Definition of due diligence:
Due diligence, also known as prudent investigation, generally refers to the comprehensive and in-depth review of the historical data files, management background, market risk, management risk, technology risk and capital risk of the enterprise after the investor reaches a preliminary cooperation intention with the target enterprise through consultation.
It is mainly carried out in capital operation activities such as acquisition and investment, but enterprises will also need to conduct due diligence in advance when they go public to find out whether they have the listing conditions.
Purpose of due diligence:
The purpose of due diligence is to let buyers know as much as possible about the stocks or assets they want to buy. From the buyer's perspective, due diligence is risk management. For buyers and their financiers, M&A itself has various risks, such as the accuracy of the past financial accounts of the target company.
Whether the main employees, suppliers and customers of the target company will stay after the merger; Whether there are any obligations that may lead to the disintegration of the operation or financial operation of the target company.
Key points of due diligence:
1. Is the team strong and healthy?
If the startup team is small, angel investors may meet with each member. Angel investors will investigate the intelligence, loyalty, strengths, weaknesses, teamwork and management style of each team member. A dysfunctional team or an old naysayer in a key position will affect the success of financing.
2. Preparation of products or services:
Technical investigation usually begins with engineers and technicians and product marketers. Angel investors will evaluate the progress of startups and evaluate products.
All the preparation goals of entrepreneurs are to make angel investors completely satisfied with the functions and quality of the claimed products, and the whole team and R&D process must ensure that the products can be realized in the future. Finally, angel investors also need to confirm the protection and status of intellectual property rights.