Due diligence in mergers, acquisitions and business transactions

Every major deal demands absolute clarity

One mistake in a deal can cost you everything you have built. In Malaysia, due diligence is not just another checklist; it is your strongest line of defence and your best way to unlock value in any business transaction. If you are planning a merger, acquisition or other high-stakes move, here is what you need to know to protect your ambition, avoid costly surprises and accelerate growth.

Why mergers and acquisitions (M&A) as a business strategy in Malaysia

Mergers and acquisitions (M&A) are terms for when two businesses join together or when one business buys another. For founders and business leaders in Malaysia, M&A is more than just paperwork; it is a proven way to grow fast, break into new markets, or leave the competition behind.

Why use M&A for growth?

M&A is used by ambitious businesses to:

• Accelerate expansion: Move into new markets or regions without starting from scratch.

• Gain market share: Quickly grow your customer base and outpace slower competitors.

• Enter new industries: Access new products, skills, or intellectual property.

• Get new technology: Upgrade overnight by acquiring innovative teams or solutions.

• Consolidate the field: Reduce competition by bringing rivals under your roof.

The key fundamentals of M&A

Any successful M&A follows a structured roadmap:

• Deal sourcing: Finding the right target or buyer.

• Valuation: Accurately working out what the business is worth.

• Due diligence: Investigating every detail to uncover risks and validate claims.

• Negotiation: Reaching a win-win deal.

• Integration planning: Making sure both sides fit together smoothly.

• Post-merger management: Driving value after the ink dries.

Bottom line: Effective due diligence sits at the heart of every successful M&A strategy. It protects your position, exposes risks before they become disasters, and makes sure the deal delivers what you expect.

Merger and acquisition due diligence / Due diligence for merger and acquisition / Due diligence process in merger and acquisition

What is due diligence in M&A?

Due diligence means doing a full, deep assessment of a business before you sign any deal. In the context of mergers and acquisitions, this is a comprehensive process to check every legal, financial, and operational aspect of the target business. If you are buying or merging in Malaysia, skipping due diligence is a shortcut to disaster.

The main areas covered

Due diligence is not just a ‘tick the box’ exercise. The process covers:

• Legal due diligence: Reviewing contracts, ownership records, licenses, ongoing litigation, and legal risks.

• Financial due diligence: Analysing accounts, debts, cash flow, and assets to spot any financial landmines.

• Operational due diligence: Checking business operations, key people, suppliers, and customer contracts.

• Compliance and regulatory checks: Making sure the business meets Malaysian laws, sector regulations, and tax requirements.

Why does it matter?

Robust due diligence helps you:

• Uncover hidden risks: Spot undisclosed debts, lawsuits, or regulatory breaches.

• Validate information: Make sure what is promised matches reality.

• Negotiate from strength: Use findings to adjust the deal terms or price.

• Avoid overpaying: Know exactly what you are buying.

How the due diligence process works in Malaysia

1. Planning: Identify the goals and focus areas based on your risk appetite and deal structure.

2. Documentation: Request and collect all necessary business, financial, and legal documents.

3. Compliance review: Check for any breaches of Malaysian law or sector rules.

4. Site visits: Physically inspect offices, assets, or factories if relevant.

5. Final risk analysis: Assess findings, summarise key risks, and make recommendations in a due diligence report.

Action: Do not sign until you have a clear, written due diligence report from a legal growth partner who knows Malaysian law and the realities of local business.

Due diligence for sell side / Due diligence for buy side

What is sell side due diligence?

Sell side due diligence (sometimes called vendor due diligence) is when the business owner or seller reviews their own business before going to market. The aim is to spot and fix issues early, making the business more attractive to buyers and speeding up the sale process.

Why it matters for sellers:

• Prepares your business: Identify and address weaknesses before a buyer finds them.

• Builds confidence: Transparent records and clean reports give buyers trust to proceed.

• Fewer surprises: Reduce the risk of last-minute price drops or failed deals.

What is buy side due diligence?

Buy side due diligence is when a buyer investigates a business they want to buy. This is your best chance to spot hidden risks and negotiate a fair deal.

How it works for buyers:

• Deep records check: Review financial statements, legal files, contracts, and compliance history.

• Spot the risks: Identify legal, financial, or operational problems before you commit.

• Negotiate better: Use findings to secure better terms or adjust the price.

Why both sides win with robust due diligence

A thorough due diligence process protects everyone:

• Buyers avoid buying hidden problems.

• Sellers minimise surprises and delays.

• Both sides reduce the risk of disputes, failed transactions, or unexpected liabilities after the deal.

Step to conduct legal due diligence for private merger and acquisition

How to do legal due diligence in private M&A deals in Malaysia

Legal due diligence is your insurance policy in a deal. Here are the steps every Malaysian business owner should expect:

1. Prepare a due diligence checklist

   • List all the documents and records you need to review: company constitution, share register, contracts, licenses, permits, past lawsuits.

2. Issue a document request list

   • Formally request these documents from the seller or the business being acquired.

3. Review contracts, licences, and corporate documents

   • Check all major agreements: supplier and customer contracts, employment agreements, intellectual property, and ongoing obligations.

4. Check compliance with Malaysian law and regulations

   • Ensure the business has followed all relevant laws, from the Companies Act 2016 to sector-specific rules and tax compliance.

5. Analyse ongoing or potential litigation

   • Investigate any current lawsuits, claims, or legal threats that could impact future value or operations.

6. Summarise legal risks and make recommendations in the due diligence report

   • Document your findings clearly, flag major risks, and recommend next steps or changes to the deal terms.

Why these steps matter:
Missing a single red flag can undo years of growth. Proper legal due diligence gives both buyers and sellers a foundation for negotiation, risk management, and peace of mind.

Own the deal. Protect your ambition.

Every number tells a story. Before you sign, make sure you have read it. Due diligence is not just a process—it is your best leverage to grow, protect, and accelerate your ambition in Malaysia’s fast-moving business landscape.