Last Updated by David J. O. Tuhusula on 27/03/2024
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.



Due diligence is an indispensable process that aids investors and companies in comprehending the essence of a potential transaction. This intricate procedure serves as a thorough examination aimed at revealing any possible risks associated with a deal and assessing its compatibility with the portfolio of the investor or the company and acts as a foundational step in ensuring a smooth and informed investment decision. 


  1. General Due Diligence
    Due diligence represents a diligent exercise of care in a business context. Specifically, mergers and acquisitions embody a comprehensive review spanning legal, operational, and financial aspects to validate the claims and accuracy of information presented by the parties involved.

    This process involves an in-depth investigation into the economic, legal, fiscal, and financial situations of a business or individual. Key focus areas include sales data, shareholder composition, and potential connections to economic crimes such as corruption or tax evasion. This evaluation is critical for any entity considering initiating a new relationship, whether partnering or purchasing another company or property for investment purposes.

  2. Legal Due Diligence
    Legal due diligence is an investigative activity executed by legal consultants or lawyers. Its purpose is to gather material information or facts about a company or transaction object, offering a clear depiction of the entity or object.

    Legal due diligence aims to evaluate the legal risks that could emerge during the transaction, during ongoing business operations, and after the transaction occurred. These risks, often overlooked, pertain to the transaction at hand. A well-executed legal due diligence process facilitates improved decision-making, the opening of more opportunities, and enhanced situation management.

The Importance of Legal Due Diligence

The necessity of conducting legal due diligence can be illustrated through its application in multiple contexts, for example:

  1. Mergers and Acquisitions (M&A)
    Essential for assessing potential risks, liabilities, and compliance issues related to the target company.

  2. Investments
    Crucial for understanding the legal structure, contracts, regulatory compliance, and potential legal risks affecting investments.

  3. Real Estate Transactions
    Helps identify legal encumbrances, ownership disputes, zoning restrictions, environmental issues, or other legal matters that could impact the value or usage of the property.

  4. Financing Transactionss
    Important for ensuring compliance with relevant laws and assessing legal risks associated with financing arrangements.

  5. Business Partnerships or Joint Ventures
    Aids in understanding the legal rights, obligations, and potential liabilities of each party involved.

  6. Initial Public Offerings (IPOs) or Public Offerings
    Mandatory for ensuring compliance with securities laws and regulatory requirements and disclosing material legal risks or liabilities to potential investors.

  7. Intellectual Property (IP) Transactions
    Assessing the ownership, validity, and potential risks associated with the IP portfolio.

  8. Compliance Audits
    Regular legal due diligence audits help companies ensure ongoing compliance with laws, regulations, and contractual obligations, mitigating legal risks and liabilities.

In essence, legal due diligence should be performed whenever there is a significant legal component involved in a business transaction or activity to identify and mitigate potential risks, liabilities, and compliance issues. 

The Best Time to Conduct Legal Due Diligence

The optimal timing for conducting legal due diligence is contingent upon the nature of the transaction or business activity involved. It is typically conducted on the following examples: 

  1. Before finalizing a transaction, to provide insights and information that facilitate informed decision-making by the parties involved.

  2. Before making investments, to understand all aspects of the legal structure and potential risks.

  3. Before entering into financing agreements, to ensure all legal compliances are met and assess any associated legal risks.

  4. Before establishing business partnerships or Joint Ventures, to understand the legal landscape and prepare for potential liabilities.

  5. In preparation for IPOs, to ensure all regulatory requirements are fulfilled and material legal risks are disclosed.

  6. When acquiring or licensing IP rights, to ensure due diligence on the ownership and validity of IP assets.

Effectively, the best time to undertake legal due diligence is before engaging in any significant legal, financial, or operational commitment. 

Benefits of Legal DUe Diligence

The execution of legal due diligence confers numerous advantages, underscoring its indispensability in business transactions. Examples of the benefits of conducting legal due diligence are as follows: 

  1. Enhanced Understanding of Business Aspects
    Legal due diligence aids companies in gaining a profound comprehension of their business structures and those of potential partners or acquisition targets. This insight is pivotal, especially in scenarios involving mergers or significant sales, enabling an entity to ascertain its valuation and the worth of others.

  2. Valuation of Target Companies
    Through legal due diligence, companies can accurately evaluate the value of target entities by scrutinizing agreements, assets, and other critical factors, facilitating a grounded comparison and assessment.

  3. Facilitation of Drafting and Negotiations
    The comprehensive data collected during legal due diligence simplifies the negotiation process and aids in drafting agreements. Access to all pertinent information allows for informed discussions, risk assessment, and mitigation strategies.

  4. Identification of Potential Closing Problems
    Legal due diligence is a proactive measure to unearth potential issues that impede business continuity. Early detection offers the latitude to explore alternatives and devise solutions efficiently.

