Business investment due diligence consulting is a professional service that helps investors or acquirers to conduct a comprehensive, in-depth and objective analysis and evaluation of the target enterprise. Business investment due diligence consulting covers the market environment, competitive advantage, development strategy, operation status, financial status, legal risk and other aspects of the target enterprise. It aims to provide investors or acquirers with a complete, true and accurate portrait of the target enterprise to help them judge the value, potential and risk of the target enterprise, and whether it meets their investment or merger objectives.

The quality and effectiveness of business investment due diligence consulting projects directly affect the decision-making and risk control of investors or acquirers. Therefore, for business investment due diligence consulting projects, it is not only necessary to clarify the objectives, scope, methods, processes, teams, outputs and other elements of the project at the beginning of the project, but also to effectively evaluate and summarize these elements at the end of the project to test whether the project has reached the expected objectives, whether it meets the needs of customers, and whether there are areas that can be improved or optimized, and whether it provides valuable and impactful advice and solutions to customers.

Based on the six elements identified at the beginning of the project, this paper puts forward the important steps and precautions for evaluating and ending the business investment due diligence consulting project, and shows how to improve the value and effect of the business investment due diligence consulting by evaluating and ending the business investment due diligence consulting project.

Assess Project Objectives

The project objective refers to the final result of the business investment due diligence consulting project, usually to provide the client with a comprehensive, in-depth and objective analysis report on the target enterprise, as well as recommendations and solutions based on the analysis report. The main purpose of evaluating the project is to test whether the analysis report covers all key issues within the scope of the project, provides sufficient data and evidence support, reflects the true situation of the target enterprise, meets the expectations and requirements of the customer, and brings clear value propositions and action guidelines to the customer.

There are several ways to assess project objectives, such:

Communicate and feedback with customers to understand customer satisfaction and acceptance of the analysis report, as well as acceptance and implementation of suggestions and solutions.

Communicate and verify with the target company to confirm whether the data and information in the analysis report are accurate and whether there are omissions or deviations.

Discuss and summarize with the project team, share the highlights and shortcomings of the analysis report, as well as the gains and difficulties in the process of the project.

Communicate and review with industry experts or peers, obtain opinions and suggestions from third parties, and evaluate and rate analysis reports.

Considerations for evaluating project objectives are:

Assessing project objectives should be done as soon as possible after the analysis report is completed to avoid information loss or obsolescence.

Assessing project objectives should be carried out from multiple perspectives and dimensions to ensure the comprehensiveness and objectivity of the assessment.

Assessment project objectives should be recorded and a project summary report should be formed to facilitate subsequent follow-up and improvement.

Case:

Champ Consulting advised a European private equity fund on a business investment in a Chinese auto parts manufacturer. The goal of the project is to provide customers with a comprehensive, in-depth and objective analysis report on the market environment, competitive advantage, development strategy, operation, financial situation, legal risk, etc. of the target enterprise, as well as investment advice and risk avoidance plan based on the analysis report.

After completing the analysis report, Champ Consulting evaluated the project objectives using the following methods:

Two teleconferences were conducted with customers to present the main contents and conclusions of the analysis report, to answer customers' questions and concerns, and to collect customer feedback on the analysis report. The client expressed great satisfaction with the analysis report and believed that Champ Consulting provided a comprehensive and in-depth portrait of the target company, helping them to better understand the value, potential and risks of the target company. The client also indicated that it would formulate an investment strategy and action plan based on the investment advice and risk aversion plan provided by Champ Consulting.

A site visit was conducted with the target enterprise to verify some of the data and information in the analysis report and to communicate with the management of the target enterprise. The target company expressed its appreciation for the professionalism and integrity of Champ Consulting and confirmed that there was nothing wrong or misleading in the analysis report.

An internal meeting was held with the project team to summarize the highlights and shortcomings of the analysis report, as well as the gains and difficulties during the project. The project team believes that the analysis report makes a good analysis of the market environment, competitive advantage, development strategy, etc., and puts forward targeted and feasible investment suggestions and risk avoidance plans. However, there are still some details and depth deficiencies in terms of operational status, financial status, and legal risks, which need to be further improved and optimized. The project team also shared some challenges and solutions encountered during the project, such as how to obtain internal data and information of the target company, how to deal with cross-border and cross-cultural communication and collaboration, and how to deal with the sensitivity and confidentiality of the target company.

An email communication was held with industry experts, sending them a summary of the analysis report and the main conclusions, and inviting them to provide their comments and suggestions. Industry experts said that they highly praised and recognized the analysis report of Shangpu Consulting, and believed that Shangpu Consulting has strong professional ability and industry experience in business investment due diligence consulting. Industry experts also made suggestions for additions and improvements, such as adding some industry trends and outlook analysis to the analysis report, and considering the impact of some policies and regulations in investment advice and risk aversion programs.

