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Indonesia’s economy continues to grow at some pace, with Gross Merchandise Value projected to more than double by the end of the decade.1
The opportunity is not in question, but the price of entry has fundamentally changed. The number of private deals has fallen sharply over the past three years, and the remaining capital is not just chasing growth, but also quality.
Investors today are making investment decisions based on the strength of a company’s legal and governance foundations as much as its commercial metrics. Business founders need to consider whether their legal, commercial and operational infrastructure can rise to the level expected by investors.
While some key changes will need clarifying through implementing regulations, Regulation 6 represents a fundamental shift in the regulation of Indonesia's hospital industry that will have significant implications for both existing hospital operators and prospective investors. In this article, we summarise the key developments relevant to hospital operators and investors.
Due diligence is now conducted from a fresh perspective
At its core, due diligence is about knowing what you are buying. It can raise material issues and facilitate conversations on risk allocation before an investment is finalised, not just flag compliance gaps, whether during the transaction or after completion. In essence, it sets the tone for how the company will be run going forward, and clarifies whether the parties share the same risk appetite.
In tandem, good corporate governance drives transparency and predictability in decision-making, creates internal checks and balances, and holds management to account.
The practical implications of recent investment trends are clear – for investors, the quality of a company’s legal and governance infrastructure reflects the quality of its management.
Capital is concentrating in high-growth consumer sectors
Capital is being focused on specific sectors, each with a distinct regulatory and governance profile that directly shapes how transactions are structured and how due diligence is conducted.
Four high-growth sectors are currently driving deal activity in Indonesia:
- Financial technology and digital financial services: Growth is partly driven by opportunities to broaden financial inclusion in a rapidly evolving regulatory landscape operating under Indonesia’s financial services authority (OJK). Investors can expect grey areas in frontier products.
- Healthcare technology: Indonesia is entering an expansion and consolidation phase, driven by the desire to increase accessibility and affordability of quality healthcare services across a geographically dispersed archipelago. This creates significant investment opportunities but also regulatory complexity and investor scrutiny, especially around licensing, data protection, and corporate structuring around licensed operating entities and real-estate holding companies.
- AI and B2B enterprise software: AI and B2B software deployment spans multiple sectors, including financial services and fintech, healthcare and telemedicine (both mentioned above) as well as logistics and supply chains, e-commerce and retail, and agritech. Intellectual property (IP) ownership and data processing compliance are the dominant due diligence concerns here.
- Digital retail: Expansion is being driven by ever-increasing internet and smartphone penetration across Indonesia, accompanied by supporting infrastructure including warehousing and logistics. New exploratory questions are being raised around third-party platform dependency, IP ownership and regulatory classification.
Operational resilience
Investor due diligence often raises material issues about the consistency and completeness of the legal infrastructure of the business, including legal documentation, licensing, employment practices, IP ownership and data governance.
Unless addressed, these issues will affect the transaction terms and could be priced in by prudent investors, whether through a reduced valuation, a restructured deal, or additional conditions to completion. As regulatory scrutiny of fintech, healthcare, and AI intensifies in Indonesia, the cost of unresolved legal gaps will carry more weight.
Corporate governance as the foundation of investor trust
Corporate governance is one of the first areas examined by institutional investors, and its importance extends beyond the transaction itself.
Strong governance creates predictability in decision making, and predictability builds trust between founders and investors. Investors want answers to three fundamental questions:
- How are material business decisions made?
- What internal controls are in place?
- To what standard is management held accountable?
Where investment is part of a broader strategy involving integration or expansion, alignment on both risk and decision-making is essential. The goal is to build something sustainable, not simply optimise value for an exit a couple of years down the line. Governance is therefore even more important for strategic investors, as the primary lens through which that goal is evaluated.
Recalibrating investment in Indonesia
Indonesia’s investment landscape has been recalibrating, not contracting. There is still plenty of capital, and the sectors driving deal activity today offer some of the most significant growth opportunities in Southeast Asia.
What has changed are the investment thresholds and the pricing of investment opportunities– defined not only by legal compliance, but by transparency, governance discipline, and sustainability of the underlying business model.
Investors are looking to invest in businesses that demonstrate both commercial traction and a legal and governance infrastructure aligned with the risks that they carry. Due diligence is no longer a procedural step but a process through which investor confidence is built (or lost).
The current environment is not an obstacle for founders that treat governance as a strategic priority and maintain discipline in their legal and operational foundations. Instead, it presents a competitive advantage.
(Legal Intern Kenneth Soefianus assisted the authors in preparing this article.)
Footnote
1 e-Conomy SEA 2025 Report by Google, Temasek and Bain & Company.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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