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How to conduct time-constrained due diligence?
1. What is short-term due diligence
Short-term business due diligence, as the name implies, is a business due diligence to be performed in a very short period of time. Although this kind of investigation can obtain internal information of the target company, the implementation time is very short.
Short-term due diligence is generally required in the following situations: Due to the delay in the schedule of the transaction, but the final contract date cannot be changed for some reason, the time that can be left for commercial due diligence is very limited. Due to the special business of the target enterprise, only allowed to set up a reference room within a limited period; The data room is set up for a long time, which is easy to cause internal information leakage of the company, and the target enterprise is generally skeptical about long-term due diligence. Enterprises whose performance is greatly affected by seasonal fluctuations are more willing to set up data rooms during periods with less impact on business. In these cases, due diligence is required to be completed within a very short period of time.
2. Precautions when performing short-term due diligence
In terms of the steps of the investigation, short-term due diligence is the same as general business due diligence, but compared with general business due diligence, short-term due diligence needs to pay attention to the following five points.
1. Carefully determine the scope of investigation
2. Ensure adequate staffing
3. Conduct interviews to the maximum extent within the information development period set by the target enterprise
4. Make a detailed list of information in advance
5. Get the opportunity to follow up here
Carefully determine the scope of investigation
To determine the scope of the investigation is to determine the breadth and depth of the investigation. More care needs to be taken in determining the scope of a short-term due diligence investigation than a normal commercial due diligence.
The buyer enterprise has a limited time to decide whether to proceed with the merger. The buyer's position is different or the purpose of the merger is different, and the judgment criteria will be very different. The judgment criteria of the buyer company will directly affect the scope of commercial due diligence investigation.
For example, in the strategic acquisition, the buyer enterprise is often in the same industry or the surrounding industry with the target enterprise, and has a better understanding of the business model and industry situation of the target enterprise. So the investigation time is limited if buy. If the company has identified the specific content that it wants to investigate, it only needs to investigate that specific content.
Similarly, in the financial acquisition, the buyer enterprise will not be satisfied with only understanding the specific content of a certain aspect, and the position of the target enterprise in the industry, the advantages and disadvantages of the target enterprise in the industry obtained through SWOT analysis, and the overall grasp of the changes in the market environment in the short and medium term in the future have become the focus of its attention. The members of the investment committee can make a final investment judgment only after they have understood the overall situation of the investment objective.
As such, the cutting edge of commercial due diligence will vary depending on the buyer's corporate position and the purpose of the merger. In a very short survey time, the scope of the survey should be carefully selected before carrying out specific tasks in order to avoid duplication of tasks.
Ensure adequate manpower
When conducting business due diligence within a buyer's company, it is common to assign employees responsible for day-to-day operations to participate. Despite the limited scope of the investigation, the task of commercial due diligence is still very heavy, and the project team members need to complete a huge workload in a short investigation time, which puts high demands on the physical and energy of the implementation staff. To ensure that sufficient manpower is available for the survey, consider taking the employees involved in the survey completely away from their day-to-day business to participate in the survey full-time, or bring in external resources.
Conduct interviews to the maximum extent within the information opening period set by the target enterprise
If the information opening period set by the target enterprise is only 1 week, it is necessary to try to make full use of this 1 week, conduct an open-ended interview with the target enterprise, and prioritize the acquisition of internal information from the target enterprise. External interviews, reviewing documents, etc., can be done at other times. In short, internal interviews with target companies should be carried out to the maximum extent within the information opening period set by target companies.
∠ Make a detailed list of information in advance
A detailed information list should be prepared before the interview, and the target enterprise should be required to provide relevant information. By analyzing these data, we strive to have a deep understanding of the business situation of the target enterprise before the interview, so as to improve the pertinence and effect of the interview.
Since short-term due diligence has only one opportunity to obtain information from the target company, it is necessary to develop a detailed information request detail.
⊥ Get a chance to follow up again
The implementer of due diligence needs to conduct an interview within a specified period of time. After the interview, with the progress of analysis, it is inevitable that some problems need to be further confirmed with the target enterprise, so it is better to obtain the consent of the target enterprise in advance and arrange another interview or follow-up opportunity.
How to conduct time-constrained due diligence?
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