Thursday, January 15, 2009

Due Diligence Report

I was asked by one of my client to conduct a quick and brief due diligence report last few days on one construction project some in Kelantan, the client is a bit concern about the validity of the project since it involves very huge amount of contract value. In a way, a respect his attitude, namely prepare to do whatever necessary study (proper) before he give any decision to take the project. Most businessmen especially Malay in Malaysia has a bad attitude of 'safe a penny, lost a mountain'. They don't want to spend money in conducting due study or report on any business venture they want to do, and end up to be a bad business decision.

In my case, the project was a 'Private Foreign Investment' scheme proposing to build a government agency office and head quarter that cost around RM800mil. What a huge contract! The project alleged to be endorsed by Prime Minister Department and the fund is arranged by one private company (I named it as company A). Now these company A, appointed company B as the main contractor and company B approached my client to be his sub contractor.

Being this time of economic environment, of my client is more than happy to do the job, but he is not that greedy and at last minute decision, he called me to give him a final view. I attended his call, and after reviewing one simple piece of so called award letter, I raised my doubt and requested a time for conducting at least a brief due diligent report of the whole thins. The client agrees.

Since my time frame given is very short, and too make things worse, the assignment is given on Friday night (having weekend to frustrate my proper government-dealing-related study). Anyway I manage to pull some 'internal' connection and with the help of online services to prepare the report.

My study found out the following;

  1. There is no official statement or approval given by Prime Minister or Economy Plan Unit regarding the project.
  2. The fund raising company is a RM2 company! Never submit its financial statement since 2006
  3. However, the main company is a capable company with a 'proper' financial capacity
  4. There is no civil claims against the both companies and its directors.
  5. One very interesting fact I found out is that the fund raising company has a previous case of same nature whereby the EPU has made public rejection on their involvement with the company.

I emailed my opinion on Saturday late night, I think at about 1.56am. Anyway professionally, I advised my client to abort the dealing. Lucky for him otherwise he would have lost at least RM50, 000-00 upon signing the agreement for initial payment.

For those who do not know what is due diligence report or want to know brief idea how to do it, wait for my next post, insyallah I will write on it tips.


  1. Hi Kamarul,

    My Firm also been swamp with businessman whom been approached by street conman who bravely declare that due to the "special connection with the 4th Floor guy" in Putrajaya, billion dollar project is their fungertips for approval.

    The businessman is eager to lock the deal and willing to dump the initial money/ jantan man handshake to lock the deal. This scrupulous ppl very smart playing with ppl emotion and their are good playing drama. They worked in a group. I have seen and dealt with conman. other is queing for the "deal".

    My due diligent is...if the conman utter the word...other ppl is queing, then my advise to my client, then let other ppl lock the deal. My justification, the ppl who r ready, willing and able to lock the deal must be able to appoint a lawyer to do DD. If they r next to a second to lock it, then as an ethical, one sd not barge in..potong Q.

    As you knw, potong Q kat jalan raya, kadangkala accident. Sama juga dlm contract, when money is concern....etreme care must be adhere to avoid fatality in business..

    I am talking from real-life self-experience.


  2. hi... sorry to interupt but am sure u can help :)
    i would like to know how much it cost to appoint a lawyer to do the due diligence report on a SDN. BHD company??

    thank you

  3. hi..i also want to know how much the cost and what is the different between due diligence done by audit firm and lawyer?