Due Diligence – buying a business in Indonesia
When buying business in Indonesia it is vital that the prospective business owner examine the business in detail. This process is known as due diligence. Due diligence is generally conducted after the buyer and seller have agreed in principle to a deal, but before a binding contract is signed.
Conducting due diligence is the best way for you to assess the value of a business and the risks associated with buying it. Due diligence gives you access to important and confidential information about a business, often within a time period specified in a letter of intent.
With this information you can assess the business’s reputation, political exposure, financial position and identify any other risks. This is an opportunity to have any questions answered about the business. The due diligence process ensures that you get good value for a business. Done correctly, it can be the difference between buying a business that makes you money and buying a business that costs you money.
Due diligence can be performed with different partners such as a lawyer and accountant. IPIA can support you with this process but you can also engage a specialist such Business Due Diligence Indonesia (BDDI). IPIA or BDDI can play a crucial role in gathering information that is not normally in a company’s “books”. BDDI does this through media research (mainstream and fringe Indonesian press) and source interviews. We also examine other areas of concern such as corruption, any previous or on-going legal disputes, and other issues of reputation.
These additional elements can play a critical role in your decision making process to add to the more common coverage such as review of finances, credit, meeting minutes, audit reports, existing contracts, intellectual and fixed assets etc.
Warning signs for the buyer
When buying a business in Indonesia you should be cautious of sellers who:
- have a negative history and reputation and have been involved in scandals,
- do not disclose important information (e.g. their reasons for selling, financial statements, licences and permits, staff contracts)
- won’t agree to a trial period or enough time to conduct due diligence (you will need at least 30 days)
- won’t introduce you to their suppliers, landlord or estate agent
- are involved in legal proceedings
- are keen to close the deal quickly
- have a questionable credit record and history.
Bali Eye Private Investigation Agency (BEPIA) along with our sister agency Indonesia Private Investigation Agency (IPIA) are fully registered Private Investigation Agencies offering private detective and private investigator services to the Private and Business sectors throughout Indonesia and South East Asia.
For more focussed business due diligence work and analysis we would also refer you to Business Due Diligence Indonesia.