How to do 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 books 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. Therefore, it is necessary for the buyer to make up for the imbalance of information acquisition between buyers and sellers by implementing due diligence. Once the risks and legal issues are determined through due diligence, the buyer and the seller can negotiate on who should bear the relevant risks and obligations, and the buyer can decide under what conditions to continue the acquisition activities. \x0d\ For large-scale M&A activities involving multiple potential buyers, due diligence usually goes through the following procedures: \ x0d \ 1. The seller appoints an investment bank to be responsible for the coordination and negotiation of the whole M&A process. \ x0d \ 2。 The potential buyer should appoint a due diligence team composed of experts (usually including lawyers, accountants and financial analysts). \ x0d \ 3。 Potential buyers and expert consultants hired by potential buyers sign a "confidentiality agreement" with the seller. \ x0d \ 4。 Under the guidance of the seller, the seller or the target company will collect all relevant information and compile the data index. \ x0d \ 5。 Potential buyers should prepare a due diligence list. \ x0d \ 6。 Designate a room (also known as "reference room" or "due diligence room") to place relevant materials. \ x0d \ 7。 Establish a program to give potential buyers the opportunity to ask other questions about the target company and obtain copies of documents that can be disclosed in the reference room. \ x0d \ 8。 Consultants (including lawyers, accountants, financial analysts) hired by potential buyers make a report, which briefly introduces matters important for determining the value of the target company. The due diligence report should reflect the substantive legal matters found in the due diligence, usually including suggestions on the transaction framework and analysis of various factors affecting the purchase price according to the information obtained in the investigation. \ x0d \ 9。 The buyer shall provide the draft M&A contract for negotiation and revision. \x0d\ due diligence outline of consulting company \x0d\ 1. Company profile \x0d\ 1. Company background and introduction; \x0d\ 2。 The historical evolution of the company; \x0d\ 3。 Changes in the ownership structure, capital increase and asset reorganization since the establishment of the company; \x0d\ 4。 The main development stages since the establishment of the company, and the reasons for the changes and development in each stage; \x0d\ 5。 Major changes in business development, production capacity, profitability, sales volume and product structure since the establishment of the company; \x0d\ 6。 The company's foreign investment, including investment amount, investment proportion, investment nature, investment income, etc. And the introduction of the main invested units; \x0d\ 7。 Employee status of the company, including age structure, education structure, post distribution structure and technical title distribution structure; \x0d\ 8。 Resumes of directors, supervisors and senior managers; \x0d\ 9。 The dividend distribution of the company over the years and the current dividend distribution policy of the company; \x0d\ 10, the stock ownership plan for senior managers and employees implemented by the company. \x0d\ II。 Organizational structure of the company \x0d\ 1. The organizational management structure established by the company now; \x0d\ 2。 the Articles of association of the company \x0d\ 3。 Composition of the company's board of directors. Part-time jobs of senior managers and members of the board of supervisors; \x0d\ 4。 Shareholder structure of the company, introduction of major shareholders, including background, shareholding ratio, main business, registered capital, assets, profitability, business scope, legal representative, etc. \x0d\ 5。 Business dealings between the company and the above major shareholders (such as raw material supply, cooperative research and development of products, patented technology and intellectual property rights, sales agents, etc.). ) and capital transactions, and whether there is a related party transaction contract that regulates the above business and capital transactions; \x0d\ 6。 What support does the company's major shareholder have for the company's business development, including capital, market development, research and development, and technical investment. \x0d\ 7。 Relevant information of the company's subsidiaries (factories), including name, business, assets, financial statements, income and profitability, foreign business dealings, etc.; \x0d\ 8。 Relevant information of the holding subsidiary, including its name, business, assets, financial statements, income and profit, foreign business dealings and domestic capital valley business dealings; \x0d\ 9。 How to manage the company and its wholly-owned subsidiaries (factories) and holding subsidiaries in a unified way in administration, sales, material supply and personnel; \x0d\ 10。 Introduction of major shareholding companies. \x0d\ III。 