Due Diligence Research

Pricing: Negotiable, completion within approximately 15 days.

In the context of increasing global competition, Chinese companies are increasingly investing abroad, engaging in cross-border mergers and acquisitions, and forming strategic partnerships. However, over 60% of cross-border collaborations and transactions fail or experience value erosion due to insufficient due diligence (according to McKinsey data). As the cornerstone of investment decision-making, due diligence plays a critical role in identifying risks and establishing strong safeguards for businesses.

Four Key Reasons for Conducting Due Diligence:

1. Ensuring Legal Compliance:
Identifying compliance risks related to policy restrictions and industry access in the target country. For example, a tech company’s attempted acquisition of a German semiconductor firm was halted by the European Commission over national security concerns due to inadequate review of export control regulations.

2. Assessing Financial Health:
Uncovering hidden debts and inflated asset valuations. When a publicly-listed company acquired a Southeast Asian mining firm, it discovered the target had overstated its reserves by 30%, preventing a potential loss of $520 million by halting the deal.

3. Understanding Market Dynamics:
Evaluating local consumer behavior and competitive landscapes. Before entering the Middle Eastern market, a consumer goods brand conducted consumer research to adjust its product formula, successfully avoiding religious and cultural conflicts.

4. Assessing Management Integration:
Preventing management conflicts. After Geely acquired Volvo, it maintained Volvo’s independent operational framework. By assessing cultural compatibility, they achieved synergies and saw the company’s market value grow more than 8 times in 10 years.

The High Cost of Ignoring Due Diligence:

· Financial Black Holes:
When TCL acquired Thomson's television business in 2003, it underestimated the risks of technological obsolescence, resulting in accumulated losses exceeding 4 billion RMB.

· Legal Pitfalls:
An energy company investing in Africa failed to verify land ownership, leading to a protracted 7-year property dispute.

· Reputational Damage:
After acquiring a European car brand, a car manufacturer faced a scandal over emissions fraud, causing an 18% drop in stock price in a single day.

The Need for Specialized Due Diligence:

Effective due diligence goes beyond the financial, legal, and commercial aspects. It must also establish a dynamic monitoring system for country-specific risks. As more Chinese companies expand globally, partnering with specialized agencies to conduct localized due diligence is crucial. By identifying risks early in the process, companies can transition from merely "going out" to truly "entering" international markets.