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Various Types of M&A Due Diligence in Indonesia: Which One do You Need?

If you are thinking of entering a contract with a new partner, or are considering a merger in Indonesia, doing your share of homework such as engaging in due diligence will provide you with the confidence and knowledge that you need to get the most out of the deal. Due diligence is an important part of mergers and acquisitions (M&A) in Indonesia.

In the M&A transaction, due diligence allows buyers to identify issues that can be tackled at early stages, as well as to confirm the accuracy of seller’s information.

There are several types of due diligence involved in the M & A process in Indonesia. While conducting different types of due diligence, they shouldn’t just be focused on regulatory compliance, they should empower you to have confidence in who you do business with and negotiate the best terms for your company.

Cekindo has gathered the major types of due diligence in Indonesia in this article.

Types of Due Diligence in Indonesia

The main categories of due diligence are financial, legal, and commercial. Although these are the best due diligence that are commonly used by many companies, there may be more than 20 due diligence analysis and most agencies have integrated different due diligence types to provide a more comprehensive service.

1. Financial Due Diligence

Financial due diligence focuses on confirming the accuracy of the financial information provided including audited financial statements, recent unaudited financial statements, company’s financial projections, capital expenditure plan, debtors and creditors, inventory schedule and others. Accurate financial information allows buyers to assess the underlying performance of a business.

2. Administrative Due Diligence

Administrative due diligence involves validating administrative matters, for example, rate of occupancy, facilities, and the amount of workstations. The purpose of an administrative due diligence is to prove that all operational costs are included in the showcased financials.

3. Legal Due Diligence

Legal due diligence is also critically important and it consists of verifying the following items:

  • Articles of Association and Copy of Memorandum
  • Meeting minutes of shareholders for the previous three years
  • Board meeting minutes for the previous three years
  • Material contracts such as a partnership or joint venture agreement, operating agreements
  • Franchise or licensing agreements
  • Share certificates for key management personnel
  • Loan agreements, financing agreements, and lines of credit
  • Guarantees

 

4. Asset Due Diligence

Another essential type of due diligence performed by most companies is asset due diligence. This type of due diligence basically verifies fixed assets’ detailed schedule, locations, schedule of sales and purchases, lease agreements, mortgages, real estate deeds, use permits, etc.

5. Tax Due Diligence

Taxes are inevitable in every business and thus conducting taxes due diligence relating to tax liability is particularly important when doing business with another company. This category of due diligence confirms that all taxes are properly calculated and there is no tax under-reporting.

How Cekindo can Assist

Mergers and acquisitions can be complex and lengthy transactions and require a lot of liaison between the seller and buyer before an M&A deal is completed.

Each company and business structure is unique and therefore no one’s due diligence is ever the same. Without due diligence investigation, it is possible that companies would fail to reveal important information that could eventually jeopardise a buyer’s decision of the M&A deal.

By undertaking a detailed due diligence from Cekindo on companies and individuals, you can ensure a smooth transaction with informed decisions, and help safeguard your company’s reputation by complying with Indonesian legal requirements.

Cekindo wants to make sure that your target investment or company is financially sound with all possible risks identified, so that you are assured and content when doing business with others.

For more information about the Cekindo’s due diligence process, send us an enquiry today through the form below.