Business investment refers to the allocation of funds or resources by enterprises or individuals in order to obtain income or achieve other goals. Business investment involves many forms, such as equity investment, debt investment, mergers and acquisitions, project development and so on. Regardless of the form, business investment requires a full understanding and evaluation of the target enterprise or project before decision-making to avoid blindness and uncertainty, which is due diligence.

Definition of due diligence

As far as possible (Due Diligence), also known as prudential investigation or due diligence, refers to the comprehensive, in-depth and objective investigation and evaluation of the target enterprise or project by the investor in a business investment to determine its value, risk and feasibility. As a working process, as well as a working method. The due diligence involves many aspects, such as finance, law, market, technology, management, etc. The results of due diligence usually result in a detailed report that provides the basis and recommendations for investment decisions.

Classification of due diligence

According to different angles, due diligence can be divided into different types. According to the subject angle, it can be divided into active due diligence (Active Due Diligence) and passive due diligence (Passive Due Diligence). Active due diligence is a due diligence activity initiated and organized by the investor to obtain real information about the target enterprise or project and assess its value and risk. Passive due diligence is a due diligence activity in which the target actively provides information and cooperates with the inspection, with the aim of demonstrating its strengths and attracting investors.

According to the content point of view, it can be divided into financial due diligence (Financial Due Diligence), legal due diligence (Legal Diligence), market due diligence (Market For Diligence), technical due diligence (Technical Due Diligence), etc. Financial due diligence refers to the review and analysis of the financial position, financial statements, financial policies, etc. of the target enterprise or project. Legal due diligence refers to the review and analysis of the legal compliance, legal risks, legal documents, etc. of the target enterprise or project. Market due diligence refers to the review and analysis of the industry environment, market size, market competition, market potential, etc. of the target enterprise or project. Technical due diligence refers to the review and analysis of the technical level, technological innovation, and technological protection of the target enterprise or project.

According to the time angle, it can be divided into early due diligence (Preliminary Due Diligence), formal due diligence (Formal Due Diligence) and late due diligence (Post ue Diligence). Pre-due diligence refers to the initial understanding and screening of the target enterprise or project by the investor before the investment intention is reached, in order to determine whether there is the possibility of further cooperation. Formal due diligence means that after the investment intention is reached, the investor conducts a detailed investigation and evaluation of the target enterprise or project in order to determine the value and risk of the investment. Late due diligence refers to the continuous supervision and management of the target enterprise or project by the investor after the signing of the investment agreement, with the aim of ensuring the effectiveness and return of the investment.

Purpose of due diligence

The main purpose of due diligence is to help investors make the right investment decisions and achieve their investment objectives. Specifically, due diligence has the following purposes:

Confirm the authenticity, legality and validity of the target enterprise or project. The due diligence can help the investor to verify whether the information and documents provided by the target party are true, accurate and complete, whether they comply with laws, regulations and industry norms, and whether there are false, concealed, fraudulent and other acts.

Assess the value, risk and feasibility of the target business or project. To help investors analyze the target party's financial situation, market position, technical advantages, management capabilities, etc., to determine its intrinsic value and growth potential, while identifying its financial risks, legal risks, market risks, technical risks, etc., to assess the feasibility and sustainability of its future development.

Develop reasonable investment plans and trading conditions. The due diligence can help investors determine the appropriate investment method, amount, proportion, term, etc. according to the value and risk of the target party, as well as the corresponding transaction terms and safeguards, such as equity transfer agreement, shareholder agreement, non-competition agreement, etc.

Optimize post-investment management and risk control. As far as possible to help investors to establish an effective post-investment management mechanism and risk control system, such as regular monitoring of the target party's operating conditions, financial situation, market changes, etc., timely detection of problems and take corresponding measures to ensure investment income and safety.

Methods of due diligence

The due diligence is a complex and professional task that requires the use of a variety of methods and means. In general, due diligence methods include the following:

Review the documentation. This is one of the most basic and important methods in due diligence. By reviewing various documents and materials provided or publicly disclosed by the target party, such as business registration certificates, financial statements, legal contracts, patent certificates, etc., basic information and data of the target party can be obtained, and preliminary analysis and judgment can be made.

