Due diligence concept:
Due diligence, also known as prudent investigation, refers to a series of activities in which the partner conducts on-site investigation and data analysis on all matters related to this cooperation of the target enterprise after reaching a preliminary cooperation intention with the target enterprise through consultation. Including financial due diligence and legal due diligence. The survey contents generally include: industry research, enterprise owners, historical evolution, human resources, market and sales, research and development, production and service, procurement, law and supervision, finance and accounting, taxation, management information system, etc.
Due diligence reason:
Due diligence is to collect information related to the key issues of the proposed transaction through the investigation of business partners or counterparties, so as to understand business partners and counterparties, find out their business advantages and disadvantages, find out their existing and potential main problems and important factors affecting the transaction, and provide decision-making basis and basis for cooperation or transaction, negotiation and even the integration plan after the transaction is completed.
1. Due diligence on M&A and investment behavior of enterprises is a complex legal project, and the success of M&A depends on many factors. Among them, investors' understanding of the target company is one of the most important determinants. Therefore, investors must conduct necessary investigations on the target company and understand all aspects of the target company. This kind of investigation is often not done independently by investors themselves, and professional institutions must be entrusted, such as lawyers to investigate the subject qualification of the target company, the legality of the target company's operation and management, the assets of the target company, creditor's rights and debts and other possible legal risks. Entrust an asset appraisal company to appraise the assets of the target company. Entrust a financial consulting company or other professional organizations to investigate and evaluate the operating ability, operating status and competitiveness of the target company, entrust a professional organization to investigate and evaluate the technical ability of the target company, and entrust an environmental assessment agency to evaluate the environmental protection matters involved in the target company. In practice, these investigations are called "due diligence". It can be seen that due diligence is an overall process to help investors deeply understand all aspects of the invested or acquired enterprises, and the result is generally a due diligence report drafted by investors themselves or entrusted intermediaries. Through this achievement, investors can judge whether a potential investment enterprise conforms to its own investment strategy and principles, and whether it has reached the investment value standard, and provide reference opinions and suggestions for subsequent investment negotiations and final investment decisions. Therefore, due diligence plays a fundamental role in enterprise equity investment, and all parties should attach great importance to it. So, what specific contents does a due diligence generally include? Let's make an overview: due diligence in general investment and mergers and acquisitions is often divided into three aspects: commercial investigation, that is, the investigation of the market situation and market prospects of the invested object. Commercial investigation often involves the determination of investment value, which is generally completed by professional consulting companies. Legal affairs investigation legal affairs investigation involves all aspects of legal disputes that the acquired object may involve, such as the organizational structure of the investment object, ongoing litigation matters, potential legal hidden dangers, etc. This work is generally carried out by law firms. Financial due diligence Financial due diligence usually does not involve the determination of investment price. However, as long as it is entrusted by investors, such as understanding assets and liabilities, operating results, internal control, contingent liabilities, contingent losses, related transactions, financial prospects, etc. For the invested enterprise, it can be the scope of financial due diligence. These findings will have a direct impact on investment. Usually, a complete due diligence project will deeply understand ten aspects of the enterprise, which has reached the state of relatively in-depth scanning of the whole enterprise.