M&A in Indonesia: Legal Process, Deal Options, and Post-Merger Setup

Merger and acquisitions (M&A) in Indonesia not only present compelling opportunities but also signify a promising growth trajectory. 

Companies in Indonesia are leveraging mergers and acquisitions as a strategic move to expand their customer base and enhance operational efficiency. This trend is fueled by Indonesia’s robust domestic market, rapid digitalization, and evolving regulatory landscape.  

Successfully navigating the legal process, selecting the right deal structures, and ensuring a smooth post-merger setup in Indonesia’s M&A landscape necessitates a profound understanding of local dynamics and meticulous planning. This insight and planning are crucial for managing risks and ensuring full compliance. 

Indonesia’s Growing M&A Activity 

In 2024, public companies have conducted several high-profile mergers and acquisitions across various sectors. Companies use mergers and acquisitions to gain a competitive edge, expand their market reach, and enter new industries. 

Below are some notable M&A transactions from 2024, categorized by industry: 

Energy and Natural Resources 

• PT Barito Renewables Energy Tbk acquired PT UPC Sidrap Bayu Energi, a wind power plant operator in Sidrap, South Sulawesi. 
• PT Petrindo Jaya Kreasi Tbk acquired PT Borneo Bangun Banua and PT Borneo Bangun Banua Bestari, both engaged in coal mining. 
• PT Rukun Raharja Tbk acquired an 8% participating interest in the Jabung Oil and Gas Working Area. 
• PT Energi Mega Persada Tbk acquired a 90% interest in both the Siak and Kampar Oil and Gas Working Areas. 

Healthcare and Financial Services 

• PT Saratoga Investama Sedaya acquired a majority stake in Brawijaya Hospital, one of Indonesia’s leading women’s and children’s hospital groups. 
• PT Bank OCBC NISP Tbk completed the acquisition and consolidation of PT Bank Commonwealth, expanding its footprint in the banking sector. 

Media, Entertainment, and Telecommunications 

• PT MD Entertainment Tbk acquired PT Net Visi Media Tbk (IDX: NETV), a prominent television broadcasting company. 
• PT Dayamitra Telekomunikasi Tbk acquired PT Ultra Mandiri Telekomunikasi, expanding its telecom infrastructure portfolio. 

Logistics and Infrastructure 

• PT Cipta Krida Bahari, a subsidiary of PT ABM Investama Tbk, acquired PT Sarana Citranusa Kabil and PT Citra Pembina Pengangkutan Industries, both of which provide seaport services.

Types of M&A Deal Structures in Indonesia 

When planning an M&A in Indonesia, the deal structure plays a key role in how ownership is transferred, risks are handled, and control is gained. There are several ways to carry out a merger or acquisition, and the best option depends on the investor’s goals, the industry, and local regulations on foreign ownership. 

Below is a simplified overview of the most common M&A deal structures used in Indonesia: 

Structure	Advantages	Drawbacks	Best For
Share Purchase	Keeps business running smoothly with existing contracts and licenses intact.	Buyer takes on all liabilities, even hidden ones.	Complete control of a company with minimal disruption.
Asset Purchase	Let the buyer pick valuable assets and avoid problem areas.	Needs new licenses and approvals, which can slow things down.	Buying only a specific part of a business.
Joint Venture (PT PMA)	Allows foreign investors to enter restricted sectors by partnering with locals.	Depends heavily on strong shareholder agreements.	Foreign investors need local market access.
New Share Subscription	Directly adds capital to the company for growth.	Dilutes existing ownership; must agree on new share split.	When the goal is to grow, not exit.
Merger or Consolidation	Combines businesses into a single legal entity, improving efficiency.	Triggers major regulatory checks and license updates.	Domestic company integrations or restructures.
Spin-Off or Carve-Out	Focuses only on the desired part of a business.	A new entity needs fresh licenses, which adds time.	Isolating and acquiring a specific business line.

Legal, Tax Due Diligence, and Post-Merger Compliance 

A successful merger or acquisition in Indonesia relies on more than deal negotiation. It requires careful due diligence and strong post-merger compliance.  

Many M&A deals face legal, financial, or operational risks that can impact long-term success if not adequately addressed. Here’s a breakdown of the critical areas to focus on: 

Legal Due Diligence 

Before finalizing any merger and acquisition, investors must carefully review the target company’s legal standing. This includes: 

• Reviewing corporate documents, licenses, and ownership structures. 
• Checking for hidden liabilities, unresolved disputes, or regulatory issues. 
• Ensuring compliance with foreign investment restrictions under Indonesian law. 

Thorough legal review helps avoid costly surprises and ensures the deal is enforceable under local regulations. 

READ MORE:

• The Differences Between Mergers and Acquisitions
• 5 Worst Merger and Acquisition Mistakes in Indonesia to Avoid
• The Complete Guide to Mergers & Acquisitions In Indonesia

Tax and Financial Due Diligence 

Indonesian tax laws can significantly affect the structure and cost of an M&A deal. Due diligence should cover: 

• Past and current tax obligations. 
• Transfer pricing arrangements. 
• Unpaid liabilities or ongoing audits. 
• Tax incentives or penalties linked to the transaction. 

Working with local advisors can streamline the process and uncover red flags early. 

Post-Merger Compliance and Integration 

Once the deal is closed, the next challenge is aligning operations and meeting compliance requirements. Key steps include: 

• Updating business licenses to reflect new ownership or structure. 
• Registering tax changes and notifying government agencies. 
• Aligning HR policies, payroll, and employment contracts. 
• Ensuring continuity of customer, vendor, and partner relationships. 
• Integrating systems, governance models, and reporting structures. 

Failure to handle post-merger compliance properly can lead to delays, penalties, or loss of business continuity. 

Legal Risks in M&A Transactions in Indonesia 

Indonesia offers a supportive environment for mergers and acquisitions, but investors need to manage several legal risks carefully. These risks can affect deal timelines, increase costs, or even cause deals to fall through if not addressed early. 

Creditor Issues 

Under Law No. 40/2007 on Limited Liability Companies, creditors can legally object to an M&A deal, thereby delaying or even halting the transaction. This is especially important if the target company has existing loans or agreements that include change-of-control clauses.  

Buyers should also check if any creditors have the right to convert debt into shares, as this could affect ownership after the deal closes. 

Employment and Labor Compliance 

Under Indonesian Law No. 13 of 2003, amended by Law No. 11 of 2020, companies must prioritize employee rights during mergers and acquisitions. Poor management of layoffs or pay changes can lead to resistance or public backlash.  

To avoid issues, businesses must adhere to labor regulations on severance, notice periods, and employee communication. 

Foreign Ownership Limits 

According to the Positive Investment List (Presidential Regulation No. 10/2021), Indonesia restricts foreign ownership in specific sectors. Some industries have limits on foreign ownership, while others are entirely closed to foreign ownership.  

However, even in restricted sectors, investors can still maintain influence through shareholders’ agreements that define control over key business decisions.

Ready to Set Up Your M&A Deal in Indonesia? 

A successful M&A in Indonesia begins with proper execution, not just signing the agreement. From legal structuring to licensing, tax registrations, and team integration, each step of the post-merger process is crucial. 

InCorp Indonesia (an Ascentium Company) can assist you in navigating the complexities of the Indonesian market, such as: 

• M&A Setup: Seamless incorporation of new legal entities (PT or PT PMA) to match your post-merger structure. 
• Business Process Outsourcing (BPO): Support your deal with reliable due diligence, payroll, tax reporting, and HR services. 

Start your M&A journey in Indonesia with confidence by filling out the form below.

Frequently Asked Questions