Refer to external information. This is one of the most common and effective methods in due diligence. By referring to external information, such as industry reports, market research, expert opinions, media reports, etc., it is possible to obtain information on the macro and micro environment in which the target party is located, as well as the competitive advantages and disadvantages of the target party, for comparison and evaluation.

conduct a site visit. This is one of the most direct and important methods in due diligence. By conducting on-site inspections, such as visiting the target party's production base, office space, customer groups, etc., you can observe the actual operation status, management level, technical capabilities, etc. of the target party, as well as the problems and challenges faced by the target party, for verification and analysis.

Conduct interview communication. This is one of the most flexible and critical methods in due diligence. Through face-to-face communication, such as communication and consultation with senior managers, core employees and key partners of the target party, we can understand the strategic planning, development vision and corporate culture of the target party, as well as the demands and expectations of the target party, and conduct communication and consultation.

Cases of due diligence

In order to better illustrate the application and value of due diligence in business investment, this paper will combine the Champ Consulting Company (Shangpu Consulting) of customer service cases, showing the specific practices of due diligence in different industries and fields.

Case 1: M & A of a Chinese dairy company by an international food group

An international food group (hereinafter referred toAGroup) is a leading global food producer and supplier with multiple well-known brands and product lines. In order to further expand the Chinese market,AThe group decided to make a decision on a dairy enterprise in China (hereinafter referred toBcompanies) for M & A.AThe Group entrusts Champ Consulting to provide it with a full range of due diligence services.

Shangpu Consulting has organized a professional team to evaluate the financial, legal, market, technical and other perspectives.BThe company conducted an in-depth investigation and evaluation. By reviewBThe company's financial statements, legal documents, market data, etc., are found by Champ Consulting.BAlthough the company has a certain share in China's dairy market, its financial situation is not good, with a large number of debts and losses; its legal compliance also has problems, and has been involved in product quality and food safety litigation; its market competitiveness is also weak, facing the challenges of many strong competitors at home and abroad; its technical level is also low, lack of innovation ability and core competitiveness.

By referring to external information, such as industry reports, market research, expert opinions, etc., Shangpu Consulting found that although China's dairy market has great potential, there are also many risks and uncertainties, such as changeable consumer demand, strict policies and regulations, and fierce competition in the industry.

by conducting site visits, such as visitsBThe company's production base, office space, customer groups, etc., Shangpu Consulting found thatBThere is a big gap between the actual operation status, management level and technical ability of the company and the information and documents provided by it. Its production equipment is old, the office environment is poor, and customer satisfaction is low.

Through interviews, such asBThe company's senior management, core employees, key partners, etc. communicate and consult, and the company found thatBThe company's strategic planning, development vision, corporate culture, etc.AThere are great differences in the group, its senior managers have reservations about mergers and acquisitions, its core employees are resistant to mergers and acquisitions, and its main partners are worried about mergers and acquisitions.

Combining the above information and analysis, Champu Consulting is.AThe Group provided a detailed due diligence report recommendingAThe Group waives its commitmentBThe company's merger plan, or significantly reduce the merger price, and propose the corresponding transaction terms and safeguards.ABased on the report and recommendations of Champ Consulting, the Group has finally decided to terminate the relationshipBThe company's merger and acquisition negotiations, instead looking for other more suitable target companies. Through the due diligence services of Champ Consulting,AThe Group avoided a wrong investment decision that could have caused huge losses.

Case 2: A domestic Internet giant's investment in a U.S. e-commerce platform

A domestic Internet giant (hereinafter referred toCInc.) is one of the largest online search engines and social networking platforms in China, with hundreds of millions of users and wide reach. In order to further expand overseas markets,CThe company decided to make a decision on an e-commerce platform in the United States (hereinafter referred toDcompanies) to make investments.CThe company entrusts Champ Consulting to provide it with a full range of due diligence services.

Shangpu Consulting has organized a professional team to evaluate the financial, legal, market, technical and other perspectives.DThe company conducted an in-depth investigation and evaluation. By reviewDThe company's financial statements, legal documents, market data, etc., are found by Champ Consulting.DThe company is one of the most innovative and dynamic e-commerce platforms in the United States. Its financial status is good, and it has achieved rapid growth and profitability; its legal compliance is also high, and it has not involved major lawsuits or disputes; its market competitiveness is also Strong, with a huge user base and loyalty; its technical level is also high, with advanced data analysis and artificial intelligence capabilities.

