One of the most important processes in business transactions in Indonesia is due diligence. All companies involved in commercial transactions as well as mergers and acquisitions as buyers or sellers must ensure that they have due diligence in place to achieve their risk management objectives.
Due diligence is a process that buyers conduct to determine if the seller’s claims are accurate. There are several types of due diligence in Indonesia and among them, commercial due diligence is considered the most important.
Unlike other types of due diligence with very narrowed focuses, commercial due diligence is defined as such: the process a private company or a corporation performs to evaluate an organisation’s commercial outlook.
Commercial due diligence provides the evaluating company with a complete overview of the evaluated organisation’s internal and external factors influencing the commercial attractiveness. With that, all the information relevant for the evaluating company to decide on certain commercial transactions in Indonesia comes to light.
An experienced commercial due diligence team is essential in Indonesia to help you recognise potential risks and facilitate early tackling.
What to Check when Performing Commercial Due Diligence
A commercial due diligence checklist ensures that you don’t overlook important things when participating in a commercial transaction.
By going through the checklist below, you can learn about a company’s assets, obligations, liabilities, benefits, potential risks, possible opportunities, and suspicious contracts.
However, the checklist may vary depending on the type of business of the target company. Cekindo provides a general checklist that applies to most industries in Indonesia.
1. Determine the Trade Area Size
A detailed commercial due diligence shall include the understanding of the target company’s trade area size. The distance that a customer willing to travel to the target company’s location is defined as a trade area size.
Therefore, the farther a customer is willing to travel, the more superior the product or the service is.
2. Define the Core Customers
Core customers often buy from a company or a brand at a higher rate. Commercial due diligence will be able to define core customers by capturing the demographics, psychographic and behavioral factors, and life stage elements.
3. Know the Competitiveness
Through due diligence, a buyer can get insights on how the target company’s competitors perform and behave in the market and industry.
4. Understand the Performance Motivators
Determining the performance motivators of the target company is key to the success of a commercial transaction. Commercial due diligence provides information about the performance drivers such as brand awareness and the quality of customer service.
5. Analyse the Growth Opportunities
Analysing the growth potential of a target company is the major component of commercial due diligence. A well-executed growth analysis allows the buyer to forecast the target company’s value and decide on its bidding amount.
How to Conduct
Business owners often conduct commercial due diligence before the business negotiation. This allows the buyer (the evaluating company) to gauge the target company’s risks and opportunities before making a decision.
The commercial due diligence process consists of the below steps:
- A private company or corporation works with third-party due diligence professionals.
- The due diligence provider conducts the assessment on the target company.
- The due diligence professional prepares the report with information necessary for a particular commercial transaction.
- The prospective buyer will review the report and make a final decision in regard to the commercial transaction.
Cekindo as Your Due Diligence Partner
Cekindo is your commercial due diligence partner that helps you evaluate your target company’s overall commercial performance, possible risks, and future opportunities, in addition to its historical financial performance and financial position.
Our commercial due diligence service gives you the valuable insights you need to make an informed decision. We identify major deal breakers and ensure a successful business transaction in Indonesia.
Reach out to us now.