The Complete Guide of Mergers & Acquisitions In Indonesia

Well-capitalized firms looking to expand are currently faced with an aberrant opportunity to make acquisitions and consolidate power. As the pandemic continues to take its toll on the economy, weaker business actors in Indonesia receiving handouts via government support schemes or dipping into their cash reserves could be fast approaching a state of deeper financial distress, leaving them open for takeovers. To learn more, here’s the latest mergers and acquisitions update in Indonesia.

Omnibus Law: Merger & Acquisition Regulations In Indonesia

Due to its large population, economic growth, and untapped potential, the vast majority of Merger & Acquisition (M&A) deals in Indonesia are led by foreign investors. The most recent and prolific M&A deals in Indonesia include Singapore internet giant – SEA’s acquisition of Indonesian Bank BKE and the much talked about Go Jek and Tokopedia merger. 

Indonesia’s Positive Investment List 

To further improve Indonesia’s investment climate, the Indonesian government enacted the Omnibus Law in October 2020. As part of the Omnibus Law, it introduced a ‘Positive Investment List” which relaxes foreign ownership limitations from a large swathe of sectors. Nonetheless, foreign investors looking to merge or acquire Indonesian companies should still observe the foreign ownership composition of these sectors.

To improve the investment climate, the Omnibus Law amends 73 laws, consisting of 15 chapters and 174 articles. Business actors can expect both large and small (but important) changes in the way business will be done in Indonesia. Firms entering Indonesia should exercise caution and due diligence, to achieve their goals and maximum shareholder wealth from the deal. 

Common M&A Methods In Indonesia 

Foreign investors should also note the several laws that regulate M&A activities in Indonesia. The general M&A requirements, provisions, and procedures can be referred to as Indonesia’s “Company Law” (Law No 40 of 2007). The ‘Company Law’ outlines the four types of M&A transactions found in Indonesia;

• Merger:  All assets and liabilities are legally transferred to the acquired entity. The remaining firms are legally liquidated.
• Consolidation: All entities are legally liquidated, all assets and liabilities are legally transferred to a newly formed entity
• Share or Asset Acquisition: A legal entity acquires shares of assets in a company resulting in a change of control in the acquired entity. There are strict proceeds under the Indonesian Company Law such as Public acquisition announcement, Sale and purchase agreement, and Deed of transfer, to name a few. In Indonesia, VC transactions in the form of direct investment will be treated as an acquisition under the Indonesian Company Law. 

READ MORE:

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

Implementation of Indonesia’s New M&A Policy

Through the Indonesian Competition Commission (ICC) Regulation No. 3 of 2023 and Government Regulation No. 20 of 2023, Indonesia has introduced a new merger and acquisition regime. This initiative includes a revised threshold for merger filings, the introduction of filing fees, and the implementation of an online filing system. These measures aim to streamline the merger filing process by providing a more efficient administrative approach through digital submissions. The key aspects of these changes includes:

Merger Thresholds in Indonesia

Companies must file a merger notification in Indonesia if their transaction meets at least one of the following thresholds. The new regulation limits asset calculations to assets located within Indonesia:

• A combined asset value exceeding 2.5 trillion rupiah
• A combined annual sales value exceeding 5 trillion rupiah

Previously, regulators calculated the asset-based threshold using worldwide assets, which often resulted in more merger filings. The new regulation restricts asset calculations to Indonesia, reducing the number of filings, particularly for foreign companies.

Updates on Foreign-to-Foreign Transactions

The previous regulations required a merger filing under a single-nexus approach if at least one party had business activities or assets in Indonesia. The new merger and acquisition law now require that foreign-to-foreign transactions meet local nexus requirements, meaning all involved parties must have assets in Indonesia for a filing to be mandatory.

Introduction of a New Online Portal

The Indonesian Competition Commission has launched a new online portal for merger filings, replacing the previous direct filing process. Companies must now submit their filings through this portal, which includes both an administrative and substantive review of supporting documents. If a transaction does not significantly impact the market, the commission’s task force will issue a recommendation letter to the ICC’s Deputy of Law Enforcement, who will then issue a confirmation letter.

Notification Fee

Each merger filing now requires a fee of approximately 0.004% of the combined assets or turnover of the parties, with a maximum cap of IDR 150 million.

Required Documents for M&A in Indonesia

For mergers, the following documents are typically required:

• Merger Plan
• Announcements
• Deed of Merger
• Shareholders Register
• Collective Shares Certificate
• Notification to or approval from the MOLHR or other relevant government agencies
  • Includes the issuance of a NIB
  • Submission of a merger report to the KPPU

Meanwhile for acquisitions process, these documents are mandatory to be completed, such as:

• Announcements
• GMS Resolutions
• Sale and Purchase Agreement or Share Subscription Agreement
• Deed of Transfer
• Shareholders Register
• Collective Shares Certificate
• Notification to or approval from the Ministry of Law and Human Rights (MOLHR) or other relevant government agencies (including NIB and submission of a merger report to KPPU).

