Commercial investment due diligence means that after the investor has reached an initial cooperation intention with the target enterprise, he conducts a comprehensive and in-depth review of all aspects of the target enterprise to assess its value and risk and provide a basis for investment decision-making. Business investment due diligence is an essential part of the equity investment process and a key factor in the success of the investment. From a practical point of view, this paper summarizes the seven skills of business investment due diligence, including clear due diligence purposes, making due diligence plans, performing due diligence work, writing due diligence reports, communicating due diligence feedback, making investment decisions and continuous follow-up management. This paper also combines the service experience and customer cases of Shangpu Consulting Company in commercial investment due diligence, and shows the actual operation and effect of commercial investment due diligence.

1. clear due diligence

Before making a business investment due diligence, it is important to clarify the purpose of due diligence, I .e. to answer the following three questions:

Why do we need to do due diligence? That is, we need to determine the motivation and significance of due diligence, such as whether there is a cooperation intention, whether there is an acquisition plan, whether there is an exit strategy, etc.

What aspects of due diligence should be carried out? That is, to determine the scope and content of due diligence, such as whether it involves financial, legal, business, technical and other aspects, whether it is necessary to have a deep understanding of the company's history, current situation, future and other aspects.

What kind of effect should be achieved? That is, to determine the standards and objectives of due diligence, such as whether the company's value and risks can be evaluated, whether potential problems and opportunities can be found, and whether reasonable suggestions and schemes can be put forward.

A clear due diligence purpose helps to develop a reasonable due diligence plan to avoid blindness and waste.

For example, Champ Consulting provided business investment due diligence services to a well-known Internet company. The company plans to acquire an emerging e-commerce platform to expand its market share and user base. Therefore, when making business investment due diligence, Shangpu Consulting Company mainly focuses on the user scale, activity, loyalty, consumer behavior and other aspects of the target company to evaluate its market potential and competitive advantage, and discovers the existence of the target company. Problems such as high user turnover rate, high operating costs, low profitability, etc., and put forward corresponding improvement suggestions.

2. development of a due diligence plan

After clarifying the purpose of due diligence, it is necessary to formulate a specific due diligence plan, that is, to answer the following three questions:

Who will do the due diligence? That is, to determine the composition and division of labor of the due diligence team, such as whether it needs the participation of professionals or third-party organizations, whether it needs the collaboration of multiple departments or levels, whether it needs to communicate and negotiate with the target company, etc.

How to conduct due diligence? That is, to determine the methods and tools of due diligence, such as whether to use document review, data analysis, interviews, field visits, etc., whether to use data rooms, questionnaires, reports, etc., whether to sign confidentiality agreements or other agreements, etc.

When to conduct due diligence? That is, to determine the time and progress of due diligence, such as whether there is a time limit or time window, whether it needs to be carried out in phases or batches, whether it needs regular reporting or feedback, etc.

The development of a due diligence plan helps to ensure the efficiency and quality of due diligence and to avoid omissions and duplication.

For example, Champpe Consulting has provided business investment due diligence services to a well-known education and training institution. The agency plans to invest in an online education platform to expand its online business and increase its revenue stream. Therefore, in developing the business investment due diligence plan, Champ Consulting has mainly considered the following aspects:

The due diligence team consists of market research, financial consulting, investment consulting, and,IPOThe professional staff of the consulting department is responsible for the market, finance, business, technology and other aspects of the target company, and the director of the investment consulting department is responsible for overall coordination and communication.

The due diligence methods and tools include due diligence through the network, database information collection, document review provided by the target company, data analysis, expert consultation, on-site interviews, etc., and the use of data rooms, questionnaires, reports and other forms of due diligence results, and the signing of confidentiality agreements with the target company before due diligence.

The due diligence time and schedule are determined according to the size and complexity of the target company and are generally3-6The month is divided into three stages: preliminary preparation, mid-term implementation and late summary. Each stage has a clear time node and work content, and regularly reports or feedback to investors.

3. implementation of due diligence

After the due diligence plan is formulated, the specific due diligence work must be carried out according to the plan, that is, the following three questions must be answered:

What information to collect? That is, to determine the list and sources of information required for due diligence, such as whether financial statements, contract documents, certificates and licenses provided by the target company are required, whether industry reports, market data, legal judgments, etc. obtained from external channels are required, and whether interview records, analysis reports, evaluation models, etc. generated by oneself are required.

What information is verified? That is, to determine the authenticity and reliability of the information required for due diligence, such as whether it is necessary to check the original or copy, whether it is necessary to confirm or consult with relevant parties, whether it is necessary to conduct cross-validation or logical validation, whether it is necessary to conduct sensitivity analysis or hypothesis testing, etc.

