What Are Due Diligence Reports?

With the cooperation of the intermediary, the intermediary agency conducts a comprehensive and in-depth review of the company's historical data and documents, the background of the management staff, market risks, management risks, technical risks and capital risks, which mostly occur in the company's public offering of shares and corporate acquisitions .

Due diligence report

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For a large acquisition involving multiple potential buyers, due diligence usually goes through the following procedures:

1. The seller designates an investment bank to coordinate and negotiate the entire M & A process.

2. A potential buyer appoints a due diligence team of experts (typically including lawyers, accountants, and financial analysts).

3 A "non-disclosure agreement" is signed between the potential buyer and its expert consultants and the seller.

4 Collect all relevant information together and prepare the data index by the seller or by the target company under the guidance of the seller.

5. Prepare a due diligence checklist for potential buyers.

6. Specify a room (also known as a data room or due diligence room) where relevant information is placed.

7. Establish a procedure that gives potential buyers the opportunity to ask other questions about the target company and obtain copies of documents that can be disclosed in the data room.

8. The consultants (including lawyers, accountants, financial analysts) hired by the potential buyer make a report and briefly introduce matters that are important in determining the value of the target company. The due diligence report should reflect the substantive legal issues discovered during the due diligence, and usually include suggestions on the transaction framework and analysis of factors affecting the purchase price based on the information obtained in the investigation.

9. A draft of the M & A contract is provided by the buyer for negotiation and modification.

I. Company profile

1. Company establishment background and situation introduction;

2. Company history;

3. Changes in shareholding structure and capital increase and asset reorganization since the establishment of the company;

4. The main development stages since the establishment of the company, and the reasons for the change and development in each stage,

5. Major changes in business development, production capacity, profitability, sales volume, and product structure since the company was established;

6. The company's external investment situation, including investment amount, investment proportion, investment nature, investment income, etc., and introduction of the main invested unit;

7. The status of the company's employees, including age structure, education structure, job distribution structure and technical title distribution structure;

8. Resume of directors, supervisors and senior management personnel;

9. The company's dividend distribution over the years and the company's current dividend distribution policy;

10. The company's implementation of senior management and employee stock ownership plans.

Organization structure

1. The organizational management structure currently established by the company;

2. Articles of association of the company;

3. The composition of the company's board of directors and directors. Part-time employment of senior management personnel and members of the supervisory board;

4. The company's shareholder structure and introduction of major shareholders, including background information, shareholding ratio, main business, registered capital, asset status, profitability, business scope, legal representative, etc .;

5. The business transactions between the company and the above-mentioned major shareholders (such as the supply of raw materials, cooperative research and development products, joint use of patented technology and intellectual property rights, sales agents, etc.), and capital exchanges, are there related-party transaction contracts that regulate the above-mentioned business and capital transactions and transactions ;

6. What support does the company's major shareholders have for the company's business development, including capital, market development, research and development, and technology investment?

7. Relevant information of the company's subsidiaries (factories), including name, business, asset status, financial status and income and profit status, and external business transactions;

8. Relevant information of the holding subsidiary, including the name, business, asset status, financial status and income and profit status, external business transactions, and internal capital river valley business transactions;

9. How the company conducts unified management with the above-mentioned wholly-owned subsidiaries (factories) and holding subsidiaries in administrative, sales, material supply, and personnel matters;

10. Briefing on the main stock companies.

Third, supply

1. The types of raw materials and other auxiliary materials that the company needs in its business, including uses and the proportion of demand in raw materials;

2. For the major suppliers of the above raw materials, has the company signed long-term supply contracts with relevant suppliers, and if so, please explain the main terms of the contracts;

3. Please list the proportion of raw materials provided by each supplier in the company's total procurement;

4. List and basic information of the company's main outsourcing suppliers, details of outsourcing components, details and distribution of outsourcing molds, prices and supply cycles of each outsourcing component, and qualification certification of outsourcing manufacturers;

5. Does the company have imported raw materials? If so, the proportion of imported raw materials, and whether the state has any policy restrictions on the import of such raw materials;

6. Settlement of transactions between the company and raw material suppliers, and whether there are credit transactions;

7. The company's consumption of main energy.

Business and Products

1. The company's main business and business description, the importance of each business in the overall business income;

2. Background information of the industry where the main business is located;

3. The development prospect of the business;

4. The growth of major businesses in recent years, including sales volume, revenue, market share, sales price trends, and the respective proportions of various products in the company's sales revenue and profits;

5. The company's product series, product component breakdown and details;

6, the company's product structure, classified introduction of the company's current production of major products and sales in recent years; product demand status;

7. The product quality, technical content, functions and uses of the above products, the main technologies applied, technical performance indicators, and the competitiveness of the products; the specific consumer groups targeted;

8. Does the company have patented products, and if so, what protection measures does the company have?

9. What trademarks are used for the company's products for sales, and whether the above trademarks are used exclusively by the company registration;

10. The main rewards and honorary titles obtained for the above products;

11. What measures will the company take to improve product quality, product grade, and product competitiveness?

12, the company's new product development;

