DD的几个部分

Commercial Due Diligence

  • Industry attractiveness. This factor involves evaluating the company’s market size, its growth projections, basic profitability factors that drive the market, and the company’s future projections.
  • Positioning of the target company. This factor entails identifying the factors that help to create value in the industry and the probability of a sustainable market.
  • Opportunities for value creation. This factor involves identifying opportunities that help reduce the cost and enhance revenues of the company and lead to consolidation in operational activities.

  • Exit strategies. This factor concerns identifying exit strategies and the expected holding period.

    Operational Due Diligence

  • Cash management

  • Regulatory and legal compliance
  • Counterparty management
  • Back office operations
  • Trade operations
  • Valuation policies
  • Disaster recovery

  • Information technology

    Legal Due Diligence

  • Gaining a better understanding of the business.

  • Valuing the target company.
  • Drafting the relevant documentation.
  • To discover any major legal issues of the company
  • to understand the essential legal drivers that affect the target’s profitability
  • to identify how to create value from the due diligence process
  • to help adequately address the due diligence findings that affect the transaction structure and contracts
  • to recognize the hurdles that may lie ahead at the time of transaction completion whether contractual, regulatory, or other
  • the major legal risks that may be visible from the target
  • the quality of legal and compliance management
  • any hidden contingencies or commitments that the target may face
  • the essentials or the scope of price negotiation option

  • trade secrets, intellectual capital and any contractual or regulatory obstructions that need to be resolved before finalizing the transaction.

    Financial Due Diligence

  • Assess the target’s quality of earnings by identifying whether accounting policies are aggressive or conservative and review company accounts, generally accepted accounting principles, and reporting compliance with the regulators

  • Identify the key business drivers including profitability trends.
  • Identify the concentrations of risk
  • Review the assets and the liabilities both on and off the balance sheet.

  • Review the cash flows, changes in working capital, and capital income and expenditures.

    Strategic Due Diligence

  • Strategy formulation. Is a transaction required to fulfill the corporate or business unit strategy?

  • Conducting due diligence. Can the selected target company meet the investor’s strategic objectives?
  • Target valuation: Can the deal be conducted at the right price?

  • Incorporation: Can the PE firm reconstruct its plans after the deal to extract the full value of the deal?

    Human Due Diligence

  • involves understanding organizational culture and the roles, responsibilities, capabilities, and the attitudes of people in the company.

    Cultural Due Diligence

  • Power distance. A national culture attribute describing the extent to which a society accepts that power in institutions and organizations is distributed unequally.

  • Individualism vs. collectivism. The degree to which a country prefers to act as individuals rather than as members of group.
  • Masculinity vs. femininity. The extent to which assertiveness and materialism characterize societal values.
  • Uncertainty avoidance. The extent to which a society feels threatened by uncertain and ambiguous situations and tries to avoid them.
  • Long-term orientation. The extent to which a society emphasizes the future, thrift, and persistence.

  • Indulgence vs. self-restraint. The extent to which members of a society attempt to control their impulses and desires.

    IT Due Diligence

  • review IT operating and capital budgets as well as earnings before interest, taxes depreciation and amortization(EBITDA) projections and the business requirements, functionalities, and services required from the IT department.

  • review the current and planned IT projects and investments.

  • reviewing the technology environment and architecture, which should focus on a company’s IT related operational and financial risks and opportunities.

    Tax Due Diligence

  • A tax due diligence team should consist of tax professionals who are experienced in providing tax advice to corporate and PE buyers throughout the life cycle of a transaction.

    Special Due Diligence

  • companies may also want to find out information that may not be easily available about the target company.

    DD check list

    Step 1: Products due diligence

  • Description of the product and/or the business model

  • List of strategic partners
  • List of strategic suppliers
  • Major applications and customers
  • Revenue by major customer
  • Historical and projected growth rates
  • Marketing and distibution strategy
  • Market share
  • Competitors and competitive landscape
  • Technology review/presentation
  • Nature of technological change
  • Clinical studies
  • Research and development - allocation

  • List of ingredients in products (including sourcing)

    Step 2: Industrial property

  • List of patents, copyrights, licenses and trademarks (and its aplicability)

  • FTO and Patentability studies performed by the company

    Step 3: Organizational due diligence

  • Organization chart and function chart

  • Key persons and their job description
  • Board of Directors
  • Biography of senior management
  • Advisory board (if any)
  • Supervisory board (if any)
  • Participation of the shareholders on the management of the company
  • Compensation arrangements (copy of the agreements)
  • Incentive stock plans (copy of the agreements)
  • Other benefit plans
  • Significant employee relations problems (past and present)

  • Personnel turnover

    Step 4: Legal due diligence

  • Articles of incorporation (including subsidiaries)

  • By-laws
  • Shareholder agreements
  • Minutes of Board of Directors meeting
  • Minutes of Sharholder meetings
  • All documents provided to the Directors and Shareholders
  • Description of environmental issues
  • Description of employee safety issues
  • History with regulatory bodies
  • Summary of insurance coverage (things)
  • Summary of insurance coverage (employees and directors)
  • Past lawsuits against the Company
  • Pending lawsuits against the Company
  • Past lawsuits initiated by the Company
  • Pending lawsuits initiated by the Company

  • Summary and copy of the existing contracts

    Step 5: Financial due dilligence

  • Capital structure

    • Current outstanding shares and evolution since inception
    • List of all holders of shares, options, warrants, etc. and evolution
    • Investment made by the Founders
    • Subscription ways (in kind, in cash, others)
  • Debts
    • Summary of all debt instruments issued by the Company (terms & conditions)
    • Banking loans (terms & conditions)
    • Sharedholers loans (terms & conditions)
    • Off balance financial liabilities
  • Annual financial information for the past 3 years (if possible)
    • Accounting policies
    • Audited Financial statements (Income statements, balance sheets, cash flows and footnotes)
    • Annual tax return
    • Management financial reports
    • Distribution of the sales by:
      • Product type
      • Channel
      • Geography
      • Sector
    • Subsidies received from public entities (terms & conditions)
    • Detailed list of the employees and salaries
    • Detailed list of the operational charges
    • Trial Balance
    • Fixed assets list
    • Intangible assets list
    • Rents and leasings (copy of the agreements)
  • Financial projections and Business plan
    • Quarterly financial projections for the next 1-3 years
    • Yearly financial projections for the next 3-5 years
    • Major growth drivers and prospects
    • Predictability of business
    • Industry and company pricing policies
    • Economic assumptions
    • Explanation on the growth of the sales and the costs
    • External financing arrangement assumption
    • Exit strategy on products and company
    • Expected financing round and funding needs for the next 1-2 years
  • Ongoing results
    • Recent P&L’s
    • Recent liquidity status including bank reconciliation
    • Unpaid invoices (frequency + analysis)
    • Cashflow maps (including the payments of interests, etc.)

      Step 6: Any other business