What problems are analyzed? That is, to determine the problem identification and resolution required for due diligence, such as whether the company's financial position, legal risks, business model, technical barriers, etc. need to be evaluated and judged, whether the company's value and growth, competitive advantages and disadvantages, potential opportunities and threats need to be analyzed and predicted, whether the company's optimization and innovation proposals, cooperation models and exit strategies need to be designed and planned.

The implementation of due diligence helps to collect effective data and information to support subsequent decision-making.

For example, Champu Consulting provided business investment due diligence services to a well-known medical device company. The enterprise plans to invest in a biopharmaceutical R & D company to acquire its core technologies and patents. Accordingly, in performing its business investment due diligence work, Champ & AMP; P has collected and validated the following data and information:

The target company's financial statements, audit reports, tax certificates, bank flows, etc. to understand its financial position and profitability, and conducted financial ratio analysis, cash flow analysis, valuation analysis, etc.

The target company's contract documents, certificates, legal proceedings, intellectual property rights, etc., to understand its legal risks and compliance, and conducted legal due diligence, patent analysis, risk assessment, etc.

The target company's business introduction, market research, customer list, competitors, etc., to understand its business model and market prospects, and conducted market analysis, competitive analysis,SWOTanalysis, etc.

The target company's technical solutions, research and development team, laboratory equipment, clinical trials, etc., to understand its technical level and innovation capabilities, and carried out technical evaluation, research and development progress, clinical effects, etc.

4. writing due diligence reports

After completing the due diligence work, a detailed due diligence report will be written based on the due diligence results, that is, the following three questions will be answered:

What is the structure of the report? That is, it is necessary to determine the chapters and order of the report, such as whether to write separately according to financial, legal, operational, technical and other aspects, whether there is a need for a summary and recommendation section, whether there is a need for an appendix and a reference section, etc.

What is the content of the report? That is, to determine the main points and arguments of the report, such as whether it can clearly explain the value and risks of the target company, whether it can objectively analyze the strengths and weaknesses of the target company, whether it can reasonably put forward the improvement plan and cooperation suggestions of the target company.

What is the form of the report? That is, to determine the language and format of the report, such as whether to use standardized language and terminology, whether to use appropriate charts and data, whether to use uniform fonts and styles, whether to use full references and comments, etc.

Writing a due diligence report helps to present the process and conclusions of due diligence, and provides a basis for subsequent communication and decision-making.

For example, Champpe Consulting provided business investment due diligence services to a well-known hotel group. The group plans to acquire an international hotel chain brand to increase its market share and brand influence. Therefore, in writing the business investment due diligence report, Champ Consulting follows the following principles:

The structure of the report is based on four parts: financial due diligence, legal due diligence, operational due diligence and technical due diligence, with a summary and recommendations at the end of each part, and an appendix and references at the end of the report.

The content of the report highlights the value and risk of the target company, and evaluates its financial status from the aspects of revenue growth rate, gross profit margin, net profit margin, asset-liability ratio, cash flow ratio, etc.; from the contract performance, intellectual property protection, legal proceedings, etc. Evaluate its legal risks; evaluate its business model from the aspects of market share, customer satisfaction, brand awareness, service quality, etc; from the hotel management system, reservation system, room facilities, security system and other aspects of its technical level, and put forward the corresponding optimization scheme and cooperation suggestions.

The format of the report uses standard language and terminology, uses appropriate charts and data, uses uniform fonts and styles, uses complete references and comments, and adds the logo and contact information of Champ Consulting to the report.

5. communication due diligence feedback

After submitting the due diligence report, it is necessary to communicate and feedback with the investor, that is, to answer the following three questions:

That is, to determine the timing and frequency of communication, such as whether to communicate immediately after the submission of the report, whether to communicate again before the investment decision, whether to communicate continuously during the investment process.

That is, to determine the way and form of communication, such as whether to communicate by telephone, email, video conference, etc., whether to communicate by oral, written, presentation and other forms, whether to prepare relevant materials and equipment.

That is, to determine the object and role of communication, such as whether to communicate with the investor's senior management, financial department, legal department, etc., whether to communicate with the target company's board of directors, shareholders, management, etc., whether to communicate actively or passively.

Communicating due diligence feedback helps to solve problems and questions that arise during the due diligence process and provides support for subsequent investment decisions.

For example, Champu Consulting provided business investment due diligence services to a well-known e-commerce enterprise. The enterprise plans to invest in a logistics distribution company to improve its logistics efficiency and reduce its logistics costs. Therefore, in communicating due diligence feedback, Champ Consulting follows the following principles:

The time point and frequency of communication are determined according to the needs and progress of the investor. The first communication is generally conducted within one week after the report is submitted, and the communication is conducted again before the investment decision, and the communication is conducted regularly during the investment process.

The method and form of communication are determined according to the preferences and conditions of the investor, generally through telephone or email for initial communication, and through video conferencing for in-depth communication, and through presentations orPPTReport presentation and prepare relevant data and documents.