  5. Mutual Benefit for All Parties Involved
    While primarily benefiting the investigating party by providing peace of mind and informed decision-making capabilities, legal due diligence allows the subject entities to examine their financial integrity and market valuation closely. This mutual advantage strengthens the foundation for transparent and equitable transactions.

Legal Due Diligence Process

Conducting legal due diligence, particularly within the Indonesian context, involves a structured process tailored to comply with local regulations and practices. The steps include: 

  1. Meeting Between Involved Parties
    Key decision-makers from the participating entities should convene to align on the objectives and scope of the due diligence. This discussion lays the groundwork for the subsequent investigation.

  2. Determining the Scope
    Deciding whether to conduct a comprehensive review or focus on specific areas such as contracts, assets, or financials is essential. This decision influences the duration and depth of the due diligence process.

  3. Renewing the Report Format
    Considering the variance in report formatting across countries, agreeing on a format recognized in Indonesia (if involving international parties) ensures clarity and uniformity in the presentation of the findings.

  4. Site Visit and Interviews
    Physical inspections of business premises and assets, coupled with interviews with company representatives, provide tangible insights into the operational reality of the entity.

  5. Information-Based Investigation
    Seeking information from external institutions or third parties may be necessary to corroborate findings or fill gaps identified during the initial assessments.

  6. Cross-Checking Findings
    This process thoroughly reviews all collected data to ensure accuracy, completeness, and alignment with the objectives of the transaction.

  7. Presenting the findings through Reports and Opinions
    All findings are classified according to a risk and material framework, presented to the client, and usually accompanied by advisory and mitigation steps.

How We Can Help

The legal experts of Putranto Alliance possess extensive experience in due diligence, offering invaluable assistance to businesses in navigating complex legal landscapes, adept at conducting thorough examinations, and ensuring that every aspect of due diligence is comprehensively addressed to provide clients with a nuanced understanding and assessment of potential investments or partnerships.  

Putranto Alliance endeavors to uncover opportunities and mitigate risks, facilitating strategic business growth and safeguarding the interests of our clients. The due diligence services provided by Putranto Alliance are tailored to meet the unique needs and objectives of each client, able to identify potential legal issues, regulatory concerns, and contractual obligations, providing clients with actionable insights and strategic recommendations. 

Putranto Alliance is committed to delivering exceptional legal services that drive business success. Focusing on collaboration, integrity, and excellence, Putranto Alliance is dedicated to providing clients with the support and guidance they need to achieve their goals and maximize their potential. 

By partnering with Putranto Alliance, clients can confidently make informed decisions, knowing their interests are protected and their investments are thoroughly vetted. 


Some of the common items that may be included in a legal due diligence process are as follows: 

1. Corporate Structure and Governance 

Review of corporate documents, such as articles of incorporation, bylaws, shareholder agreements, and board resolutions, to assess the structure, ownership, and governance practices of the company. 

2. Contracts and Agreements 

Examination of critical contracts and agreements, including customer contracts, supplier agreements, leases, employment contracts, and intellectual property agreements, to identify obligations, liabilities, and potential risks. 

3. Litigation and Disputes 

Analysis of pending or potential litigation, arbitration proceedings, regulatory investigations, and other legal disputes that may impact the financial performance or reputation of the company. 

4. Compliance with Laws and Regulations 

Evaluation of compliance with applicable laws, regulations, and industry standards, including environmental regulations, labor laws, data privacy laws, and anti-corruption laws. 

5. Taxation and Financial Matters 

Examination of tax records, financial statements, tax filings, and other financial documents to identify tax liabilities, accounting issues, and financial risks. 

However, it should be noted that the scope of legal due diligence may vary depending on the objectives, risks, and complexities of the transaction or investment, and some other items may also be included or excluded. 


Some of the most common misconceptions include: 

1. Assuming Full Coverage 

One misconception is that conducting legal due diligence will uncover every potential legal issue or risk associated with a transaction. While due diligence aims to identify significant legal risks, it may not uncover every possible issue, especially if certain information is not readily available or if the due diligence process is limited in scope. 

2. Underestimating the Time and Resources Required 

Due diligence can be time-consuming and resource-intensive, particularly in complex transactions or industries with extensive regulatory requirements. Some may underestimate the time and resources needed to conduct thorough due diligence, leading to rushed or incomplete assessments. 

3. Focusing Solely on Legal Issues 

While legal due diligence primarily focuses on identifying legal risks, it is essential not to overlook other aspects of due diligence, such as financial, operational, or reputational risks. Neglecting non-legal aspects of due diligence can result in overlooking significant risks that may impact the success of the transaction. 