Based on the evaluation results obtained by the above methods, Shangpu Consulting has formed a project summary report and sent it to the customer, target enterprise, project team and industry experts for subsequent follow-up and improvement.

Assess project scope

Project scope refers to the content and scope of the analysis and evaluation of the target enterprise to be covered by the business investment due diligence consulting project, which is usually customized according to the needs of the client and the characteristics of the target enterprise. Assessing the scope of the project is primarily a test of whether the analysis report covers all key issues within the scope of the project, whether there are omissions or redundancies, whether there are appropriate weights and priorities, and whether there is clear logic and structure.

There are various ways to assess the scope of a project, such:

Communicate and confirm with the client to understand the client's understanding and expectations of the project scope, as well as their views on the importance and urgency of the issues covered in the analysis report.

Communicate and verify with the target enterprise to confirm whether the problems covered in the analysis report are consistent with the actual situation of the target enterprise and whether there are areas that need to be supplemented or modified.

Discuss and summarize with the project team, share the selection and arrangement of issues covered in the analysis report, as well as adjustments and changes to the project scope during the project.

Communicate and review with industry experts or peers, obtain third-party opinions and suggestions on the scope of the project, and evaluate and rate the issues covered in the analysis report.

Considerations for assessing the scope of the project are:

Assessing the scope of the project should begin as soon as the scope of the project is determined and should be ongoing throughout the project so that issues related to the scope of the project can be identified and resolved in a timely manner.

The scope of the evaluation project should be carried out from multiple angles and dimensions to ensure the comprehensiveness and objectivity of the evaluation.

The scope of the assessment project should be documented and a project scope management report should be formed for subsequent monitoring and control.

Case:

Champ Consulting advised a European private equity fund on a business investment in a Chinese auto parts manufacturer. The project scope is based on the customer's needs and the characteristics of the target enterprise, customized the following six aspects of analysis and evaluation content:

Market environment: Analyze the scale, growth, structure, competition, trends, opportunities and threats of the auto parts industry in which the target company is located.

Competitive advantage: Analyze the advantages and disadvantages of the target company in the auto parts industry in terms of market share, customer base, product line, technical level, brand influence, channel network, etc., as well as comparison and differentiation with major competitors.

Development strategy: Analyze the rationality and feasibility of the target company's development vision, goals, strategies, plans, resources, capabilities, etc., as well as the fit and synergy with the customer's investment or merger goals.

Operational status: Analyze the efficiency and effectiveness of the target company's production management, quality management, supply chain management, human resource management, R & D management, etc., as well as existing problems and room for improvement.

Financial position: analyze the stability and health of the target enterprise's financial statements, financial ratios, financial risks, etc., as well as the impact on the value and profitability of the target enterprise.

Legal risk: analyze the legal liability and risk of the target enterprise in terms of contract performance, intellectual property protection, tax compliance, environmental protection, etc., as well as the potential impact and loss to investors or acquirers.

After determining the scope of the project, Champ Consulting conducted an assessment of the scope of the project using the following methodology:

A conference call was held with the client to confirm the client's understanding and expectations of the scope of the project and their views on the importance and urgency of the issues covered in the analysis report. The client states that he is very satisfied with the scope of the project and believes that Champ Consulting covers all key issues without omissions or redundancies. The client also expressed that the most concerned issues are the competitive advantages, development strategies and legal risks of the target company. It is hoped that Shangpu Consulting can make a more detailed and in-depth analysis in these aspects.

A telephone communication was conducted with the target enterprise to verify whether the issues covered in the analysis report were consistent with the actual situation of the target enterprise and whether there were areas that needed to be supplemented or modified. The target company stated that it had basically no objection to the issues covered in the analysis report, and provided some supplementary data and information. For example, in terms of market environment, it provided some latest data and reports on the auto parts industry, such as industry size, growth rate, Market share, etc. The target company also stated that in terms of financial status, some data and information are confidential and it is not convenient to disclose to Shangpu Consulting. I hope Shangpu Consulting can understand and respect it.

An internal meeting was held with the project team to summarize the selection and arrangement of the issues covered in the analysis report, as well as the adjustments and changes to the project scope during the project. The project team believes that the issues covered in the analysis report are generally in line with the scope of the project, with no omissions or redundancies. However, in the process of the project, due to the changes in the needs and feedback of customers and target enterprises, as well as the difficulty in obtaining and analyzing data and information, the project team has made some adjustments and changes to the project scope. For example, in terms of competitive advantages, the analysis of the technical level and brand influence of the target enterprise is increased, and in terms of development strategy, the analysis of the resources and capabilities of the target enterprise is reduced, in terms of legal risks, an analysis of the legal responsibilities and risks of the target enterprise in environmental protection has been added.

