What is corporate due diligence?

Usually when enterprises carry out financing plans, issue shares and go public, or when they want to carry out acquisitions, mergers and asset reorganizations.

Investment institutions and intermediary service agencies need to conduct comprehensive due diligence on enterprises.

The role of due diligence Due diligence can allow relevant institutions to gain an in-depth understanding of the enterprise and investigate possible business risks and flaws in the enterprise.

At the same time, learn more about the business performance and value of the company.

Help enterprises solve their existing deficiencies in a targeted manner.

Complete and comprehensive due diligence usually includes three levels, namely financial due diligence, legal due diligence and business due diligence.

Financial due diligence is mainly to find out the business performance of the company and determine the authenticity of its revenue and profit data.

Understand its costs, expenses and benefits.

Determine the company's liabilities and assets, including whether the company has hidden liabilities and whether the asset rights are complete. It also understands the standardization of the company's financial management and the effectiveness of internal controls, thereby determining the company's financial risks and tax risks.

What investors are most worried about is financial fraud. If the third party falsifies non-profit by 5 million, based on ten times the utilization rate, then our valuation will increase by 50 million, of which the profit is very high; for legal due diligence

In order to understand whether the company has legal issues left over from history, it is necessary to ensure that the company has complete qualifications and licenses necessary for relevant business in the industry.

Understand the complete status of the assets and legal rights owned by the company.

Determine whether the company's senior executives and key personnel meet the qualification requirements, and whether there are labor disputes in the company's labor relations.

And grasp the company's existing and possible legal proceedings and arbitration situations, determine the company's shareholders' meeting, board of directors, board of supervisors management, the structure of the three meeting levels and corporate governance, etc.

The purpose of business due diligence is to understand the true main business of the company.

As well as the proportion of various products and services and the content of products and services.

And be deeply familiar with the company's business model and related business processes such as procurement, R&D, production, sales, after-sales, etc.

It is used to determine whether the qualifications and licenses required for the enterprise's business are complete, and the market size and development prospects of the industry in which the enterprise is located.

And understand the competition situation of the industry, such as which competitors are included and their respective advantages and disadvantages, and understand the industry chain entry barriers and the impact of relevant industry policies in the industry where the company is located.

Understand and analyze the company's technology and R&D advantages, and clearly understand the company's future business development plan.

Due diligence process: Due diligence requires finding and collecting detailed information related to all financial and legal business of the enterprise, and sorting out statistics and analysis.

At the same time, it is also necessary to go to the company in person to conduct on-site investigations and conduct interviews with the company's executives, shareholders, and core technical personnel.

Ensure that the information obtained during due diligence is true, complete and valid.

After an exhaustive investigation lasting a week or two.

Investigators need to draft and complete a due diligence report detailing the company's comprehensive cost profile.

And point out the relevant risks and problems existing in the enterprise.

Understand the basic situation of the company in all aspects, and further compare, verify and verify the information and materials obtained.

Ensure that the industry provides effective rectification suggestions and professional opinions, and at the same time assists the enterprise in optimizing and rectifying so that the enterprise can operate in a more standardized manner.