Mergers and acquisitions (M&A) landscape in Indonesia has been accelerating and the positive trends still continues. According to the Indonesian Investment Coordinating Board (BKPM), investments in Indonesia hit US$ 51.5 billion (IDR 721.3 trillion) in 2018, a significant increase of 4.1% compared to that of the previous year. In the Global Competitiveness Report, Indonesia also jumped up to the 45th in 2018 with a GDP growth of 5.2%. The GDP growth is higher than many Southeast Asian and neighbouring countries such as Malaysia and Singapore.
However, the success or failure of a M&A transaction depends greatly on its regulatory aspect in Indonesia. Several regulations such as the implementation of Online Single Submission System (OSS), rules against money laundering practices, case precedents for the prevention of M&A transactions late penalties, etc. are some vital reasons of the increasing M&A transactions.
In this article, Cekindo will discuss the impact of recent Indonesian regulations on M&A and current trends that are critical for investors.
On June 21, 2018, the Indonesian government introduced GR 24/2018 that includes that implementation of OSS system. OSS cuts down most red tape by integrating different government institutions into one system. The system shortens and simplifies the M&A licensing process and foreigners can apply for investment licenses electronically.
Thanks to GR 24/2018, the timeframe of M&A transactions are shortened significantly. Under this new regulation, approval from BKPM prior to the closing of the transaction is no longer necessary.
Previously, foreign investors need to spend a long time on the complicated licensing process to employ foreign employees to hold positions in the merged company or target company – by obtaining both expat work permit IMTA and Foreign Manpower Utilisation Plan RPTKA.
However, the introduction of PR 20/2018 recently has gotten rid of the bureaucracy and now foreign investors only have to acquire RPTKA to employ foreign employees as IMTA is no longer required.
Technology companies in Indonesia have been funded or acquired by international venture capital in recent years with some of them even achieved unicorn status. Therefore, the Ministry of Finance in Indonesia issued Regulation 48/ 2018, providing an incentive as in income tax treatment to Indonesian venture capital companies that invest in micro, small and medium businesses in Indonesia with less than IDR 50 billion net sales. Foreign venture capital firms are not subject to this incentive.
Companies must inform KPPU of all mergers, acquisitions and consolidations of their transactions within 30 working days after each transaction. The late notification penalty is IDR1 billion each day, with a maximum penalty of IDR 25 billion. Hence, it is vital for investors to decide their transaction’s effective date wisely to prevent KPPU penalty.
PR 13/2018 applies to all types of companies in Indonesia to disclose their beneficial ownership structures, in an effort to improve business activities’ transparency in Indonesia and promote legal certainty.
Therefore, foreigners plan to invest in the form of M&A must take the implication of PR 13/2018 into consideration on their business plan.
Cekindo M&A services in Indonesia provide clients with insights from M&A pre-deal all the way through the final stage: valuation, negotiation and completion, as well as financial audit and due diligence investigation.
Our team of professional consultants helps your business seize opportunities and maximise the long-term benefits of an M&A transaction. Submit an enquiry now by filling in the form below or visit us at one of our offices in Jakarta, Bali and Semarang for more information.