How to Conduct Due Diligence Before Buying a Business in Cambodia (2025 Guide)
Buying a business in Cambodia can be a lucrative move—but only if you do your homework. In emerging markets like Cambodia, due diligence isn’t just a formality—it’s your first line of defense against costly surprises, legal pitfalls, and hidden liabilities.
In this comprehensive guide, we’ll walk you through the key types of due diligence, legal and financial checklists, red flags to watch for, and negotiation strategies. Whether you’re acquiring a local SME or entering a joint venture, this article will help you make a confident, informed decision—with Adaeng Development Co., Ltd. as your trusted local partner.
Why Due Diligence Is Critical in Emerging Markets
Emerging markets like Cambodia offer high-growth potential, but they also come with unique risks:
- Inconsistent record-keeping
- Unclear land titles
- Informal business practices
- Regulatory gaps
Due diligence helps you verify that the business you’re buying is legally sound, financially healthy, and operationally viable. It also gives you leverage in negotiations and protects you from post-acquisition liabilities.
Types of Due Diligence
To get a full picture of the business, you’ll need to conduct several layers of due diligence:
1. Legal Due Diligence
Ensures the business is properly registered, licensed, and compliant with Cambodian laws.
2. Financial Due Diligence
Verifies the accuracy of financial statements, tax filings, and debt obligations.
3. Operational Due Diligence
Assesses the company’s internal processes, staff, suppliers, and customer base.
4. Environmental Due Diligence
Identifies any environmental risks or liabilities, especially for manufacturing or land-based businesses.
Legal Checklist
Here’s what to review during legal due diligence:
✅ Business Registration
- Verify the company is registered with the Ministry of Commerce (MOC)
- Check the Certificate of Incorporation and Articles of Association
✅ Licenses and Permits
- Industry-specific licenses (e.g., tourism, construction, food & beverage)
- Environmental permits, if applicable
- Labor compliance certificates
✅ Land Titles and Leases
- Confirm land ownership or lease agreements
- Check for encumbrances, liens, or disputes
- Ensure land use is compatible with business operations
Adaeng Development can assist with land title verification and liaising with the Ministry of Land Management.
Financial Review
A thorough financial audit should include:
📊 Audited Financial Statements
- Review at least the past 3 years
- Look for consistency in revenue, profit margins, and cash flow
💰 Tax Compliance
- Verify registration with the General Department of Taxation (GDT)
- Check for unpaid taxes, penalties, or audits
- Review VAT filings and withholding tax records
💳 Debt and Liabilities
- Identify outstanding loans, leases, or credit lines
- Review employee benefit obligations and severance liabilities
- Check for contingent liabilities (e.g., lawsuits, guarantees)
Operational Assessment
Understanding how the business runs day-to-day is just as important:
👥 Staff and HR Contracts
- Review employment contracts and job descriptions
- Check for compliance with Cambodia’s Labor Law
- Identify key personnel and potential retention risks
🔗 Supplier and Customer Relationships
- Evaluate the stability and terms of major contracts
- Assess customer concentration risk (e.g., overreliance on one client)
📦 Inventory and Assets
- Conduct a physical inventory count
- Verify ownership of equipment, vehicles, and intellectual property
Red Flags to Watch For
Be alert to these common warning signs:
⚠️ Undisclosed Liabilities
- Hidden debts or off-the-books transactions
- Unpaid taxes or social security contributions
⚠️ Nominee Ownership
- Foreigners using Cambodian “nominees” to hold shares or land
- Risky and potentially unenforceable under Cambodian law
⚠️ Pending Litigation
- Ongoing lawsuits or labor disputes
- Regulatory investigations or compliance violations
Adaeng Development can help you uncover these risks through local legal and business intelligence networks.
Hiring Local Experts
Due diligence in Cambodia requires local knowledge and trusted professionals:
👨⚖️ Lawyers
- Review contracts, licenses, and corporate structure
- Draft or revise sale and purchase agreements
👨💼 Accountants
- Conduct financial audits and tax reviews
- Assist with valuation and forecasting
🧭 Business Brokers & Advisors
- Provide market insights and deal structuring
- Facilitate introductions and negotiations
Adaeng Development offers a full suite of due diligence services through our in-house team and vetted partners.
Negotiation Tips
Once due diligence is complete, use your findings to negotiate better terms:
💵 Valuation Methods
- Use EBITDA multiples, discounted cash flow (DCF), or asset-based valuation
- Adjust for risks uncovered during due diligence
🔐 Escrow and Earn-Outs
- Use escrow accounts to hold part of the purchase price until post-sale conditions are met
- Structure earn-outs based on future performance to align incentives
📝 Warranties and Indemnities
- Include seller warranties on financials, ownership, and compliance
- Negotiate indemnities for specific risks (e.g., tax liabilities)
Conclusion: Making a Confident Acquisition Decision
Buying a business in Cambodia can be a powerful way to enter a fast-growing market—but only if you do it right. Due diligence is your roadmap to a successful acquisition, helping you avoid pitfalls and maximize value.
At Adaeng Development Co., Ltd., we specialize in guiding foreign investors through every step of the acquisition process—from legal checks and financial audits to negotiation and post-deal integration.
Ready to buy a business in Cambodia with confidence? Contact us today to schedule a consultation.
