A due diligence report is a professional service provided by a consulting firm to help clients understand all aspects of the target company or project in a comprehensive, accurate and timely manner and provide a basis for investment decisions. This paper introduces the basic process, content and precautions of the due diligence report issued by the consulting company, and shows how the consulting company uses professional knowledge and methods to provide customers with high-quality due diligence reports in the light of the specific cases of the clients of Shangpu consulting services.

What is the due diligence report?

due diligence report (Due due due postponement) refers to a professional report formed by a consulting firm that conducts a comprehensive, in-depth and systematic investigation and analysis of the target company or project at the request of the entrusted client (usually the investor or acquirer). The purpose of the due diligence report is to help clients understand the real situation of the target company or project, assess its value and risk, and provide a basis for investment decisions.

The contents of the due diligence report generally include the following aspects:

Basic information of the target company or project, including historical evolution, organizational structure, shareholding structure, main business, market position, competitive advantage, etc;

The legal situation of the target company or project, including legal qualifications, contract performance, intellectual property rights, litigation and arbitration, compliance, etc;

The financial situation of the target company or project, including financial statements, accounting policies, audit opinions, assets and liabilities, income costs, cash flows, etc;

Operations of the target company or project, including product/Service quality, customer satisfaction, supplier relations, channel management, marketing, etc;

The industry and market conditions of the target company or project, including industry trends, market size and growth rate, policy and regulatory environment, competitive landscape and competitor analysis;

Value assessment and risk analysis of the target company or project, including valuation methods and results, sensitivity analysis, risk identification and response measures;

Investment proposals and follow-up planning for the target company or project, including investment options and conditions, exit mechanisms and timing, synergies and value-added space.

What is the process for issuing due diligence reports?

The general process for the consulting firm to issue a due diligence report is as follows:

Sign confidentiality agreement and entrustment agreement. Before the formal start of due diligence, the consulting company needs to sign a confidentiality agreement with the client to ensure that no sensitive information involving the target company or project is disclosed. At the same time, the two parties also need to sign an entrustment agreement to clarify the rights and obligations of both parties, the scope and standards of services, and the payment method of fees.

Develop a due diligence plan and checklist. The consulting firm develops a detailed due diligence plan and timetable based on the client's needs and objectives, and issues a due diligence list to the target company or project, listing the materials and information to be provided, as well as the interviews and site visits that need to be arranged.

Collect and analyze data. The consulting firm collects all kinds of data and information about the target company or project through a variety of channels and methods, including public and non-public, quantitative and qualitative, first-hand and second-hand. The consulting company also needs to verify, organize and analyze the collected data and information, and use professional knowledge and methods to form preliminary judgments and conclusions.

conduct interviews and field trips. Based on the results of the data analysis, the consulting company formulates the interview outline and inspection plan, and conducts in-depth communication and exchange with the relevant personnel of the target company or project to understand their real situation and views, and verify and supplement the results of the data analysis. The consulting firm also needs to have an understanding of the target company or project's production and operation premises, equipment and facilities, products/Service quality and other field visits to intuitively feel its operational status and potential.

Form a due diligence report. Based on the information collected and analyzed, as well as the results of interviews and inspections, the consulting firm comprehensively evaluates all aspects of the target company or project, forms a due diligence report, and submits it to the client. The due diligence report should objectively, comprehensively, accurately and timely reflect the real situation of the target company or project, and provide valuable suggestions and opinions for customers.

The Case of a Champ Consulting Service Client

In order to demonstrate how consulting firms can produce due diligence reports, the following are some specific examples of clients of Champ Consulting Services:

Case 1: A state-owned enterprise makes a strategic investment in a new energy vehicle enterprise.

A state-owned enterprise intends to make a strategic investment in a new energy vehicle enterprise and entrusts Shangpu Consulting to conduct due diligence. After communicating with the customer, the Champ Consulting team developed a due diligence plan and list, which was sent to the target company. After collecting and analyzing the information on finance, law, operation and other aspects provided by the target enterprise, the Shangpu consulting team also conducted several rounds of interviews and field visits to the target enterprise, in-depth understanding of its product research and development, manufacturing, marketing, supply chain management and other aspects, and communicated with industry experts, competitors, partners and so on, we have mastered the development trend, market scale, policy environment, competition pattern and other information of the new energy automobile industry.

