loyalty and switching cost of the market? What are the opportunities and challenges in the market? The key skills of market analysis include: using market research, expert interviews, customer interviews, competitor analysis, demand curve, supply curve, price elasticity, SWOT analysis, STP analysis, 4P analysis and other analysis tools, combined with market data and information, from the perspective of demand and supply, to analyze all aspects of the market in detail, while paying attention to distinguishing different market segments and fields, as well as the different regions and countries of the market, in order to avoid over-generalization or biased conclusions.

Competitive analysis: Competitive analysis is the key and difficult point of business due diligence consulting. It requires a comprehensive analysis of the scale, growth, profit, strategy, advantages, disadvantages, threats, opportunities, etc. of the main competitors of the target to understand the strategic intentions and action plans of the competitors, as well as the competitive advantages and competitive positions of the target. The core questions of competition analysis include: What is the definition and division of competitors? What is the size and growth of competitors? How are competitors' profits and costs allocated? What are the competitors' strategies and advantages? What are the weaknesses and threats of competitors? What are the opportunities and challenges for competitors? The key skills of competition analysis include: using analysis tools such as competitor analysis, Porter's five-force model, value chain analysis, VRIO analysis, blue ocean strategy, red ocean strategy, etc., combined with the data and information of competitors, make a comprehensive analysis of all aspects of competitors from the perspective of strategy and operation, and pay attention to distinguishing different market segments and fields of competitors, as well as different regions and countries of competitors, to avoid overly generalized or biased conclusions.

Business model analysis: Business model analysis is an important and innovative point of business due diligence consulting. It requires a systematic analysis of the definition, composition, logic, value, innovation, and sustainability of the target business model to understand the target business model. Feasibility and effectiveness, as well as the advantages and disadvantages of the target business model. The core questions of business model analysis include: what is the definition and division of business model? What is the composition and logic of the business model? What is the value and innovation of the business model? What is the sustainability and risk of the business model? What are the advantages and disadvantages of the business model? The key skills of business model analysis include: using business model canvas, business model innovation, business model evaluation, business model evolution and other analysis tools, combining the data and information of the target, from the perspective of value creation and value delivery, to systematically analyze all aspects of the target's business model, and pay attention to distinguishing different market segments and fields of the target, as well as different regions and countries of the target, to avoid overly generalized or biased conclusions.

Risk analysis: Risk analysis is a necessary and guarantee point for commercial due diligence consulting. It is necessary to identify, evaluate, respond to, and monitor the risks that the target may face in terms of policy, law, finance, technology, market, competition, and management. Understand the risk status and risk level of the target, as well as the risk response and risk management capabilities of the target. The core questions of risk analysis include: What is the definition and division of risk? What is the identification and assessment of risks? How are risks addressed and monitored? What are the implications and consequences of the risk? What are the opportunities and challenges of risk? The key skills of risk analysis include: using risk matrix, risk map, risk classification, risk score, risk control, risk transfer, risk avoidance and other analysis tools, combining the data and information of the target, from the perspective of probability and impact, to conduct a comprehensive analysis of the risks of all aspects of the target, and pay attention to distinguishing different market segments and fields of the target, as well as different regions and countries of the target, to avoid overly generalized or biased conclusions.

Valuation analysis: Valuation analysis is the result and output point of commercial due diligence consulting, which requires reasonable calculation and estimation of the value of the target in order to compare and judge the market price of the target in order to support the client's investment decision. The core questions of valuation analysis include: What is the purpose and methodology of valuation? What are the data and assumptions for the valuation? What are the results and sensitivities of valuation? What are the advantages and disadvantages of valuation? The key techniques of valuation analysis include: using valuation methods such as price-to-earnings ratio, price-to-book ratio, price-to-sales ratio, price-to-cash ratio, market value increase rate, net present value, internal rate of return, enterprise value, free cash flow, etc., combined with the historical performance of the target, Current situation and future forecast, as well as industry benchmarks and trends, to reasonably calculate and estimate the value of the target, while taking into account the uncertainty and sensitivity, and different scenarios and assumptions for valuation to avoid overly optimistic or pessimistic conclusions.

Integration and optimization suggestions: integration and optimization suggestions are the extension and value-added point of business due diligence consulting. It is necessary to provide customers with strategies and plans for integration and optimization of objectives according to the analysis of target business model, organizational structure, human resources, business process, information system, etc., so as to realize the synergy effect and value enhancement of investment. The core questions of integration optimization recommendations include: What is the purpose and scope of integration optimization? What are the strategies and solutions for integration optimization? What are the costs and benefits of integration optimization? What are the risks and challenges of integration optimization? The key skills of integration and optimization include: using analysis tools such as integration and optimization matrix, integration and optimization roadmap, integration and optimization project management, integration and optimization performance evaluation, and combining the data and information of the target, systematically analyze all aspects of integration and optimization from the perspective of strategy and operation, and pay attention to the different stages and steps of integration and optimization, as well as the different influencing factors and key success factors of integration and optimization, to avoid overly simple or complex conclusions.