Thursday 29 November 2012

Social Media: Fundamental to modern due diligence

When moving into any market, undertaking due diligence is essential. With the ever-expanding use of social media in China, it is proving a useful research tool to form part of this due diligence.

The CBBC’s new webinar series was launched this week by Pacific Strategies & Assessments' Shaghai Director, Greg Hallahan. The CBBC’s webinars offer ‘A China Expert on your Desktop’, and the first of these was on the topic of Effective Due Diligence.

The webinar explored the idea that “social media is a fundamental part of modern due diligence”, and to what extent this is true in China. The Chinese equivalent of Twitter, Weibo, provides a platform for advisers to do a basic level of investigation on companies and individuals prior to doing business. Even though Weibo is monitored by the Government, its instantaneous nature and sheer number of users undoubtedly makes it more transparent than other forms of media, which can make it invaluable when it comes to due diligence.

In addition to Weibo, online forums and bulletin boards enable the views of current and former employees to be taken into account when researching a potential client. This can be furthered by looking at current vacancies that the company is advertising to see whether the potential client is hiring and what positions within the company are changing.

Besides the informal information on the internet, Hallahan advised that “there is a wealth of information in the public domain within the PRC, you just need to know how and where to look”. He outlined how location within the country is key in terms of the information available; within tier one cities in the east of China the information regarding companies and individuals is of a very good standard and availability, but it may not be the case elsewhere.

Chinese companies are often part of a web of other companies that are inter-related on a management and investment level. The spread of wealth can make it complex to ascertain the ownership and management structure of a company at first glance. Hallahan advised that understanding the information that is available online becomes a lot easier when you have on the ground human intelligence.

Besides social media and desk top research, a crucial step for UK companies looking to move into the Chinese market is site visits, something Abchurch has much first hand experience of. Hallahan’s estimation is that one third of site visits that they undertake explore issues that they would been difficult to address from afar.

As a result of the growth in its usage, social media is a tool that is only going to grow in usefulness to undertake due diligence on any company, in any market across the world.

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