By referring to external information, such as industry reports, market research, expert opinions, etc., Shangpu Consulting found that although the U.S. e-commerce market is relatively mature, it still has broad development space and opportunities, such as consumer demand diversification, policy and regulation support Sex, active industry innovation, etc.

by conducting site visits, such as visitsDThe company's office space, customer base, etc., Champ Consulting found thatDThe company's actual operating conditions, management level, technical capabilities, etc. are consistent with the information and documents provided, and its office environment is elegant and customer satisfaction is high.

Through interviews, such asDThe company's senior management, core employees, key partners, etc. communicate and consult, and the company found thatDThe company's strategic planning, development vision, corporate culture, etc.CThe company has a large degree of fit, its senior management has a positive attitude towards investment, its core employees have expectations for investment, and its main partners express support for investment.

Combining the above information and analysis, Champu Consulting is.CThe company provided a detailed due diligence report suggestingCCompanyDThe company makes investments and proposes corresponding investment plans and trading conditions, such as investment methods, amounts, proportions, terms, etc., as well as corresponding transaction terms and safeguards, such as equity transfer agreements, shareholder agreements, and non-competition agreements.CThe Company, based on the reports and recommendations of Champ Consulting, ultimately andDThe Company entered into an investment agreement and successfully completed the investment transaction. Through the due diligence services of Champ Consulting,CThe company achieved a successful investment decision that was conducive to its overseas market expansion and business growth.

Case 3: Investment by a domestic new energy vehicle company in a German battery technology company

A domestic new energy automobile enterprise (hereinafter referred toECompany) is one of the most promising and influential new energy vehicle manufacturers in China, with multiple innovative and high-performance products and models. In order to further enhance its technical level and competitiveness,EThe company decided to a German battery technology company (hereinafter referred toFcompanies) to make investments.EThe company entrusts Champ Consulting to provide it with a full range of due diligence services.

Shangpu Consulting has organized a professional team to evaluate the financial, legal, market, technical and other perspectives.FThe company conducted an in-depth investigation and evaluation. By reviewFThe company's financial statements, legal documents, market data, etc., are found by Champ Consulting.FThe company is one of the leading battery technology R & D and manufacturers in Germany. Its financial situation is stable, achieving sustained growth and profitability; its legal compliance is also high, and no major litigation or disputes have been involved; its market competitiveness is also strong, with a number of well-known customers and partners; its technical level is also high, with a number of patents and awards.

By referring to external information, such as industry reports, market research, expert opinions, etc., Shangpu Consulting found that battery technology is one of the core technologies in the field of new energy vehicles, and it is also one of the key factors for future development, such as battery performance, safety, Life span, etc.

by conducting site visits, such as visitsFThe company's R & D center, production base, etc., Shangpu Consulting found thatFThe actual operation status, management level and technical capability of the company are in line with the information and documents provided by it, and its R & D center is advanced and its production base is standardized.

Through interviews, such asFThe company's senior management, core employees, key partners, etc. communicate and consult, and the company found thatFThe company's strategic planning, development vision, corporate culture, etc.EThe company has a large degree of fit, its senior management has a positive attitude towards investment, its core employees have expectations for investment, and its main partners express support for investment.

Combining the above information and analysis, Champu Consulting is.EThe company provided a detailed due diligence report suggestingECompanyFThe company makes investments and proposes corresponding investment plans and trading conditions, such as investment methods, amounts, proportions, terms, etc., as well as corresponding transaction terms and safeguards, such as equity transfer agreements, shareholder agreements, and non-competition agreements.EThe Company, based on the reports and recommendations of Champ Consulting, ultimately andFThe Company entered into an investment agreement and successfully completed the investment transaction. Through the due diligence services of Champ Consulting,EThe company achieved a successful investment decision that contributed to its technological advancement and increased competitiveness.

Summary

This paper introduces the basic concept, classification, purpose and method of due diligence, and shows the application and value of due diligence in different industries and fields, combined with the customer service case of Shangpu Consulting Company. The due diligence is an indispensable job in business investment, and it is also a highly professional job. As a professional business consulting organization, Shangpu Consulting Company has rich due diligence experience and excellent due diligence team. It can provide customers with high-quality due diligence services, help customers make correct investment decisions and achieve investment goals.