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Cooperation Process
Business Process
Model of Business Plan
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Business Process

 
Main flow of private equity financing
Step (1): make preliminary investigation, thinking and full communication with customer before the project execution
 
read project materials
 
understand and analysis enterprise history, the market segments, products, technology, business model, development planning, financial data and the future profit forecast situation, etc
 
four dimensional analysis of project
 
internal value chain analysis: detailedly analysis the complete process of enterprise development, products, the construction of a productivity, procurement, production and sales
external value chain analysis: detailedly analysis the macro environment of the enterprise, resource provider, market demand and drive factors
main competitor analysis: to clarify the main competitors and its orientation, and makes a general comparison about advantages and disadvantages
competition between the value chain analysis: the analysis of now existing and has been replaced value chain, and the analysis of which may be replaced by other common value chain in the future
 
► three standard judgment
judgment of return on investment: judge current situation and source of return on investment synthesizing with profit margin, asset turnover, leverage ratio
judgment of persistence: judge if the product/service price, volume, cost, capital input factors can last for long
judgment of expansibility: according to the market space, growth drive, if the unit model is confirm, what the bottleneck of expansion is and if it can be eliminate in the future to judge the expansion speed of the project and the scale that the project can achieve in the future
Put forward questions/communicate with project party and fund many times
 
according to the four dimensional analysis and three standard judgment, puts forward the related unknown problems, and communicate with project party for more than one time;
during this period, closely contact with several VC/PE funds, know their attitude and feedback;
if the business model of enterprise has defects, suggest the enterprise to adjust;
basically understand the business model positioning and financing idea of the project integrating multidimensional information;
 
signed a financial advisor agreement
 
puts forward the cooperation intention comprehensively considering with the stage that the project placed, workload and difficulty of the work;
after creation investment and the enterprise reached an in-depth agreement, then sign a financial advisor agreement
 
Step (2): execute phase
Comprehensive due diligence, ensure to show the enterprise value
 
Comprehensive due diligence
 
communicate with enterprise executives for 2 ~ 3 days, further understand market, products and technology, purchasing, sales, finance, profit model and equity structure;
spend 1 ~ 2 weeks to investigate into the detailed working condition of each department with enterprise middle chief;
put forward questions and material list to the enterprise and hope enterprise can prepare answers and materials in stages;
after consulted with enterprise, to have an interview with enterprise's important customers and suppliers;
put forward the preliminary audit work and legal structure building work of public listing to enterprise according to enterprise financial status and equity structure.
 
Results
 
Business plan, detailed explanation, fully showing enterprise value:
• Subdivide market scale, growth and the driving factors, the main provider;
• Enterprise main products, the stage, production status, operation flow, profit ability, core value, competitive advantages and disadvantages and risks;
• Enterprise development planning, financial status and forecast, fund demand and use
Financial model, layer upon layer hypothesis derivate financial results, show the profitability of enterprise
• Income: completely based on the product price and sales which the enterprise has now or in the future
• Cost: come up with assumptions and forecast based on careful analysis of enterprise’s cost structure including the raw materials, artificial, solid capital depreciation, the management expenses and the sales expenses;
• Operation: simulate and suppose based on the actual capital flow balance of enterprise
Key question explanation: an explanation that detailedly expound the key questions which do not mention in the business plan and financial model because of being limited to the length. This explanation can be used for many times and will save a large number of communication time between executive layer and fund.
Customer interview record: record and analyze customer interview results, avoiding the interview risk between the fund and customer in the future;
Due diligence file bag: early prepare all kinds of files including enterprise system, plan, licenses and agreement for the needed of due diligence by the fund;
Financial preliminary audit report: the files issued by professional preliminary audit company for the needed of due diligence by the fund, include enterprise historical simulation statements and preliminary opinion.
 
Step (3): Execute phase main work of quality assurance
 
Main work
 
the interview between enterprise senior managers, customers, suppliers
 
Quality assurance measures
 
clear-out interview target and information required to obtain before the interview, prepare interview plan;
make detailed interview notes and recording;
After interview, timely review interview minutes, make next step strategy according to the information sufficiency
 
Questions and material list
 
Quality assurance measures
 
background of mentioned questions, these problem has more pertinence
usually use the language or idioms which enterprise are familiar with
 
Business plan
 
Quality assurance measures
 
project team discussed repeatedly and partner review;
use "BP quality standard" to ensure that the documents can meet quality requirements;
ensure the BP which is used in the roadshow is reviewed by enterprise
 
Financial model
 
Quality assurance measures
 
communicate many times with the enterprise about income, cost, operation and hypothesis;
both creation investment and enterprise think that we can realize planned future annual revenue and profit results
use "financial model quality standard" to ensure that the documents can meet quality requirements;
ensure the financial model which is used in the roadshow is reviewed by enterprise
 
Preliminary audit work
 
Quality assurance measures
 
suggest enterprise to employ the preliminary auditor who comes from the big four accountancy firms and has much private financing experience.
 
Listing legal structure building
 
Quality assurance measures
 
suggest enterprise to employ the law firm which is familiar with public listing law and has well-known reputation in the country
 
Step (4): carefully planning roadshow, tracking all-the-way, dealing with various problems timely
 
To work out roadshow plan
 
roadshow training of management: recognized and accepted financing materials, unified information, familiar with the questions which fund institution will ask and reasonable answer
confirm the roadshow time: usually start immediately after the roadshow review meeting
 
Fund screening
 
select dozens of suitable fund from creation fund store for enterprise
divide the funds into many group, each group is about 6 ~ 8 funds, so that the management can focus to participate in roadshow,
the feedback of first fund is very important since we can make corresponding adjustment and supplement of project schemes
 
Information transmission and management
 
Creation investment authorized by enterprise will send materials to funds;
All the dozens of even hundreds of documents will be managed by Creation according to Creation specific process, so that to ensure the materials are accurately, timely, efficiently sent and timely know the send situation
 
The arrangements and organization of roadshow
 
made proper arrangements and confirm the roadshow time and place for many times
try to keep good communication in roadshow meeting. Where necessary, add supplemental instruction
after the roadshow meeting, review meeting results, communicate shortcomings with enterprise, communicate with funds to understand its intention
 
Close communication with fund institution
 
often communicates with fund institution, understands its intention, and provides additional information and material, ready to answer questions;
adopts appropriate way to explain to fund institution and offers a solution for the shortcomings of enterprise business model, property right, corporate governance and financial aspect
according to the customer’s desire, proceeds a necessary instruction to fund institution when customer is interviewing fund institution, in order to avoid getting disadvantageous information and misunderstanding the enterprise
 
There are a lot of travels, high level participants, complex, professional and influential work in the roadshow period. Strong, powerful and efficient project management will greatly shorten the financing time, improve the success rate of financing
 
Step (5): Clarify the intention in the signing stage, solve divergences and contribute to the cooperation of both sides
 
Discusses the reasonable enterprise valuation and private investment structure with enterprises;
 
Assists to interpret investment frame agreement (Term sheet) for enterprise, and put forward analysis opinions;
 
Assists to complete negotiations between enterprises and fund institution, and puts forward solution plans, and try hard to persuade the fund institution;
 
If there are several fund institutions, helps to evaluate the Term sheet of each fund, helps enterprises to select appropriate fund institution;
 
Assists fund institution to conduct a comprehensive due diligence (business/audit/law, etc.) to the enterprise
 
To design investment structure, review private agreement, negotiation, finally reached an investment cooperation agreement between two sides
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