Due diligence is also translated as "due diligence". It refers to a series of investigations conducted by the acquirer on the assets and liabilities, operation and financial situation, legal relationship, opportunities and potential risks faced by the target company during the acquisition process.

It is one of the most important links in the process of enterprise acquisition and merger, and it is also an important risk prevention tool in the process of acquisition and operation.

In the process of investigation, professional experience and expert resources in management, finance and taxation are usually used to form independent opinions to evaluate the advantages and disadvantages of mergers and acquisitions as decision support for management.

The investigation is not only limited to reviewing the historical financial situation, but also focuses on assisting the acquirer to reasonably predict the future, which also occurs in the preliminary work of venture capital and enterprise public listing.

Extended data:

For a large M&A activity involving multiple potential buyers, due diligence usually goes through the following procedures:

1, an investment bank designated by the seller is responsible for the coordination and negotiation of the whole merger and acquisition process.

2. The potential buyer shall appoint a due diligence team composed of experts (usually including lawyers, accountants and financial analysts).

3. The potential buyer and the expert consultant hired by the potential buyer sign a "confidentiality agreement" with the seller.

4. Under the guidance of the seller, the seller or the target company will collect all relevant data and prepare the data index.

5. The potential buyer shall prepare a due diligence list.

6. Designate a room (also called "data room" or "due diligence room") for storing relevant materials.

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

8. Consultants (including lawyers, accountants, financial analysts) hired by potential buyers make a report, briefly introducing matters of great significance in determining the value of the target company. The due diligence report should reflect the substantive legal matters found in the due diligence, which usually includes suggestions on the transaction framework and analysis of various factors affecting the purchase price based on the information obtained in the investigation.

9. The draft M&A contract shall be provided by the buyer for negotiation and modification.

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