Based on the information collected and analyzed, the Champ Consulting team forms a due diligence report and submits it to the client. The report points out that the target company has strong technological innovation capabilities, product competitiveness, brand influence and other advantages in the field of new energy vehicles. At the same time, there are also some risks and challenges, such as unstable financial status, unresolved legal disputes, and market competition. Fierce etc. The report also evaluates the value of the target enterprise and puts forward investment recommendations and follow-up plans, including investment options and conditions, exit mechanisms and timing, synergies and value-added space.

Case 2: Mergers and acquisitions of a medical device company by a listed company

A listed company intends to merge a medical device enterprise and entrust Shangpu Consulting to carry out due diligence. After communicating with the customer, the Champ Consulting team developed a due diligence plan and list, which was sent to the target company. After collecting and analyzing the information on finance, law, operation and other aspects provided by the target enterprise, the Shangpu consulting team also conducted several rounds of interviews and field visits to the target enterprise, in-depth understanding of its product research and development, manufacturing, marketing, supply chain management and other aspects, and communicated with industry experts, competitors, partners and so on, mastering the development trend, market scale, policy environment, competition pattern and other information of medical device industry.

Based on the information collected and analyzed, the Champ Consulting team forms a due diligence report and submits it to the client. The report points out that the target enterprise has strong technological innovation ability, product competitiveness, brand influence and other advantages in the field of medical devices, but also has some risks and challenges, such as unstable financial situation, unresolved legal disputes, fierce market competition and so on. The report also evaluates the value of the target enterprise and makes recommendations and follow-up plans for mergers and acquisitions, including merger options and conditions, exit mechanisms and timing, synergies and value-added space.

Case 3: A private equity fund invests in an educational technology company.

A private equity fund intends to invest in an educational technology enterprise and entrusts Shangpu Consulting to conduct due diligence. After communicating with the customer, the Champ Consulting team developed a due diligence plan and list, which was sent to the target company. After collecting and analyzing the information on finance, law, operation and other aspects provided by the target enterprise, the Shangpu consulting team also conducted several rounds of interviews and field visits to the target enterprise, in-depth understanding of its product research and development, platform operation, user service, teacher resources and other aspects, and communicated with industry experts, competitors, partners and so on, mastering the development trend, market scale, policy environment, competition pattern and other information of education science and technology industry.

Based on the information collected and analyzed, the Champ Consulting team forms a due diligence report and submits it to the client. The report points out that the target company has strong technological innovation capabilities, product competitiveness, and user loyalty in the field of education and technology. At the same time, there are also some risks and challenges, such as unstable financial conditions, unresolved legal disputes, and market competition. Fierce etc. The report also evaluates the value of the target enterprise and puts forward investment recommendations and follow-up plans, including investment options and conditions, exit mechanisms and timing, synergies and value-added space.

Considerations for due diligence reports

Consultants need to pay attention to the following aspects when issuing due diligence reports:

Respect the confidentiality of the target company or project. When collecting and analyzing the information of the target company or project, the consulting company shall abide by the agreement of the confidentiality agreement, do not disclose any sensitive information related to the target company or project, do not share or discuss the content and results of the due diligence with third parties, and do not publish or disclose the due diligence report to the public.

Maintaining the objectivity of due diligence reports. When forming a due diligence report, the consulting company shall objectively, comprehensively, accurately and timely reflect the true situation of the target company or project, shall not be influenced or interfered by the client or the target company or project, shall not favor or belittle any party, shall not conceal or exaggerate any information, and shall not presume or speculate on any conclusions.

Focus on the professionalism of due diligence reports. When issuing a due diligence report, the consulting company should use professional knowledge and methods to conduct in-depth, systematic and detailed investigation and analysis on all aspects of the target company or project, and provide valuable suggestions and opinions, not just simply listing or repeating the information provided by the target company or project, not ignoring or omitting any important details or problems, and not using vague or wrong concepts or terms.

Summary

This paper introduces the basic process, content and precautions of the due diligence report issued by the consulting company, and shows how the consulting company uses professional knowledge and methods to provide customers with high-quality due diligence reports in the light of the specific cases of the clients of Shangpu consulting services.