The past few years have been going well for mergers and acquisitions (M&A) in Indonesia. The trajectory of merger and acquisition in Indonesia is expected to have a positive outlook in the coming years.
According to Statista.com, the M&A deals in Indonesia had a value of US$4billion in 2017. Mirroring the positive market sentiments, we saw a significant increase in M&A deals, recorded at US$10 billion in 2019.
Mergers and acquisitions in Indonesia are transactions of ownership change between two organisations. A merger means a combination of two companies and an acquisition means the purchase of one company by another.
The main objective of an M&A is to create higher company value through synergy, as well as to achieve greater productivity and cost-efficiency. The end-goal is, of course, to expand to new markets and increase revenues.
One of the many factors that can affect the M&A deal significantly is the human aspect. Failure to take employee and human resource matters into account will cause many strong M&A deals to collapse.
Therefore, before taking over or combining with another company, all potential buyers must complete HR due diligence. HR due diligence for merger and acquisition in Indonesian are performed for the long-term benefits for both parties.
Related article: What to Know about Post Merger, Acquisition and Consolidation Transactions in Indonesia
The Importance of Conducting HR Due Diligence in Merger and Acquisition in Indonesia
In a merger and acquisition in Indonesia, the financial information has its fair share of importance for its results.
However, an M&A can also fail due to people-related reasons and that is why an HR due diligence is of utmost importance.
To start with, HR due diligence refers to the process by which companies considering M&A in Indonesia identify and evaluate the culture of another company, and the employee’s roles, attitudes, and capabilities. This helps buyers to decide if the M&A is worthwhile, and lay the foundation for smooth integration.
An HR due diligence is critical for an M&A in Indonesia as without it may cause the following issues:
- Clash of cultures
- Decrease of morale due to employees lacking the understanding of the new company’s expectation
- Customers or accounts are affected
- Loss of talents or key employees depart
- New management can’t agree on the company’s future direction
Checklist for HR Due Diligence
An effective due diligence process that can eliminate imminent risks during the process of merger and acquisition in Indonesia shall cover the following:
- Reviewing regulatory compliance and confidential materials. This includes employment agreements, employee’s data, HR processes, and others
- Studying the procedures, policies, and training
- Scrutinising workplace relations and culture, analysing any previous employee disputes, performance issues, and turnover
- Auditing HR department documents to ensure its completeness and consistency
- Examining the employee remuneration structures, compensations and benefit policies
- Evaluating the HR strategies on recruitment, retention, exit, training, and workforce planning
Cekindo can Assist in M&A Transactions and Due Diligence in Indonesia
HR due diligence is almost omnipresent these days for mergers and acquisitions in Indonesia. Most business owners and company directors remain risk-averse and thus carrying out an HR due diligence under a meticulously implemented regime can reduce their potential liabilities and stress significantly.
With Cekindo’s HR due diligence for merger and acquisition in Indonesia, we ensure that you will have the comfort to sign a contract. Your concerns about the risks, uncertainties, and confidentiality will diminish.
Our experience and approaches in HR due diligence can help you make an informed decision of your M&A transactions in Indonesia on acceptable terms more effectively and sooner.
Fill in the form below if you want us to perform an HR due diligence or assist you with your M&A transaction.