Supply \x0d\ 1. Types of raw materials and other auxiliary materials required by the company's business, including their uses and their proportion in the demand for raw materials; \x0d\ 2。 The main suppliers of the above raw materials, and whether the company has signed long-term supply contracts with relevant suppliers; If yes, please explain the main terms of the contract; \x0d\ 3。 Please list the proportion of raw materials provided by each supplier to the total purchase amount of the company; \x0d\ 4。 List and basic information of the company's main outsourcing manufacturers, details of outsourcing parts, details and distribution of outsourcing molds, price and delivery cycle of outsourcing parts, and qualification certification of outsourcing parts; \x0d\ 5。 Whether the company imports raw materials, if so, the proportion of imported raw materials, and whether the state has any policy restrictions on the import of raw materials; \x0d\ 6。 Whether there is a credit transaction in the settlement method of the transaction between the company and the raw material supplier; \x0d\ 7。 The company's main energy consumption. \x0d\ IV。 Business and products \x0d\ 1. The main business and business description that the company is currently engaged in, and the importance of each business in the whole business income; \x0d\ 2。 Background information of the industry in which the main business is located; \x0d\ 3。 The development prospect of this business; \x0d\ 4。 The growth of main business in recent years, including sales volume, revenue, market share, sales price trend, and the respective proportion of various products in the company's sales revenue and profit; \x0d\ 5。 Subdivide and refine the company's product series and product parts; \x0d\ 6。 The product structure of the company, introducing the main products currently produced by the company and the sales situation in recent years; Product demand status; \x0d\ 7。 Product quality, technical content, functions and uses, main technologies applied, technical performance indicators and product competitiveness of the above products; Targeting specific consumer groups; \x0d\ 8。 Does the company have patented products? If so, what protective measures does the company have? \x0d\ 9。 What trademarks are used to sell our products, and whether the above trademarks are registered for the exclusive use of our company; \x0d\ 10, major awards and honorary titles won by the above products; \x0d\ 1 1。 What measures will the company take to improve product quality, upgrade product grade and enhance product competitiveness? \x0d\ 12, new product development of the company; \x0d\ V. Sales \x0d\ 1。 Briefly describe the development of the domestic and international sales market of the company's products and the establishment of the sales network; \x0d\ 2。 Who are the main customers of the company, and introduce the relevant information of the main customers and their proportion in the company's total sales; Geographical distribution of the company's main customers; \x0d\ 3。 The main domestic sales areas, sales management and sales network distribution of the company's products; \x0d\ 4。 The sales proportion of the company's products at home and abroad, the distribution structure and proportion of the main export countries and regions; \x0d\ 5。 Does the company have a long-term fixed-price sales contract? \x0d\ 6。 The company's main measures and marketing means to expand sales; \x0d\ 7。 The structure of sales staff, including the number of people, education, work experience, division of labor, etc. \x0d\ 8。 The company's main incentives for sales staff; \x0d\ 9。 What is the company's advertising strategy, the main media of advertising and the proportion of advertising expenses in each media, the total amount and growth of the company's annual advertising expenses, and the proportion of the total advertising expenses to the company's total expenses; \x0d\ 10。 Please list the company's main competitors in domestic and foreign markets and their main information, as well as their respective market share in domestic and foreign markets; \x0d\ 1 1。 What after-sales services the company provides to consumers and how to arrange them; \x0d\ 12。 How long is the company's credit sales period and what is the proportion of credit sales to total sales; Whether there have been bad debts in history, and what is the proportion of actual bad debts to accounts receivable every year; Information and reputation of major credit customers; \x0d\ 13。 Does the company have import and export rights? If not, which foreign trade company does the company entrust as an agent to introduce its main information; \x0d\ 14。 What impact will China's entry into WTO have on the company's products? \x0d\ VI。 Research and development \x0d\ 1. Please introduce the research situation of the company in detail, including the establishment time, R&D strength, R&D achievements, main research equipment, R&D means, R&D procedures, R&D organization and management structure, etc. \x0d\ 2。 The structure of the company's technical developers and the resumes of engineers and major technical developers; \x0d\ 3。 