Meaning
Verifying ownership and liability through a detailed inspection of property records minimizes the risk of a failed acquisition. Target asset due diligence identifies hidden debts, encumbrances and operational risks that could affect the value of the acquisition. In the Chinese market, this process focuses heavily on verifying land use rights, environmental compliance and the validity of intellectual property filings.
Investigation Depth
Teams of lawyers and accountants review historical records at local government bureaus to confirm the ownership chain of the assets. During target asset due diligence, the investigators check for outstanding mortgages or court-ordered freezes that might prevent the transfer of the title. They also examine the payroll and social security records of the factory to ensure there are no looming labor disputes.
Physical Verification
Site visits provide an opportunity to compare the actual inventory and equipment against the balance sheet provided by the seller. A thorough target asset due diligence report highlights discrepancies between the registered capacity of a plant and its current output. It also includes assessments of the structural integrity of buildings and the remaining useful life of key machinery.
Risk Assessment
Findings determine the final price. The report provides the foundation for the committee.
