The composition of the due diligence team: project leader (transaction promoter), industry experts, business experts, marketing and sales experts, financial experts, legal experts, etc.
The purpose of due diligence: to identify potential fatal defects and their possible impact on acquisitions and expected investment returns.
Definition of financial due diligence: in the whole due diligence system. Financial due diligence mainly refers to the financial professionals' review and analysis of the investment-related financial situation of the target enterprise.
In the process of investigation, financial professionals generally adopt the following basic methods: review, through the review of financial statements and other financial information, to find the key and main financial factors; Analysis procedures, such as trend analysis and structural analysis. , analyze the data obtained from various channels and find anomalies and major problems; Interview, fully communicate with all levels, functional personnel and intermediaries within the enterprise; Intra-group communication, the members of the investigation team come from different backgrounds and occupations, and mutual communication between them is also a way to achieve the purpose of investigation. Because the purpose of financial due diligence is different from general audit, financial due diligence generally does not use financial audit methods such as letter verification, physical inventory and data recalculation, but uses more analytical tools such as trend analysis and structure analysis. In the process of capital operation such as investment merger and acquisition, financial due diligence is an indispensable prerequisite for investment integration scheme design, transaction negotiation and investment decision-making, and it is the basis for judging whether investment meets strategic objectives and investment principles. It plays an important role in understanding the real situation of assets and liabilities, internal control and management of the target enterprise, fully revealing its financial risks or crises, analyzing profitability and cash flow, and predicting the future prospects of the target enterprise.