List of major R&D institutions cooperating with the company and the cooperative development; The main information of the cooperative unit; \x0d\ 4。 The main patented technologies, independent intellectual property rights and patents currently owned by the company, including their names, uses, applications and awards; \x0d\ 5。 The annual R&D expenditure invested by the company and its proportion to the company's operating income; \x0d\ 6。 What are the new technologies and products that the company is currently developing? \x0d\ 7。 Development cycle of the company's new products \x0d\ 8. New technologies and products planned to be developed in the future; \x0d\ VII。 The company's main fixed assets and business facilities \x0d\ 1, the composition of the company's main fixed assets, including the name, original value, net value, quantity, use and depreciation of the main equipment, and the advanced technology adopted; \x0d\ 2。 Fixed assets are allocated according to production and operation purposes, auxiliary production and operation purposes, non-production and operation purposes, office purposes, transportation purposes and other purposes; \x0d\ 3。 Property facilities such as houses and buildings owned by the company, including construction area, occupied area, original value, net value, depreciation and acquisition method; \x0d\ 4。 The main projects currently under construction, including name, investment plan, construction period, commencement date, completion date, progress and whether they have been approved by government departments; \x0d\ 5。 The nature, area, market price, acquisition method and current purchase price (lease price) of the land currently owned by the company; \x0d\ VIII。 Corporate finance \x0d\ 1. The source and composition of the company's income and profits; \x0d\ 2。 The composition of the company's main business cost and the composition of the company's management expenses; \x0d\ 3。 The composition of the company's sales expenses; \x0d\ 4。 The proportion of main business income to income; \x0d\ 5。 The composition of the company's main expenditure; \x0d\ 6。 Financial indicators such as accounts receivable turnover rate, inventory turnover rate, current ratio, quick ratio, return on net assets, gross profit margin and asset-liability ratio in the first three years of the company; \x0d\ 7。 The balance sheet, profit and profit distribution table of the company for the first three years; \x0d\ 8。 What are the factors that have a significant impact on the company's future main income and expenditure? \x0d\ 9。 Various tax rates currently implemented by the company; \x0d\ IX。 Main creditor's rights and debts \x0d\ 1. What are the main creditor's rights of the company at present and the reasons for their formation; \x0d\ 2。 The company's current major bank loans, amount, interest rate, term, maturity date and whether there are overdue loans; \x0d\ 3。 Loans made by the company to related parties (shareholders, employees and holding subsidiaries); \x0d\ 4。 Guarantee and low mortgage of the company's loans to major shareholders and other companies and enterprises; \ x0d \ X. Investment projects \x0d\ 1. The main information of the investment project raised this time, including project feasibility, project establishment, purpose, total investment, planned commencement date, project background information, investment recycler, financial rate of return, annual sales income and profit after the project is put into production, etc. \x0d\ 2。 The technical content, advanced degree, future market development prospect of the investment project and its influence on the development of the whole company; \x0d\ 3。 What are the major investment projects that the company has completed at present? Introduce the major investment projects that have been completed. \x0d\ XI。 Other \x0d\ 1. The advanced degree, maturity, characteristics, performance and advantages of the technology and production process currently adopted by the company; \x0d\ 2。 Compared with competitors in the same industry, the company's current main business advantages, management advantages, competitive advantages, market advantages and technological advantages; \x0d\ 3。 The company and its major shareholders, directors and senior management personnel are currently involved in legal proceedings, and if so, what impact will it have on the company; \x0d\ xii。 Industry background information \x0d\ 1. Please introduce the development of the industry in recent years; \x0d\ 2。 Relevant industrial policies, management measures and possible future policy changes; \x0d\ 3。 The degree of market competition in this industry, and introduce the main competitors in the same industry, including annual production capacity, annual actual output, annual sales volume, sales revenue, market share and position in the domestic market; \x0d\ 4。 The development of this industry abroad; \x0d\ 5。 The impact of current national policies on the industry; \x0d\ 6。 At present, the introduction of the national market, including annual demand, annual supply, regional demand distribution, regional supply distribution, the number of production enterprises, whether it competes with similar imported products.