Due diligence in non litigation business

In a market economy, various economic entities need to conduct comprehensive investigations on target companies or project entities due to different business motivations, such as mergers and acquisitions, securities issuance, etc. This is the due diligence work in non litigation business. Due diligence work is also one of the types of work that novice lawyers or legal assistants who have just entered a law firm often face.

On the afternoon of February 14, 2025, in Denghu Classroom, Lawyer Assistant Zuo Jianfang from our firm shared with everyone how to conduct due diligence work in non litigation business based on recent work.

Firstly, the left assistant introduced three situations that require due diligence from different perspectives of business motives:

One is to conduct due diligence on the company's own situation before accepting regulatory inspections or preparing for financing and listing; The second is to conduct due diligence on partners in joint ventures or joint venture transactions with third parties; The third is to conduct due diligence on the target company in equity investment, financing, and mergers and acquisitions. In the various scenarios mentioned above, due diligence is essentially a quality inspection of the target company, providing reference opinions for clients to make business decisions.

Next, the left assistant summarized the basic workflow of due diligence, including: accepting commissions, determining targets, legal research, due diligence checklist, executive interviews, on-site due diligence, external verification, material review, feedback requirements, supplementary materials, drafting reports, modifying reports, stamping reports, organizing workpapers, and archiving and retention. At the same time, during the due diligence process, the target company is mainly investigated from the aspects of main body, business, property, debt, stock, knowledge, personnel, data, and responsibility. Finally, the left assistant summarized how to do a good job in due diligence work, which can be considered from two dimensions: first, it is necessary to understand the investment purpose of the entrusted client clearly: investors have different concerns under different investment purposes, long-term investment focuses on potential, short-term investment focuses on cash flow, and understanding investors' business concerns is the first trick to grasp the key points of due diligence; The second is to promote key verification points based on the industry characteristics of the target company. The profit logic of different industries varies greatly, some rely on technology, some rely on traffic, and some have license advantages. For example, the key verification aspects of technology enterprises should be technology, data, and manpower, while the key verification aspects of financial enterprises should be license and data... Understanding the target company's enterprise type and profit model is the second trick to grasp the key points of due diligence.

After listening to the interpretation of Lawyer Assistant Zuo Jianfang, every colleague felt that they had benefited greatly. Thank you very much for the sharing today from Lawyer Assistant Zuo Jianfang. We look forward to learning more useful knowledge through Denghu Classroom!