The object and role of communication are determined according to the organizational structure and functions of the investor, generally with the president, finance director, logistics director, etc. of the investor, and with the target company.CEO、CFO、COOCommunicate and proactively provide information and advice.

6. making investment decisions

After completing the due diligence feedback, the final investment decision is made based on the due diligence results, I .e., the following three questions are answered:

Whether to invest? That is, to determine whether the target company has enough confidence and interest, whether the target company has enough value and potential, whether the target company is in line with their own strategic objectives and risk preferences.

How to invest? That is, to determine the way and conditions of investment, such as whether to use equity investment or debt investment, whether to use cash payment or stock good, I continue to show you the rest of the article content, as follows:

Payment or stock exchange, whether to use a one-time payment or installment payment, whether to set the investment period or return, etc.

That is, to determine the timing and sequence of the investment, such as whether it is necessary to wait for the target company's performance or market conditions, whether it is necessary to coordinate or compete with other investors, whether it is necessary to sign an investment agreement or other documents with the target company, etc.

Making investment decisions helps to achieve the objectives and effects of the investment and provides guidance for subsequent investment management.

For example, Champpe Consulting provided business investment due diligence services to a well-known media group. The group plans to invest in an online video platform to enrich its content resources and attract more users. Therefore, after preparing the business investment due diligence report, Shangpu Consulting also provides investors with the following investment decision recommendations:

Investment: Shangpu Consulting believes that the target company has high value and potential. Its online video platform has massive content resources and a large user group, and has strong technological innovation capabilities and operational efficiency, which is in line with the investor's strategy. Goals and risk appetite are in line.

Adopt equity investment: Champu Consulting believes that equity investment is a more appropriate way to enable investors to obtain the management and decision-making power of the target company and share its future earnings and growth, as well as to have more in-depth cooperation and communication with the target company.

Adoption of stock exchange: Shangpu Consulting Company believes that stock exchange is a reasonable condition, which can avoid cash outflow and financial pressure, and reflect the confidence and sincerity of both parties in cooperation, and can also increase the market value and brand influence of both parties.

Invest as soon as possible: Champ Consulting believes that it is a wise choice to invest as soon as possible, to seize the development opportunities and market advantages of the target company, and to avoid interference and intervention from other competitors, and to sign investment agreements and other documents with the target company in a timely manner.

7. continuous follow-up management

After the investment decision is completed, the investment project will be continuously followed up, that is, the following three questions will be answered:

That is, to determine the target company's performance evaluation and risk control, such as whether to monitor its financial situation, market conditions, business conditions, technical conditions, etc., whether to set appropriate indicators and standards, whether to regularly collect and analyze relevant data and information.

That is, to determine the help and assistance to the target company, such as whether to provide financial support, marketing support, business support, technical support, etc., whether to provide professionals or resources, whether to provide training or consulting, etc.

That is, to determine the optimization and improvement of the target company, such as whether it needs to adjust its financial strategy, market strategy, business strategy, technology strategy, etc., whether it needs to adjust its organizational structure or management model, whether it needs to adjust its cooperation model or exit model.

Continuous follow-up management helps to ensure the stable operation and sustainable development of investment projects, and provides guarantee for subsequent investment income.

For example, Champu Consulting has provided business investment due diligence services to a well-known game development company. The company plans to invest in a virtual reality technology company to develop more innovative game products. Therefore, after completing the commercial investment due diligence, Shangpu Consulting also provided the following continuous follow-up management suggestions to the investors:

Monitor the target company's financial situation, market situation, business situation, technical situation, etc., set the corresponding indicators and standards, such as revenue, profit, market share, user satisfaction, technical progress, technical quality, etc., and regularly collect and analyze relevant data and information.

Provide financial support, market support, business support, technical support, etc. for the target company, provide professionals or resources, such as financial advisors, market advisors, business advisors, technical advisors, etc., and provide training or consulting.

Adjust the target company's financial strategy, market strategy, business strategy, technical strategy, etc., adjust its organizational structure or management model, such as increasing investment quota, expanding market channels, optimizing product design, improving technical level, etc., and adjust its cooperation model or Exit mode, such as increasing equity ratio, establishing cooperation platform, formulating dividend plan, setting exit conditions, etc.

Summary

Business investment due diligence is a complex and important task that requires professional knowledge and experience, as well as rigorous methods and tools. From a practical point of view, this paper summarizes the seven skills of business investment due diligence, including clear due diligence purposes, making due diligence plans, performing due diligence work, writing due diligence reports, communicating due diligence feedback, making investment decisions and continuous follow-up management. This paper also combines the service experience and customer cases of Shangpu Consulting Company in commercial investment due diligence, and shows the actual operation and effect of commercial investment due diligence. It is hoped that this paper can provide some reference and enlightenment for readers who are interested in commercial investment.