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China PE Due Diligence ‘Best Practice’: Strategic Due Diligence
On March 10, 2013
This is the third article in a series of five were we present our take on how the most effective PE firms approach due diligence in China.
1. Understand the industry… including how companies “game” the system
Make sure your investment professionals spend enough time in the field to gain a deep understanding of the competitive dynamics of the Target’s industry. All market segments are “gamed” to some extent; make sure you understand how and to what extent this happens in the Target’s industry.
2. Confirm competitive advantage
Make investigating the Target’s competitive advantages and the future sustainability of these advantages a key part of the due diligence. Don’t mistake “strengths” for competitive advantage. All companies have strengths, but only few have competitive advantages that can be relied upon to beat the competition when times get tough.
Read the other posts in our series on how the most effective private equity firms approach due diligence in China:
- China PE Due Diligence ‘Best Practice’: Due Diligence The Big Picture
- China PE Due Diligence ‘Best Practice’: Due Diligence Strategy
- China PE Due Diligence ‘Best Practice’: Strategic Due Diligence Execution
- China PE Due Diligence ‘Best Practice’: The Human Factor
Our ViewOur team-members' views and reflections on China-related mergers and acquisitions (M&A) – including inbound foreign investment and outbound Chinese M&A – and other China-related business issues.