Due diligence generally include three aspects of legal due diligence, financial due diligence and management due diligence. Different strategic intent is bound to lead to different strategic goals. It is only in the understanding of enterprise merger and acquisition targets and strategic deeply, can accurately grasp the direction, an investigation to determine the contents of investigation. Such as, for the financial M & A, financial due diligence should focus on profitability target enterprise and obtain cash flow ability as the core, the asset quality and various important risk conditions; for industry mergers and acquisitions, financial due diligence should focus on asset quality, the target enterprise net assets of stock and growth potential as the core, pay attention to the risks, taking into account post merger profitability and future access to cash flow situation etc..
1, the due diligence process
Due diligence will disturb the target enterprise normal business order in some degree, be investigation will not only affect the efficiency and results of the investigation, and may reduce transaction trust, increase the transaction cost before. Therefore, in order to meet the due diligence investigation purposes, to try to make it orderly, moderate.
The basic process of due diligence as follows: both signed a confidentiality agreement due diligence; the merging party designated by themselves or hire of legal experts due diligence team; due diligence teams submit list of due diligence to target enterprises; Target Corp fill in and provide the corresponding instructions, and the collection of related documents, data, or placed in an the room, by the due diligence team to check and sign; due diligence team to provide to the goal enterprise within a given time information for review, and asked about the target enterprise's shareholders, senior management personnel and other employees on relevant facts; due diligence team for Internet information retrieval, field survey and investigation; due diligence Advisory Group, visited the relevant management departments, industry associations, intermediary organizations, the contract the other party, investigation, relevant to verify the situation; due diligence group according to internal communication, professional and comprehensive analysis on the investigation results, and provide the basic due diligence report, on the need to further understand the situation again drafted "due diligence" list, and so on, until everything is clear ; due diligence teams submit accurate, complete, detailed due diligence report.
The due diligence report should be a comprehensive introduction to the investigation process, the survey results, the issue or risk, the risk has no possibility and means to eliminate or decrease, and puts forward the definite conclusion opinion. Usually, the due diligence report includes the following aspects: the basic situation of the enterprise, and the historical evolution of corporate shareholders, the basic situation, the organizational structure of enterprises, land and property, production and operation of equipment and other property, credit, debt financing, guarantee, major business production contract and investment projects, connected transactions and competition, the staff and the labor, finance and taxation, litigation, arbitration, administrative punishment, etc..

2, legal due diligence
The legitimacy of the target enterprise qualification is the primary content of legal due diligence, generally need to investigate whether the target enterprise establishment procedure, qualification, condition, way to comply with the provisions of the laws, regulations and normative documents, such as relates to be approved to set up businesses, also need to check whether it has been entitled to approval. The establishment of the shareholder qualification and authorization, assets appraisal, capital verification, in the process of creation of the general assembly or the first general meeting of shareholders and other procedures to review the legality of the target enterprise, especially pay attention to investigation and verification on the related problems of state-owned assets. On this basis, to talk to executives, management consulting, independent access to business records and other methods of target enterprise main body qualification history, realistic existence, continuous operation of inspection.
Investigation on the target enterprise assets mainly include: fixed assets of the target enterprise and its subsidiaries owned property, equipment; trademark, patent, copyright, franchise, land use rights and other intangible assets; the long-term equity investment and other long-term foreign investment. Through the investigation, Scope Verification of assets and the assets have achieved complete proof of ownership, the existence of defects in quality and efficiency, the existence of property rights disputes or potential disputes, the existence of security or other rights restricted conditions, the existence of the exercise of the right of limitation, the existence of rental housing, the right to use land or other major production facilities the situation.
Investigation on the debt target enterprise creditor's rights include: major contracts are or will be performed; accounts receivable, prepayments, other receivables and other major creditor's rights; accounts payable, accounts receivable, other payable, taxes payable and other major debt; because of environmental protection, intellectual property rights, product quality, labor safety, personal rights and other causes of major tort obligation; unsettled or foreseeable major litigation, arbitration or administrative penalties and other major legal issues etc.. Through the investigation, verification of major contract is comprehensive, true, lawful and effective; verify debts is normal, legitimate, whether there are potential disputes or other important legal risk, with particular attention to the limitation of action and the possibility of realization; reason, verify the major tort obligation type, amount, payment, influence to verify the major legal issues; the reason, object, request, the parties, the amount in dispute, the focus of controversy, program progress etc..
Investigation on the rights and interests of the owners of target enterprise mainly includes: the registered capital and ownership structure. Through the investigation, completeness verification of shareholder qualification, the number of shareholders, investment, investment proportion of legitimacy, the examination and approval procedures and in place; currency investment legal, integrity, non verifiable, ownership transfer. Verify target enterprises set up equity setting, all previous changes in share capital and share transfer, judge the ownership is clear, the holder of the shares is clear, changes in ownership is legal, compliance, real, effective; verify the controlling shareholder holdings and the controlling shareholder or actual controller dominated shareholders of target corporation and their changes, the judgment of the company is pledged, freezing, seizure or other major ownership dispute; verify target enterprise shareholder whether people are consistent with the actual investment, legal documents, employee stock ownership union holdings, the Commission held or Trust shares and underlying shares and the evolution of the existence of.
Investigation on the goal of enterprise management mainly includes: the scope of business, mode of operation, the main business and the changes of the target enterprise; enterprise strategy and its changes; corporate directors, supervisors, senior management personnel and their changes; independence and related enterprises linked transactions; the standardization of enterprise operation and tax, environmental protection quality inspection situation. Through the investigation, verification of target enterprise actual scope is consistent with the industrial and commercial registration, business registration, for the record, the existence of approval, business qualification or license flaw, business process whether there are significant issues of illegal, safety and effect of continuous operation, the production and operation of the project is in line with national industrial policies and procedures to verify the enterprise strategy; with the main business, compliance with the relevant laws, regulations and policy requirements, whether through the board of directors, shareholders will approve, the existence of significant effects on entrepreneurial planning internal, external factors; the possibility of legitimacy, stability and change of the actual controller and verify target enterprise management; independent verification of the target enterprise assets, personnel, finance, organization, business, whether it has a complete business system and market oriented independent operating capability; verify the transactions of the legitimacy, effectiveness, fairness, judge the target company's controlling shareholder, actual controller and target enterprise competition relations and its influence. Verify target enterprise's articles of association, organization, directors, supervisors, and senior management personnel, the foreign guarantee, fund management and other aspects are legitimate, standardized, effective, other exists in taxes, pollution, quality defects, damage the legitimate interests of investors and social public interests.

