Chapter 5

Beyond the Checklists: Founder and Management

Until now, we have discussed the more traditional methods of conducting due diligence on Chinese companies. Most of the due diligence exercise carried out currently in China is steered by having standard checklists provided, administered, and implemented by the various service providers. These checklists typically cover the legal, financial, and operational aspects of due diligence. From time to time, a more careful acquirer might seek for additional due diligence on other areas often missed in conventional checklists, such as management, environment, and information technology.

During a checklist due diligence process, the due diligence team may also conduct meetings and site visits; however, due to inexperience and other factors like time and costs, the team may not extract the best benefits of interview meetings and site visits, and these processes become more going-through-the-motions checklist items. What the due diligence team really needs is a careful planning of interview meetings and site visits.

The essence of good due diligence in China is performing the aforementioned beyond-the-checklist items in an exact, consistent, systematic, and planned manner. Beyond-the-checklist due diligence requires much more effort, time, and resources because it encompasses everything covered in a conventional due diligence checklists, plus the additional, yet absolutely critical items in the beyond-the-checklist due diligence process; ...

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