V. Sales

1. Briefly describe the development of domestic and foreign sales markets for the company's products and the establishment of a sales network;

2. What are the company's main customers, and introduce the relevant situation of the main customers, the proportion of the main customers in the company's total sales; the geographical distribution of the company's main customers;

3. The main domestic sales regions, sales management and distribution network of the company's products;

4. The sales ratio of the company's products at home and abroad, and the distribution structure and proportion of major countries and regions for export;

5. Does the company have a long-term fixed price sales contract?

6. The company's main measures to expand sales and marketing methods;

7. The structure of sales personnel, including the number of people, education, work experience, division of labor, etc .;

8. The company's main incentives for sales staff;

9. What is the company's advertising strategy, the major media of advertising and the proportion of advertising expenditures on each media, the total annual advertising expenditures and growth of the company, the total advertising expenditures as a percentage of the total corporate expenditures;

10. Please list the company's main competitors in the domestic and foreign markets and the main information of the main competitors, and the market share of the company and the main competitors in the domestic and foreign markets.

11. What after-sale services the company provides to consumers and how to arrange them;

12. How long is the company's credit sales period, and how much of the credit sales account for the total sales; whether there have been bad debts in history, and how much of the actual bad debts account for receivables each year; the status and reputation of major credit customers;

13. Does the company have the right to import and export, if not, the company mainly entrusts that foreign trade company as an agent, and the main information of the foreign trade company is introduced;

14. What impact will China's products have upon China's entry into the WTO?

Research and Development

1. Please provide detailed information about the company's research institute, including the time of establishment, research and development strength, research and development achievements that have been achieved, main research equipment, research and development methods, research and development procedures, and research and development organization management structure;

2. Structure of the company's technical developers, resumes of engineers and major technical developers;

3. List of major research and development institutions that cooperate with the company and the status of cooperative development; introduction of the main information of the cooperative units;

4. The main patented technology, independent intellectual property rights, patent status currently owned by the company, including name, use, application, and awards;

5. The company's annual research and development expenses and its proportion of the company's operating income;

6. What new technologies and products are the company currently researching and developing?

7, the company's new product development cycle,

8. New technologies and products planned for future research and development;

7. The company's main fixed assets and operating facilities

1. The composition of the company's main fixed assets, including the main equipment name, original value, net value, quantity, use and depreciation, and advanced technology;

2. Distribution of fixed assets according to production and business use, auxiliary production and business use, non-production and business use, office use, transportation use and other uses;

3. The property and facilities owned by the company, including construction area, land area, original value, net value, depreciation and acquisition methods;

4. The company's main construction projects at present, including the name, investment plan, construction period, start date, completion date, progress and whether it has obtained permission from government departments;

5. The nature, area, market price, acquisition method, and purchase price (leasing price) of the land currently owned by the company;

Corporate Finance

1. Company income, profit source and composition;

2. The composition of the company's main business costs and the company's management expenses;

3. The composition of the company's selling expenses;

4. Proportion of main business income to total income;

5. The composition of the company's main expenditures;

6. The company's accounts receivable turnover rate, inventory turnover rate, current ratio, quick ratio, return on net assets, gross profit margin, asset-liability ratio and other financial indicators in the first three years;

7. The company's balance sheet, profit and profit distribution statement for the previous three years;

8. What are the factors that will have a significant impact on the company's future major income and expenditures;

9. Various tax rates currently implemented by the company;

9. Major claims and debts

1. What are the main claims of the company and the reasons for the formation of such claims;

2. The company's current main bank loans, the amount, interest rate, term, maturity date and whether there are overdue loans;

3. The company's borrowings to related parties (shareholders, employees, holding subsidiaries);

4. The company guarantees and low mortgages the loans of major shareholders and other companies and enterprises;

X. Investment Projects

1. Introduction to the main investment project of the raised funds, including project feasibility, project establishment status, use, total investment, planned start date, project background information, investment recovery period, financial return rate, annual sales income and profitability after reaching production ;

2. The technical content of the investment project, the advanced level of technology, the future market development prospects and the impact on the development of the entire company;

3. What are the major investment projects that the company has completed so far?

Eleven, other

1. The advanced level, maturity, characteristics, performance and advantages of the technology and production process currently used by the company;

2. Compared with competitors in the same industry, the company's main operating advantages, management advantages, competitive advantages, market advantages and technological advantages;

3. The company, the company's major shareholders, the company's directors, and senior management personnel are currently involved in legal proceedings, and if so, how it will affect the company;

twelve. Industry background information

1. Please introduce the development of the industry in recent years;

2. The state's relevant industrial policies, management measures for the industry, and possible policy changes in the future;

3. The degree of market competition in the industry, and introduce the situation of the main competitors in the same industry, including annual production capacity, annual actual output, annual sales volume, sales revenue, market share, and domestic market position;

4. Development of the industry abroad;

5. The impact of relevant national policies on the industry;

6, the current national market situation, including annual demand, annual supply, regional demand distribution, regional supply distribution, the number of manufacturing companies, whether by competition from similar imported products.