4. Assuming Due Diligence Guarantees Success 

There may also be a misconception that conducting thorough due diligence guarantees the success of a transaction or investment. While due diligence can provide valuable insights and help mitigate risks, it does not eliminate the inherent uncertainties and potential challenges in business transactions. 


The duration of legal due diligence can vary significantly depending on various factors, including the complexity of the transaction, the volume of documents to review, the number of legal issues to address, and the responsiveness of the parties involved. In general, legal due diligence can take anywhere from a few weeks to several months to complete. 

Additionally, factors such as negotiating transaction terms, resolving identified legal issues, and the overall pace of the transaction process can impact the duration of legal due diligence. Parties involved in the transaction must allocate sufficient time and resources for the due diligence process to ensure a comprehensive assessment of legal risks and facilitate informed decision-making.  

Putranto Alliance understands the importance of conducting legal due diligence in a timely and proper manner to meet the needs and objectives of the clients. The legal experts of Putranto Alliance are equipped to efficiently manage the due diligence process, ensuring that it is conducted with thorough attention to detail and in accordance with industry best practices. 

After legal due diligence has been completed, several steps typically follow, depending on the nature of the transaction and the findings of the due diligence process, for example: 

1. Report Preparation 

The findings of the legal due diligence are compiled into a comprehensive report. This report outlines the legal risks, compliance issues, and other relevant findings identified during the due diligence. The report may also include recommendations and suggestions for addressing identified issues. 

2. Post-Closing Obligations 

If the legal due diligence involves a transaction between parties, after the transaction closes, parties may have post-closing obligations, such as payment of consideration, delivery of assets, or fulfillment of any remaining contractual obligations. Parties may also need to address any ongoing legal or regulatory matters that arise after the transaction has been completed. 

3. Evaluation and Decision-Making 

The parties involved in the transaction, such as buyers, sellers, investors, or lenders, review the due diligence report and evaluate its implications. Based on the findings of the report, parties assess the risks and benefits of proceeding with the transaction, renegotiating terms, or implementing risk mitigation measures. 

4. Implementation of Risk Mitigation Strategies 

Parties may implement mitigation strategies to address identified legal risks or compliance issues. This may include obtaining legal opinions, warranties, or representations from the other party, obtaining insurance coverage, restructuring the transaction, or seeking legal remedies to address specific issues. 

5. Integration and Monitoring 

In cases where the transaction involves a merger, acquisition, or other business combination, parties may engage in integration activities to integrate the acquired business or assets into their operations. Additionally, parties may monitor ongoing compliance with legal obligations and address any issues that arise post-closing. 

Overall, the completion of legal due diligence marks an essential milestone in the transaction process, providing parties with valuable insights and information to inform decision-making and mitigate risks. 

Putranto Alliance stands ready to assist clients with a comprehensive range of post-due diligence matters. With a deep understanding of the complexities of legal transactions and a commitment to safeguarding the interests of clients, Putranto Alliance endeavors to provide strategic guidance and tailored solutions to address their specific needs. 

When significant issues or risks are unearthed during legal due diligence, Putranto Alliance can step in to provide comprehensive assistance, for example: 

1. Thorough Risk Assessment 

Putranto Alliance assists by reviewing the findings of the due diligence report and conducting a detailed assessment of the nature and severity of the identified issues or risks. We analyze the potential impact on the transaction and consider the broader implications for the objectives and interests of the clients. 

2. Skillful Negotiation and Renegotiation 

Putranto Alliance excels in negotiation tactics, leveraging the expertise to address the identified issues or risks and effectively renegotiate transaction terms, engaging in discussions to adjust the purchase price, indemnification provisions, representations, warranties, or other terms of the transaction agreement to align with the needs of the clients. 

3. Strategic Risk Mitigation 

Putranto Alliance is able to assist by devising tailored risk mitigation strategies to mitigate the impact of identified issues or risks. This may involve securing warranties, representations, or indemnities from the other party, obtaining insurance coverage, restructuring the transaction, or pursuing legal remedies. 

4. Comprehensive Due Diligence Support 

Putranto Alliance may conduct further due diligence or investigations to gather additional information and deepen the understanding of the identified issues or risks. By collaborating with experts or consultants to provide specialized expertise on specific aspects of the transaction, Putranto Alliance ensures a thorough and informed approach. 

5. Transparent Disclosure Practices 

Throughout the process, Putranto Alliance emphasizes transparency and open communication. We help clients fulfill disclosure obligations to other stakeholders, such as regulators, shareholders, or lenders, maintaining integrity and trust in the transaction. 

6. Efficient Documentation and Closing Support 

Finally, Putranto Alliance assists clients in finalizing transaction documentation and closing the deal seamlessly. We ensure that amended transaction agreements are executed, closing conditions are met, and all necessary legal formalities are completed precisely. 

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