3, financial due diligence
Investigation on the target enterprise accounting subject mainly includes: the accounting subject name, set up time, registered capital, shareholders, investment form and nature, the capital's main business, history, business objectives, strategy and risk management, corporate governance structure, market position. Through the investigation, verify the effectiveness of target enterprise accounting subject's legitimacy, the continuity of operation, management.
Investigation on the external financial environment target enterprise mainly include: laws and regulations, enterprises directly related to enterprise financial industry and market conditions. Such as, the national interest rate, exchange rate, fiscal and monetary policy, government restrictions, tax policy, industry preferential policy, resource consumption policy, trade protection policy, the property industry, the industry cycle and seasonal characteristics, industry growth and profitability of the main factors, main competitors, industry mergers and acquisitions, target corporate public relations and market status. Through the investigation, verification of target enterprise's financial operation of legal compliance, possibility, sustainable management of financial information and forecasting of the credible degree.
Investigation on the target of enterprise internal financial environment mainly include: management policies, business processes and internal control system. Through the investigation, verification of target enterprise internal financial environment of scientific, effective, compatibility.
Investigation on the target of the enterprises' financial statements and major financial matters including: review and analyze financial statements, the main accounting policies and accounting estimates changes, special accounting matters. Through the investigation, fair and trends of the main assets, liabilities, income verification of target enterprise, cost, profit, cash flow, accounting standards and tax compliance, financial commitment, or loss, or a debt, the balance sheet items in future, the possibility of related party transaction and account balance and other special accounting matter exists.
The merger process, the real situation of target enterprise may make the disclosure of financial information to a serious deviation from the enterprises through various means, in order to influence the acquisition price and decision. For example, before or after confirmation of income or expense, the disposable income to raise revenue or offset the cost, income, do not record record forged or not appropriate to reduce debt. In order to avoid financial traps, M & a first need to seriously study the target enterprise's financial statements, pay attention to the analysis of the project structure and its influence and combined statements amount is larger projects. And use the historical data of target enterprise, index analysis of enterprise value, profit ability, debt paying ability, operating ability, development ability, the level of liquidity, and its development trend. When necessary, can be on the target enterprise audit the financial statements. Through the establishment of and compliance to the substantive test for compliance testing and data on the accounting items of internal control system of the audited entity, as much as possible to ensure the authenticity and accuracy of the financial statements.
Due diligence, management 4
Investigation on the target enterprise management ability mainly includes: enterprise highest responsible person and team situation, equity structure of enterprises, enterprise organization structure and decision making system, enterprise management status and trends. Through the investigation, verification of target enterprise management ability of the advantages and disadvantages and trust degree.
Investigation on the target of enterprise human resources mainly include: the internal organization structure, employee compensation, profit sharing plan, other welfare and benefits, labor relations, employee handbook, trade unions, labor relations, government relations. Through the investigation, the effectiveness of human resource target companies to verify the inferiority and the incentive system.
Investigation on the target enterprise marketing include: marketing personnel, product, customer related situation, industry status and development trend, the market marketing strategy. Through the investigation, the realization degree of inferiority and the market strategy verify target marketing.
Investigation on the production target of the enterprise mainly includes: production management, organization and personnel, management, production facilities, production process, energy demand, quality control, product design, government supervision, subcontract management, inventory management, production cost management, production, procurement management, supplier management, mainly, storage and transportation of inventory management, production efficiency obstacles, production. Through the investigation, the realization degree of inferiority production target enterprise verification and production plan.
Investigation on the target enterprise research and development mainly includes: R & D management, R & D personnel, research process, research and development project. Through the investigation, the realization degree of the advantages and development strategy research to verify the goals of the enterprise.

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