More Than Just Numbers: The Role of Commercial Due Diligence in the Success of Mid-Market M&A Transactions

Global mid-market transaction activity experienced a decline in 2025 due to rising geopolitical tensions and trade tariff uncertainty. However, numerous delayed transactions remain in the pipeline as investors await more conducive market conditions.

Mid-Market Remains Resilient Amid Market Complexity

According to BDO’s M&A Horizons 2026 report, the decline in global mid-market transaction activity in 2025 was also influenced by limited strategic planning horizons amid economic uncertainty. However, this does not entirely reflect a permanent slowdown. Many business owners and investors have retained their transaction plans and chosen to await more stable market momentum before proceeding with deals.

In the Asia-Pacific region, mid-market transactions have increasingly become a primary focus of private equity activity. Investors tend to prioritise smaller-scale transactions focused on operational improvements over large acquisitions. In Southeast Asia, private equity recorded investments of approximately US$9.1 billion through 59 transactions in 2025, reflecting an increasingly selective investment environment.

Indonesia itself remained an active M&A market with a value of around US$6.2 billion from 102 transactions, demonstrating sustained investor interest despite more cautious capital deployment. Growing consumer demand and accelerating digital adoption continue to attract both domestic and international investors. Sectoral factors such as consolidation in financial services and increasing interest in technology, manufacturing, and sustainable energy sectors are also driving transaction activity.

Marvin Camangeg, Partner (Advisory) at BDO Indonesia, believes that moving forward, investors will increasingly demand higher due diligence criteria and more creative transaction structures. Should global trade conditions become clearer, transaction flows are expected to increase again, though with stricter selectivity.

Reliable Performance and Commercial Sustainability

Conventionally, due diligence on financial, tax, and legal aspects focuses on verifying the company’s historical conditions. This process answers an important question: is the information presented to investors accurate and trustworthy?

However, investors ultimately ‘purchase’ future potential, not merely historical performance. A company may have sound financial statements yet still face declining market risks, potential customer base deterioration, or competitive shifts not apparent from financial reports alone. This is where commercial due diligence becomes a critical component of investment decision-making.

“Ensuring the reliability of historical performance is indeed important, but assessing whether the underlying market can sustain future growth is equally crucial. In M&A transactions, the greatest value often emerges from the ability to identify how market dynamics can create expansion opportunities beyond current performance,” said Marvin Camangeg, Partner (Advisory) at BDO Indonesia.

“This is increasingly relevant in Indonesia, where accelerating digital adoption, shifting consumer behaviour, and evolving regulation require companies to ensure business strategies that maintain long-term growth. Comprehensive investment evaluation typically combines financial analysis with commercial analysis to provide a more complete picture of business prospects,” Camangeg added.

Beyond assessing historical performance, commercial due diligence also analyses various external factors such as market conditions, growth potential, industry trends, competitive environment, and customer demand stability. This analysis helps ensure that growth projections in business plans are truly realistic and supported by market conditions.

Why Market Analysis Is Increasingly Important in M&A

Amid rising industry disruption, investors now face greater pressure to validate market conditions behind each transaction. Digitalisation, changes in global supply chains, and shifts in consumer behaviour are shortening the life cycle of traditional business models. Simultaneously, company valuations increasingly depend on future growth projections, particularly in the technology and digital sectors. This carries significant risk if market assumptions prove incorrect.

For foreign investors entering Indonesia, the complexity of local dynamics, regulation, and competitive intensity present additional challenges. In this context, independent market validation becomes an important step to ensure more informed investment decisions.

Case Study: Manufacturing Acquisition Target in Indonesia

In one evaluation of a manufacturing transaction in Indonesia, a foreign investor identified stable financial performance and healthy margins. However, through commercial due diligence, it was revealed that the business was heavily dependent on a small number of customers and order volumes were actually more volatile than revenue trends suggested. Market analysis also indicated overly optimistic growth projections. These findings helped the investor adjust the valuation and develop a more realistic post-acquisition strategy.

From Due Diligence to Deal Confidence

Successful acquisitions require more than verified financial reports. Investors must also understand whether the company’s business model is truly sustainable and whether market conditions support the growth expectations underlying the transaction valuation. Experience demonstrates that transactions creating long-term value are generally those where investors have thoroughly validated market conditions and business model sustainability beyond financial metrics.