Corporate Due Diligence
Corporate due diligence is a “comprehensive check-up” before a transaction. Its core is to conduct a multi-dimensional and thorough review of the target company/project, verify information, identify risks, and uncover value, to provide an objective basis for investment, merger and acquisition and other decisions.
Reduce decision-making risks: Avoid blind investment due to information asymmetry, and investigate fatal risks such as legal compliance, financial fraud, and unsustainable business in advance.
Verify the authenticity of information: Verify whether the financial and business information disclosed by the target company is true and avoid being misled by “packaged” publicity.
Supporting transaction negotiations: Clarifying the true value and risk points of the target company provides a basis for determining the transaction price and setting terms (such as rectification requirements and guarantee clauses), thereby enhancing the initiative in negotiations.
Planning for subsequent integration: In the case of a merger and acquisition, the due diligence results can be used to formulate a follow-up integration plan (such as business synergy, team integration, and compliance rectification) to ensure smooth operation after the merger and acquisition.
Core Elements
Survey Respondents
This includes all aspects of the target company, such as its qualifications, business operations, financial status, legal compliance, personnel team, assets and liabilities, intellectual property rights, customer and supplier relationships, as well as core information such as the feasibility and profitability prospects of the project.
Investigation Basis
This mainly includes written materials provided by the target company, such as business registration documents, financial statements, contracts, and qualification documents; industry regulations and policies; market data; audit/valuation reports issued by third-party institutions; and first-hand information obtained through on-site verification and interviews.
Survey Subject
It is usually carried out by a professional team commissioned by the investor/partner, including law firms (legal due diligence), accounting firms (financial due diligence), and industry experts (business due diligence). Preliminary investigations can also be jointly conducted by the company’s internal investment and compliance departments.
Applicable Scenarios
It is primarily used for investment (equity/debt investment), mergers and acquisitions, major strategic cooperation, pre-IPO self-inspection of enterprises, and large-scale transactions (such as long-term supply chain cooperation).
Core Survey Dimensions
Legal Due Diligence
Verify the target company’s legality and compliance, including its legal status (business license, whether the equity structure is clear, and whether there are any equity disputes), compliance with industry regulations (whether it complies with industry regulations, and whether there are any administrative penalties, litigation, or arbitration), contracts and agreements (the validity of major contracts and potential risks of breach of contract), intellectual property rights (ownership and validity of patents/trademarks/copyrights), and labour employment (compliance of labour contracts and social security payment status).
Financial Due Diligence
Verify the authenticity and health of financial information, including auditing financial statements (whether profits, revenues, assets and liabilities are true, and whether there is any overstatement or concealment), cash flow status (stability of the capital chain), liabilities and contingent liabilities (hidden debts, guarantee liabilities), tax compliance (whether tax declarations are accurate, and whether there is any tax evasion), and the reasonableness of profit forecasts.
Business Due Diligence
Assess business operations and market prospects, including core business model (profit logic, competitiveness), industry position (market share, competitor comparison), supply chain stability (supplier/customer concentration), core technologies and capacity (technological barriers, production capacity), market demand and growth potential, etc.
Other Special Due Diligence
Depending on the scenario, supplement the key points, such as environmental due diligence (environmental compliance and pollution risks in heavily polluting industries), management due diligence (stability of the core team and rationality of the governance structure), and data security due diligence (data compliance and privacy protection of digital enterprises).
Standard Implementation Process
Preparation Stage
Define the scope of the investigation (e.g., focus on a certain type of risk or a certain business segment) and objectives (e.g., investigate compliance risks and assess the reasonableness of valuation), assemble a professional due diligence team, sign a confidentiality agreement (NDA) with the target company, and develop an investigation plan and a list of documents.
Implementation Phase
Collect written materials provided by the target company and verify their authenticity; conduct on-site visits (inspecting production bases and office premises); interview key personnel (management and key employees); connect with third-party institutions (such as auditors and lawyers) to obtain professional opinions; and cross-verify the accuracy of information (such as the matching degree between financial data and business data).
Analysis and Reporting Phase
Organize investigation information, identify potential risks (such as legal disputes, financial fraud, business bottlenecks), hidden problems (such as hidden debts, qualification defects) and core value points, assess the degree of risk impact and the feasibility of response, write due diligence reports, and clarify conclusions and decision recommendations (such as whether to proceed with the transaction, adjust the transaction price, and set risk protection clauses).
Decision-Making and Subsequent Stages
Investors/partners make decisions based on the due diligence report. If the transaction is to proceed, the issues discovered during due diligence can be incorporated into the transaction agreement (such as requiring the target company to rectify the issues before closing the deal or setting performance compensation clauses). If the transaction is to be terminated, timely loss mitigation and risk avoidance should be implemented.
SUSTECH
SUSTECH is an innovative technology service company with artificial intelligence, big data, and blockchain at its core. We specialize in ESG (Environmental, Social, and Governance) testing, certification, and compliance management, helping companies achieve their sustainable development goals. Through digital and intelligent means, we are redefining the testing and certification industry, making ESG compliance more transparent, efficient, and credible.
Core Advantage: Technology-enabled ESG Compliance
Intelligent ESG Data Acquisition and Analysis
- IoT Environmental Monitoring: Real-time collection of data on enterprise carbon emissions, wastewater discharge, energy consumption, etc., and automatic generation of ESG reports.
- AI carbon footprint calculation: Based on supply chain data, it accurately calculates the carbon footprint of a product throughout its entire lifecycle, in accordance with international standards such as ISO 14064 and GHG Protocol.
ESG Certification and Rating Optimization
- Automated compliance checks: AI compares data against global ESG standards (such as GRI, SASB, TCFD) to identify ESG risks for enterprises and provide improvement suggestions.
- ESG Rating Enhancement Solution: Combining industry best practices, we develop actionable ESG optimization strategies to help companies improve their ESG ratings from MSCI, S&P, and other ranking bodies.
Blockchain-based Evidence Storage and Transparent Traceability
- Tamper-proof ESG reports: All test data is stored on the blockchain to ensure traceability and auditability, enhancing the trust of investors and regulators.
- Supply chain ESG penetration management: Tracking supplier ESG performance to ensure compliance with the requirements of major international manufacturers.
