In Times of Change, Insight Comes First

Recently, Aegis was engaged by an investment firm for a follow-up investigation project. Prior to this, the investor had already conducted a comprehensive suite of traditional due diligence processes — including Commercial Due Diligence (CDD), Financial Due Diligence (FDD), and Legal Due Diligence (LDD). All three reports aligned with expectations and indicated that the project was a viable investment target.

Just as the deal was about to move forward, one investor expressed concerns and requested a deeper look into the founder and the core management team. Aegis was commissioned to conduct enhanced due diligence on the key individuals behind the business.

Our team uncovered substantial personal and professional insights into the founder — including their technical expertise, leadership capabilities, reputation within the industry, and financial background. The investigation revealed that the target company was suffering from disorganized internal financial management. More notably, a female executive responsible for operations, finance, and administration was found to be underperforming and held a close personal relationship with the male founder.

Further investigation showed that this executive had established multiple pharmaceutical tech companies in her own name and was using the resources and personnel of the target company to handle private business matters — raising serious conflict-of-interest concerns.

As a result, the investor decided to withdraw from the deal, successfully avoiding a risky investment based on these previously undisclosed red flags.

This case poses an important question: is traditional commercial due diligence sufficient on its own before making an investment?

Clearly not. Founders and key executives hold the steering wheel of a company's future. Investing in a company is, in essence, investing in its leadership. Without proper due diligence into the backgrounds, integrity, and motivations of the management team, investors are operating in the dark.

Key questions that traditional due diligence often overlooks:

#Can the founders and senior executives be trusted? What is their track record and personal integrity?

#What are their true motivations for seeking investment? Is it for genuine growth, or for personal gain such as listing or asset extraction?

#Do the executives hold undisclosed interests in competing companies, raising the potential for conflicts of interest or profit diversion?

These questions typically cannot be answered through standard due diligence or formal interviews. Only a rigorous integrity due diligence process can reveal such hidden risks.

At Aegis, we specialize in risk-focused pre-investment due diligence across Greater China. We help our clients gain deeper visibility into potential investment risks — beyond the surface-level metrics.

If you would like to learn more about our services, please don’t hesitate to contact us:jielang.liu@aegismanage.com

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