Dry information丨 Private equity due diligence and reverse due diligence

Private equity investment institutions before making investment decisions on a project，historical data and documentation for the project、Manager’s background、market risk、Manage risk、Comprehensive and in-depth research and review of technical risks and financial risks，Understand its true operating conditions，Determine whether there are significant risks，As a basis for investment decision-making and investment valuation。

港信通-今天给大家介绍下有关私募的尽职调查与反向尽职调查相关内容，Let’s learn together! one、Due Diligence About the Meaning of Due Diligence，Let’s start with a very old investment story.。After investigating the African market, two leather shoe manufacturers found that：The local natives never wear shoes。A therefore judges，There is no market for leather shoes in Africa，So the plan to build a factory in Africa was withdrawn.。

B thinks，It’s because the locals don’t have shoes，so，This has become the "blue ocean" of the leather shoe market，This strengthened his investment confidence。It can be said，Both A and B have conducted accurate due diligence on the African market.，But the conclusion is completely opposite。so，Due diligence has two levels of issues。

first level，Are there any major risks in the investment project?，The key point is to verify、Disclose the true status of the project；second level，is deciding whether to invest，The key depends on whether the project situation matches the investment strategy。The difference between the conclusions of the above short stories lies in their different investment strategies.。You can refer to Carlyle Group’s due diligence on invested companies to understand。

Carlyle usually does not invest in "non-sick companies"，Only invest in companies that have been brilliant in the past but have symptoms today，Then once symptoms are discovered，Then determine whether its symptoms can be cured by yourself。If it can't cure the disease，it will not invest。Therefore, the due diligence conducted by Carlyle plays a very important role.，Determine where the company’s illnesses lie，and whether its ailments can truly be cured。

After the investment is completed，Carlyle Group will implement post-investment management，Help invested companies re-engineer and improve their management，Spin off non-profit-generating departments，Help profit-generating departments improve operational efficiency。2025Early October，The Carlyle Group joins forces with Apple、Hynix and other companies formed a consortium to acquire Toshiba's chip business，and plans to reorganize and list it in three years，Fully reflects its investment characteristics。

we have reason to believe，This investment behavior is inseparable from the due diligence and investment strategy behind it.。The current core work of investment due diligence in China is to verify the authenticity of information.，One of the core functions of the Carlyle Group’s due diligence on invested companies is to “diagnose whether the company is sick.”，to make a decision on whether to invest，This is the match with the investment strategy。

in fact，Due diligence is not limited to private equity investment companies’ investigation of invested companies，Private equity firms themselves also face reverse due diligence。

two、Reverse due diligence abroad，After decades of rapid development, private equity funds，Has become a rescue for poor management、The most important capital market force for undervalued traditional companies，Its huge investment returns and the philosophy of pursuing long-term value investment，It has become a pension insurance fund with stable funding sources and pursuing long-term investment returns.、Charitable Fund、Investment targets of public capital such as university education funds。

Partnerships have tax advantages、Clear rights and responsibilities、Incentive mechanism is clear、Professional management with high efficiency, etc.，Became the main organizational form of private equity funds in Western countries。Our country’s Partnership Enterprise Law also clearly stipulates that GP (General Partner，General Partner) and LP (Limited Partner，Different Responsibilities of Limited Partners)。

In a standardized partnership equity fund，The relationship between GP and LP should be，GP as sponsor and manager，Responsible for the daily management and operation of equity funds，LP is responsible for supervision、suggestion，Of course, you also have the right to choose a GP。at the same time，The GP has unlimited joint and several liability for the debts of the partnership，The LP is only liable for the debts of the partnership to the extent of its subscribed capital contribution.。

Data display，At present, a total of 1,660 government guidance funds have been established in China，The target scale exceeds 8 trillion yuan。2025years since，A total of 102 government guidance funds were established，The total target size disclosed exceeds 500 billion yuan。From 2012 to August 30, 2025，1,167 listed companies have established or participated in investment industry funds，and is on an overall upward trend。

in real environment，Although listed companies participate in private equity funds，But the main focus is still on developing the main business，Government guidance funds focus on supporting the development of industrial economy，These institutions (also include social security funds、Qualified investors such as other non-professional investment companies) when cooperating with private equity management institutions，Generally, the management responsibility is fully entrusted to the GP (or private equity fund manager)，It only fulfills its investment obligations and necessary supervision.，Due diligence has become a necessary and important step for LPs to choose GPs.。

Likewise，GPs also need to be prepared to be subject to due diligence，Want to obtain mature foreign LPs or domestic professional LPs (such as social security funds、Recognition by Suzhou Venture Capital Fund of Funds, etc.)，Must pass due diligence。We learn from and analyze the rules and methods of reverse due diligence conducted by mature foreign LPs on GPs.，Combined with the current status of domestic private equity funds，Summarize a set of scientific and complete methods that can be referenced。

1. Basic situation of GP When is GP?、Where、Founded by whom? What changes have you experienced since its inception? Corporate governance structure、Organizational structure、What is the decision-making mechanism like? Which companies have you invested in? From the fundamentals, especially from the changes，You can roughly see some of the GP’s strategies and investment behaviors.。We need to view “brand funds” and “halo of honor” dialectically。

GP’s brand has important reference significance for LP，While paying attention to "brand funds"，We should also see the key factors behind the success of this brand，Such as a sound investment strategy、Diversified risk control methods, etc.，Fund brands are also dynamic and changing。We should also correctly view the actual value of the honors received by the fund.，Analyze the real reasons for the honor。

1. Inspecting the GP management team The private equity industry is a typical intelligence-intensive industry，The fund’s management team is the foundation and basis for providing professional services.。Need to examine the quality of team members、治理结构、Investment efficiency and stability, etc.，We must also correctly understand the two issues of "industry bosses" and "star teams"。
2. Correctly identify “industry giants” from three aspects：A、Do the “big guys” manage multiple funds at the same time?

If you have too many funds under management，His energy will inevitably be scattered，The end result is that it is difficult for every fund to operate well；B、How do “big guys” coordinate and handle the interest relationships between different funds?；C、Some “big guys” “rent” their personal brands，Some “big guys” even claim that they manage more than 50 funds.，In most funds, the “big boss” only has a name，does not participate in management。

1. For "Star Team"，Pay attention to inspection：A、Time for celebrity teamwork；B、Decision-making mechanism and allocation mechanism；C、The ratio of team size to fund size。
2. Pay attention to the selection of investment strategies in practice，Investment strategies for private equity funds，Need to understand how the private equity fund views domestic and global economic cycles and macroeconomics，and when there are significant changes in macroeconomics and business cycles，What measures and plans will the fund take to respond?，Determine the scientificity and rationality of response measures and plans。

Focus on analyzing the structural characteristics of investments、consistency and continuity，Gain insights into the current macroeconomics、Industry development、Views on investment projects。

1. Examine the past performance of the fund team. The past performance of private equity funds is extremely important to convince LPs.，It is the easiest place to "add water"，It is also the place where private equity funds most want to “add water”。Need to focus on inspection：Investment Performance of Private Equity Funds、Cash flow and valuation methods。
2. Rational analysis of investment behavior Analysis of GP’s past investment behavior，Need to pay attention to its screening of investment projects、primary nucleus、The mechanism and process of due diligence and investment decision-making；Standardization and actual implementation of internal control systems and processes；How to implement post-investment management，What is the relationship with the invested company?；How to plan and implement a project exit plan。Things that need to be focused on include：decision-making ability、Relationship with invested companies、risk management system。

If you still need to know more about this，You are welcome to consult Hong Kong Xintong at any time!

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