An email communication was held with industry experts, sending them a list of issues covered in the analysis report and inviting them to provide their comments and suggestions on the scope of the project. Industry experts said that they highly evaluated and recognized the project scope of Champ Consulting and believed that Champ Consulting covered all key issues without omission or redundancy. Industry experts also put forward some suggestions for supplement and improvement, such as adding some analysis on the future forecast and development direction of auto parts industry in terms of market environment, and adding some indicators and evaluation on the production efficiency and quality control of target enterprises in terms of operation status.

Based on the evaluation results obtained by the above method, Champ Consulting has formed a project scope management report and sent it to the customer, target enterprise, project team and industry experts for subsequent monitoring and control.

Assessment Project Methodology

The project approach refers to the tools and techniques used in business investment due diligence consulting projects to analyze and evaluate the target enterprise, usually selected or designed based on factors such as project scope, data sources, time constraints, etc. The evaluation project method is mainly to check whether the analysis report uses appropriate, effective and innovative methods, whether there is sufficient theoretical basis and practical proof, and whether there are clear steps and processes.

There are a variety of ways to evaluate project approaches, such:

Communicate and confirm with the customer to understand the customer's understanding and expectations of the project methodology, as well as their views on the credibility and reliability of the methodology used in the analysis report.

Communicate and verify with the target enterprise to confirm whether the methods used in the analysis report are applicable to the characteristics and situation of the target enterprise, and whether there are areas that need to be supplemented or modified.

Discuss and summarize with the project team, share the selection and design of methods used in the analysis report, as well as adjustments and changes to the project methods during the project.

Communicate and review with industry experts or peers, obtain third-party opinions and suggestions on project methods, and evaluate and rate the methods used in the analysis report.

Considerations for evaluating project methods are:

The evaluation of the project methodology should begin as soon as the project methodology is defined and should be ongoing throughout the project so that issues related to the project methodology can be identified and resolved in a timely manner.

The evaluation project method should be carried out from multiple angles and dimensions to ensure the comprehensiveness and objectivity of the evaluation.

The assessment project methodology should be documented and a project methodology management report should be developed for subsequent monitoring and control.

Case:

Champu Consulting advised a European private equity fund on a business investment in a Chinese auto parts manufacturer. The project approach is based on the project scope, data sources, time constraints and other factors, selected or designed the following tools and techniques for analyzing and evaluating the target enterprise:

Market environment: Porter's five forces model,PESTanalysis,SWOTAnalysis and other tools to analyze the size, growth, structure, competition, trends, opportunities and threats of the auto parts industry in which the target enterprise is located.

Competitive advantage: using resource-based theory, value chain analysis, core competitiveness analysis and other tools to analyze the advantages and disadvantages of the target enterprise in the auto parts industry in terms of market share, customer base, product line, technical level, brand influence, channel network, etc., as well as comparison and differentiation with major competitors.

Development strategy: The strategic triangle model, balanced scorecard, strategic map and other tools are used to analyze the rationality and feasibility of the target enterprise's development vision, objectives, strategies, plans, resources, capabilities, etc., as well as the fit and synergy with the customer's investment or M & A objectives.

Operation status: The operation management system, operation efficiency index, operation effect index and other tools are used to analyze the efficiency and effect of production management, quality management, supply chain management, human resource management, research and development management of the target enterprise, as well as the existing problems and room for improvement.

Financial position: Financial statement analysis, financial ratio analysis, financial risk analysis and other tools are used to analyze the stability and health of the target enterprise's financial statements, financial ratios, financial risks, etc., as well as the impact on the value and profitability of the target enterprise.

Legal risk: Tools such as legal due diligence checklist, legal risk identification and assessment methods, legal risk avoidance and control methods are used to analyze the legal liabilities and risks of the target enterprise in terms of contract performance, intellectual property protection, tax compliance, environmental protection, etc., as well as the potential impact and losses on investors or acquirers.

After determining the project methodology, Champ Consulting conducted an assessment of the project methodology using the following methodology:

A conference call was held with the client to confirm the client's understanding and expectations of the project methodology, as well as his views on the credibility and reliability of the methodology used in the analysis report. The client expressed that he was very satisfied with the project methodology and believed that Champ Consulting used an appropriate, effective and innovative method with sufficient theoretical basis and practical proof. The client also stated that the most trusted methods are financial statement analysis, financial ratio analysis, financial risk analysis and other tools, and hoped that Champ Consulting would be able to make a more accurate and detailed analysis in these areas.

