Failure

By , March 26, 2015 10:08 am

The East Asian culture internalizes failure.

I was brought up in in a “failure is not an option” environment. Pressure comes from many sources, my extended family, winning national contests for the school, one after another.

What I’ve been seeing from the market is a different story. Mistakes are quickly forgotten, economic mishaps are forgiven. Investors are willing to jump in the ship with entrepreneurs and deal makers who did not succeed in the first place.

It’s definitely not kindness or generosity, but greed.

So what is there to fear?

Image source: Dilbert

Investment Due Diligence for the Junior Investment Analyst

By , March 18, 2015 4:58 am

There are four main sections for a Due Diligence process.

1. Product & Technical DD

Main question: Does the product work the way it should?

Skills required: Technical skill you already have acquired. Technical may include: inspecting the machine, product review, code review.

If you don’t have the technical skill, bring in an expert in the field.

2. Commercial DD

Main question: Can the product sell in this market?

Skills required: Market research skill.

If you have the budget, bring in a market researcher. But normally business graduates even non-Marketing major should already have basic market research skill.

3. Financial DD

Skills required: Financial Statement Analysis skill. The source for this skill comes from your Accounting courses and CFA.

Pay attention to tax liabilities that may arise from the transaction.

If by any chance the investor or your boss insists on an external expert, bring in Big-4.

4. Legal DD

Main question: Is the deal legally feasible? Any legal red flag?

I find legal the toughest aspect of DD. This should go to the company lawyer or legal partner to reduce the risk upfront.

 

Essentially those are the main questions. From these main questions you can compose a thousand questions to the potential investee basing on your knowledge and experience.

DD is usually scheduled for one working week which is 5 working days where you sit with the company and go through all the items in an intensive mode.

Because of the intensity and stress, try to push as many items to pre-DD. Commercial DD should totally be in the pre-DD.

During DD process, many assumptions and information will be challenged. Keep your perspective open.

Image source: Dilbert

Panorama Theme by Themocracy