Commercial due diligence (Commercial due Diligence), as the most critical part of investment and financing due diligence, mainly evaluates the business model, business prospects and profitability of the target company/project, which is different from financial and legal due diligence. Commercial due diligence is a core value assessment of the target enterprise/project. Dennett summarized the investigation in the following aspects:
1. Technical due diligence: The listing of a product needs to undergo strict review by the State Administration of Supervision and Administration, so on the one hand, we follow the relevant policies on product review and It stipulates that the technical data of the project should be inspected; on the other hand, from the perspective of competition in the same industry, the technology of the target project should be compared horizontally with similar products to examine the technological advancement, advantages and disadvantages, so as to support investment decisions.
In addition, if it is a due diligence investigation of a company in a certain industry, we will also investigate the company's background, development strategy, core team members, product layout and business model, etc.
2. Market evaluation: Market evaluation is to understand the industry status and future development trends of the target company/project through the analysis of its macro environment, market size and competitive environment, and to clarify the target company/project business prospects.
Regarding product projects specifically, we focus on analyzing and evaluating the market position of the project from the market size of the corresponding indication, the current and future competitive landscape of the product, and comprehensively considering the impacts of pricing, patent protection, and corporate sales strategies. factors, establish a well-founded and logical product sales forecast model, and predict the sales of the product after it is launched, thereby solving the problem of how much the product can sell after it is launched.
3. Evaluation of value: How much is the project worth? This is a problem addressed in part by value assessment. In fact, no valuation method is absolutely correct. Each method has its advantages and disadvantages, so multiple valuation methods are often used to verify each other and ultimately determine a value range. For the value evaluation of enterprises/projects, the discounted cash flow method and the comparable company method are usually used for comprehensive evaluation.
For industries with high technological barriers, patent protection is an important factor that cannot be ignored. Patents are technologies protected by law, and the value of the technology/product protected in the patent claims, that is, the value of the product technology, is directly reflected in its sales and profits, which in turn affects the valuation of the project.