Investment M&A Due Diligence Operational Practices and Focus Areas

Due diligence is central to identifying and controlling risk in investment M&A transactions. A high-quality due diligence report can help investors understand the true situation of the target company and provide a basis for trading decisions.

Legal due diligence usually includes basic information about the company, business qualifications, major contracts, intellectual property rights, labor relations, litigation arbitration, tax compliance, etc. The scope of due diligence should be flexible based on deal size, industry characteristics and deal structure.

Intellectual property due diligence is a key focus in mergers and acquisitions of technology-based companies. It is necessary to verify the ownership status and validity of the core intellectual property rights of the target company, whether there are pledge or license restrictions, etc.

Financial due diligence needs to pay attention to the target company's revenue recognition policy, related transactions, account receivable recovery, debt situation, etc. It is recommended that financial due diligence be synchronized with legal due diligence to facilitate the identification of cross-cutting issues.