Chapter 8

Due Diligence Guidelines –

Business Model

7. Trends and Patterns

7.1 Guidance

7.1.1 An important goal of business model due diligence is to identify key business trends and patterns that may have a continuing impact on the performance of the applicant.53

7.1.2 When enquiring into the key trends underlying the listing applicant’s business, the sponsor may turn its mind to (among others) the following additional aspects and the listing applicant’s market positioning in light of these factors:

(a) historical performance of the industry – e.g., market capacity and growth situation;

(b) characteristics of the industry – e.g., seasonality, cyclicality;

(c) structure of competition and performance within the industry – e.g., bases of competition, shifts of competition structure within the industry, effect of technology upon competitive position, international expansion, entry barriers and potential new entrants, risks of obsolescence, etc.; and

(d) bargaining positions – e.g., stability of key suppliers, key users, key distributors and other key players; product or service substitution; cost/price relationships; presence of predominant suppliers and users; likelihood of integration with suppliers and users, etc.


53. However, this does not mean that information about global economic trends, etc. are suitable for inclusion in a prospectus. See Paragraph 3.6 of Exchange Guidance Letter GL48-13.


HKCFEF Limited and the contributing law firms, accountants and sponsors are not offering these due diligence guidelines as legal, financial or professional advice or services and they should not be relied upon as such. These due diligence guidelines should not be used as a sole basis for any decision, action or inaction and are not meant to serve as a substitute for the advice of qualified professionals. See here for the full terms and conditions.

Listing Applicants Business Key Trends and Patterns

Business Model Due Diligence on Listing Applicant

Key Business Trends and Patterns

Historical Performance of the Industry

Characteristics of the Industry

Structure of Competition and Performance within the Industry

Bargaining Positions as factor for business model due diligence

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