When you are considering partnering with a third party or buying a company in Indonesia, it’s not just a matter of finding one and writing the check. There’s a lot to think about, especially when it comes to conducting a proper due diligence of the target company or partner.
The purpose of performing due diligence in Indonesia is to validate the company’s affairs so that you can make an accurate decision. Failure to do it right, the entire transaction could be a total disaster.
From the investor’s perspective, an effective due diligence process is essential to maximising value from your purchase or acquisitions, and it consists of the verification of assets, finances, sales figures, customer data, taxes, and personnel records.
This article from Cekindo serves as a practical guide on how to conduct successful due diligence and increase the likelihood of acquisition or partnership success in Indonesia.
HOW TO CONDUCT A SUCCESSFUL DUE DILIGENCE IN INDONESIA
1. Validate Company’s Financials
Validation of tax filings, annual reports, profit and loss statements, accounts payable statements and general ledger are all important parts of a successful due diligence. Furthermore, the accounts receivable schedule, credit policy and its collection procedure are worth a review for a more insightful due diligence analysis.
2. Utilise a Virtual Data Room
The most efficient and secure way to examine due diligence items is to do it in a virtual data room. A virtual data room should be organised, highly guarded but at the same time easy to operate. This helps to expedite the entire due diligence process.
Secure access to company data via virtual data room streamlines the due diligence process, as well as decreases the time it takes for a buyer to make an informed and right decision. If a virtual data room is not available at the target company, the target company should prepare a due diligence checklist for the due diligence expert.
3. Review Inventory and Assets
Is it possible for a target company to provide proof of their intellectual property ownership? In a due diligence process, it is essential not only to determine the status, the control of assets, and the ownership, but also to verify the assets’ economic value, and potential infringement liability.
Here are some tips to review a target company’s assets and inventory:
- The due diligence plan must include the review of all assets and make sure that all asset registrations are valid with the proper registration office.
- You should never totally believe in the disclosure of assets and intellectual property from the seller or partner.
- Your due diligence specialist shall meticulously delve into all trade secret procedures and policies, and all confidential agreements.
- The due diligence process has to also include a thorough assessment of physical inventory and assets.
4. Scrutinise Outstanding Liabilities
Analysing unresolved lawsuits or litigations is also a vital component in due diligence process. You have to ask yourself if a dispute or litigation could possibly emerge even after the transaction is done. These court cases can be linked to past or existing customers, former employees, intellectual property, vendors and other stakeholders, and previous company practices.
It is never enough to only ask the seller or partner about outstanding liabilities or litigations. This is because the owners of the target company may not even be aware of some of the company’s unresolved lawsuits.
Therefore, due diligence is important in exposing the unaware disputes that may be costly to deal with if they go undiscovered.
CEKINDO CAN ASSIST WITH DUE DILIGENCE IN INDONESIA
Are you looking to invest in or purchase a business and think that you’ve made the best decision? As an investor or buyer, it is critical that you examine and investigate the business discreetly and thoroughly. Doing so will make sure that you don’t overlook anything that may come back to haunt you in the future.
There are always risks when it comes to buying and investing in businesses, however, this can be avoided through due diligence services.
Cekindo offers comprehensive due diligence and business analysis services for strategic partnerships, mergers and acquisitions, and other business investments. We customise due diligence services according to your business needs and help you prevent unwanted surprises even after the transaction.
To get a detailed due diligence report of your potential business transaction, talk to Cekindo advisor today and we’d be delighted to discuss the project with you personally.