A telephone communication was conducted with the target enterprise to verify whether the methods used in the analysis report are applicable to the characteristics and situation of the target enterprise, and whether there are areas that need to be supplemented or modified. The target enterprise indicated that it had little objection to the methodology used in the analysis report and provided some supplementary data and information, such as indicators and evaluations on the productivity and quality control of the target enterprise in terms of operational status. The target enterprise also said that in terms of legal risks, some data and information are confidential and are not convenient to disclose to Shangpu Consulting. It is hoped that Shangpu Consulting can understand and respect it.

An internal meeting was held with the project team to summarize the selection and design of the methods used in the analysis report, as well as adjustments and changes to the project methods during the project. The project team believes that the methodology used in the analysis report is generally consistent with the project methodology and that there are no inappropriate or ineffective methodologies. However, in the process of the project, due to the difficulty of data and information acquisition and analysis, the project team has made some adjustments and changes to the project method. For example, in terms of market environment, it has increased the future prediction and development direction of the auto parts industry. In terms of competitive advantage, it has reduced the analysis of the technical level and brand influence of the target company. In terms of development strategy, an analysis of the resources and capabilities of the target company has been added.

An email communication was held with industry experts, sending them a list of the methods used in the analysis report and inviting them to provide their comments and suggestions on the project methodology. Industry experts said that they highly appraised and recognized the project method of Shangpu consulting, and believed that Shangpu consulting used appropriate, effective and innovative methods, which had sufficient theoretical basis and practical proof. Industry experts also put forward some suggestions for supplement and improvement, such as adding some analysis on the competition pattern and market mechanism of the auto parts industry in terms of market environment, adding some analysis on the operation mode and innovation ability of the target enterprise in terms of legal risk, adding some analysis on the social responsibility and corporate ethics of the target enterprise.

Based on the evaluation results obtained by the above methods, Champ Consulting has formed a project method management report and sent it to the customer, target enterprise, project team and industry experts for subsequent monitoring and control.

Assess the project process

Project process refers to the arrangement and execution of the activities and tasks of the business investment due diligence consulting project in accordance with a certain sequence and steps to complete the analysis and evaluation of the target enterprise, usually based on the project objectives, scope, methods, time, resources and other factors. The evaluation of the project process is mainly to check whether the analysis report is completed in accordance with the predetermined project process, whether there is timely progress and quality monitoring and control, and whether there is efficient communication and collaboration.

There are several ways to evaluate the project process, such:

Communicate and confirm with the customer to understand the customer's understanding and expectations of the project process, as well as the satisfaction and recognition of the project process followed in the analysis report.

Communicate and verify with the target enterprise to confirm whether the project process followed in the analysis report is in line with the cooperation and assistance of the target enterprise, and whether there is any need to supplement or modify.

Discuss and summarize with the project team, share the development and implementation of the project process followed in the analysis report, as well as the adjustment and change of the project process during the project.

Communicate and review with industry experts or peers, obtain third-party opinions and suggestions on the project process, and evaluate and rate the project process followed in the analysis report.

The considerations for evaluating the project process are:

Evaluating the project process should begin as soon as the project process is developed and continue throughout the project so that issues related to the project process can be identified and resolved in a timely manner.

The evaluation project process should be carried out from multiple angles and dimensions to ensure the comprehensiveness and objectivity of the evaluation.

The assessment project process should be documented and a project process management report should be formed for subsequent monitoring and control.

Case:

Champu Consulting advised a European private equity fund on a business investment in a Chinese auto parts manufacturer. The project process is based on the project objectives, scope, methods, time, resources and other factors, the following four stages and twelve steps of activities and tasks:

Phase 1: Start-up

Step 1: Communicate needs with customers and clarify project objectives, scope, methods, time, resources and other elements.

Step 2: Communicate and cooperate with the target enterprise to obtain the basic information, data, contact person and other contents of the target enterprise.

Step 3: Form a project team and assign roles, responsibilities, tasks, etc.

Stage 2: Collection

Step 4: Collect internal data and information of the target enterprise, including financial statements, contract documents, management systems, etc.

Step 5: Collect external data and information of the target enterprise, including market reports, industry data, competitor information, etc.

Step 6: Collect third-party data and information, including industry expert opinions, customer feedback, policies and regulations, etc.

Phase III: Analysis

Step 7: Analyze the market environment of the target enterprise, including size, growth, structure, competition, trends, opportunities and threats.

Step 8: Analyze the competitive advantages of the target company, including market share, customer base, product line, technical level, brand influence, channel network, etc.

Step 9: Analyze the development strategy of the target company, including development vision, goals, strategies, plans, resources, capabilities, etc.

Step 10: Analyze the operation status of the target enterprise, including production management, quality management, supply chain management, human resource management, research and development management, etc.

Step 11: Analyze the financial position of the target enterprise, including financial statements, financial ratios, financial risks, etc.

Step 12: Analyze the legal risks of the target enterprise, including contract performance, intellectual property protection, tax compliance, etc.