Author(s): Nimmi Zulbainarni, Ade Candra, DS Priyarsono, Roy Sembel
Due Diligence (DD) in mining industry is the most important activity prior signing the share sales agreement. All risks shall be reviewed, measured and mitigated in this due diligence stage through the analysis of historical, current and future information. Due diligence’s result also significantly influences to the determination of the company’s enterprise value. Sometimes, the company may not aware on significant aspects in DD process and bring to un comprehensive DD recommendation. Thus, investor in merger and acquisition may bring the risks exposure after transaction completion. This latent risk will bring the company to either higher remedy cost, dispute or unfeasible of the asset afterward. This study aims to establish failure, to optimize time to enter new business, to minimize business risk, etc (Hariyani et al., 2011). M&A is the corporate action that involves investment in a big scale, which has risk mainly in the uncertainty of commodity price in the market (Savolainen, 2016). Therefore, a due diligence has to be done by the purchaser candidate before conducting the M&A transaction. From this due diligence activity, the purchaser candidate will determine a proper valuation method to determine the enterprise value which will be proposed to the seller for further negotiation process. However, the valuation methods between purchaser and seller may differ that makes the enterprise value between them are significantly different.