Thread: Hotel- assistance please

Ben,
you cover some interesting points here. Firstly the 1100% foreign ownership scares me. ( or maybe that is a typo and is meant to be 100%)
The current operators P & L spreadsheet is the least of your worries. That means nothing and is not checked by the tax department.
Important things are having an IMB. This shows that the building was actually built with government approval. Next check if the guy is running a registered and licenced business. If you are planning to sell alcohol that is stronger than 5%, check that there is a liquor licence. If not the licence will take you about 2 years and a fair few thousand dollars to obtain. Getting the IMB will also be a nightmare if there is not already one.
Check that there is an actual lease on the land under the building. Also check how many years are left on that lease. Also check out if the seller has had hassles with the neighbours.
All of the above points are standard practice in the western world but this is not so in Indonesia.
Forget about your parents working. Unless they have some particular expertise that a local does not have they may not be granted a work KITAS. Hire local workers and advise them of what you need doing rather than doing it yourself.

Thanks no.idea i was hoping that you would respond :)

i am pretty sure (but will double check about the IMB), the agent also mentioned about NDA - im not sure what this is? (couldnt find any info on NDA)

i will ask all these questions and thanks alot for all your help, it isnt a very big hotel only 7 rooms and from last i visited it had a 70% occupancy all year round with alot of repeat business. The rates hadnt been changed in 5 years also and in my opinion too cheap, i would look at slightly lifting these but not too much to affect occupancy levels.

appreciate all your help.

Ben S

thanks for your 2cents SA. but it was reccomended by the current owner to also raise the prices. the current owner has moved on 18+ months ago to a new venture and basically in a nut shell letting this run down and only visits once a week to collect his money.

i have asked the agent to define what NDA is? but still havent heard anything back yet, hoperfully hear something by the end of the week.

if you have some half decent advice id be happy to hear it

Originally Posted by simmo32

Thanks no.idea i was hoping that you would respond :)

i am pretty sure (but will double check about the IMB), the agent also mentioned about NDA - im not sure what this is? (couldnt find any info on NDA)


Ben S

NDA = Non Disclosure Agreement, basically signing an agreement that you won't disclose to anyone any of the information you gathered about the company or its business during the Due Diligence process.
Common in the West when considering buying a business. I've never heard of it in Indonesia - but then, I've never bought a business in Indonesia - maybe it is common there.
It might be that they are:-

1. Genuine about the sale process & want to make sure you are (by putting the 'frighteners)
2. Want to protect themselves against disclosing privileged information that might be useful to a competitor
3. Trying to cover something up
4. Trying to look sophisticated & more 'business like than they really are (think spreadsheet accounts!!!)

If the info you already have 'bothers' you, walk away! If you feel that the problems can be overcome and you want to follow up, then:

1. Sign the NDA - If it is in Bahasa, have them provide a certified translation (court/notary) & pay for it.. it's at their insistence that there's an NDA, after all.
2. Read it carefully: If there is something in the NDA you can't agree to, gently & reasonably discuss & have it removed (they may genuinely not be trying to cheat you with the NDA & have good reason for it). eg: We were selling a 'market report' to a company that asked for an NDA, they sent their standard off the shelf NDA (clearly they didn't want us to tell anyone that our report was the source of information that they might act on... (we couldn't advertise "XYZ Co was a happy customer" etc). There was a clause prohibiting us from selling the content of any 'commissioned work' - I reverted to them "well you're actually buying a book (expensive one at that), this means that we wouldn't be able to sell it to anyone else! The copyright is ours but you're welcome to make an offer for the exclusive purchase our copyright" & mentioned a figure above $50k... the clause was dropped.
3. Prepare a comprehensive list of EVERYTHING you need to see & have scrutinized & verified, maybe add a penalty clause to the NDA if they fail to provide in a timely manner (with reasonable deadline): The Due Diligence process will cost you money in accountancy & legal fees, absence of some document will delay & cost you more, even causing the deal to collapse (you still pay the fees). So you shouldn't be out of pocked as a result of their failure to disclose.... so the list has to be comprehensive - best drawn up by your lawyer/notary.

Good luck

thanks for your help Shoggard.
regarding the 1110% ownership we are not sure just yet if this can be transferred or if it will revert to current laws. i will be getting help once i finally have all the info at hand.

i currently work in sales (totally unrelated) but have a degree in tourism managment and looking to gt back into it with my own business if possible.

the current prices, along with what they could actually be raised to (which wouldnt be alot) to be honest hasn't put the $$$ in fornt of my eyes. all the calculations will be done on current rates, and if still viable continue doing so and look at the possibility of raising rates. it would only be USD$5 a night extra at most in any case.

thanks for all your help. once i have the information ill get back online and seek some more advice from you all.

there is also another option in the pipeline that i cant disclose yet ;)

Cheers

What hotel are you looking at buying?