Overview: Mergers & Acquisitions Process In Indonesia 

Stage 1: Before Closing the Deal

1. Before signing the Conditional Share Purchase Agreement (CSPA), the involved parties may be required to consult with the Business Competition Supervisory Board also known as Komisi Pengawas Persaingan Usaha (KPPU). 
2. Consultation with KPPU is to determine if the mergers and acquisitions in Indonesia deal requires reporting to KPPU. During this time, both seller and buyer should make an arrangement for corporate authorizations, which may include authorizations from individual shareholders.

Indonesia Competition Law Business competition in Indonesia is regulated by the Indonesian Competition Law and administered by the KPPU. A written notification of M&A(s) to KPPU is mandatory, if the surviving business entity’s asset value exceeds IDR2,500,000,000,000.00 (two trillion five hundred billion rupiah) or, exceeds a sales value of IDR5,000,000,000,000.00 (five trillion rupiah). Businesses in the banking sector, however, have a lower threshold.   Late notifications filed will incur a penalty of IDR 1 billion each day. The prior cap of IDR 25 billion is eliminated as part of the Omnibus Law, and therefore makes it crucial for investors to decide the effective date of the transaction to prevent unknown penalties.

3. Both parties shall then proceed with signing the CSPA that covers commercial arrangements, such as permission to use trademarks and other conditions to be met prior to closing the acquisition deal.
4. Once the deal is signed, the seller, the buyer, and its board of directors of the companies will need to make an announcement to the public. The announcement of the proposed acquisition must be published in a daily newspaper that is circulated nationally and in the form of a written notification to its employees. The announcement needs to be made no later than 30 days before the general meeting of shareholders (GMS) takes place.

During this period, employees have the right to decide whether to continue working for the surviving company. If an employee chooses to resign, the company may provide severance payment based on the employment agreement.

Omnibus Law Labor Regulations Government Regulation Number 35 Year 2021 (GR 35) concerning Temporary Work Agreement, Outsourcing, Working and Resting Hour, and Employment Termination, is effective as of 2 February 2021  Below is an overview of reasons for termination and its respective severance package.
Employee is unwilling to continue employment or vice versa due to the following:	Severance payment	Long Service	Compensation Rights
Merger & Acquisition or Spinoff	1 Time	1 Time	Eligible
Company Takeover
Company closure (not due to loss)
Debt suspension (not due to loss)
Company takeover (resulting in a change in scope of work)	0.5 time
Company closing (due to loss for 2 consecutive years)
Force Majeure
Debt suspension (not due to loss)
Bankruptcy
Force Majeure (which did not cause company closure)	0.75 times

5. During this same period, Creditors can also file for objections. If there are no objections, companies involved in the deal can continue with signing the shareholder’s resolutions over the next 30 days, following the newspaper announcement. In general, the resolutions consist of information detailing the transfer of shares and the new shareholder’s composition, BOD and BOC changes (if applicable), and changes to Articles of Association, among others.
6. The applicant submits the application to the Investment Coordinating Board, also known as Badan Koordinasi Penanaman Modal (BKPM). Along with the application, the applicant must submit mandatory documents, including a power of attorney, prior licenses, and an application form.
7. Finally, the pre-closing stage ends with restating the above-mentioned resolutions in the form of a notarial deed.

READ MORE:

• Does Every Business Setup in Indonesia Require Shareholders?
• Top 5 Reasons Why Expand Your Business to Indonesia in 2025

Stage 2: Closing the Deal

Each event that takes place during the pre-closing stage may require certain documents. During this stage, the following steps are mandatory:

1. Both seller and buyer will need to sign the Deed of Share Transfer, including the cancellation of the old share and collective share certificates (if applicable). The required documents include the Share Sale and Purchase Agreement and the Share Certificate.
2. It is necessary to record the transfer of the shares in the register of the company and/or special share register.

Stage 3: After Closing the Deal

This is the final stage of your direct acquisition and your final steps in a successful acquisition. 

1. Submit the receipt of Notification to the Ministry of Law and Human Rights (MOLHR) of Indonesia within 30 days following the signing of the Deed of Share Transfer.
2. Next,the acquiring company must publish a second public announcement in a national newspaper to disclose the acquisition results. This must occur within 30 days after receiving approval from the MOLHR.
3. If applicable, you need to report the result of the acquisition to the KPPU. As mentioned, each acquisition case may be different.

The Ministry of Trade’s Company Registry will complete this registration stage.

Where To Next – Mergers & Acquisitions Services In Indonesia 

As the global economy recovers from the Covid-19 pandemic, we will see a wave of Mergers and acquisitions in Indonesia. Well-prepared firms with the right advice, can avoid these common traps and navigate Indonesia’s business landscape with ease. 

If you would like seasoned and trusted advice in Indonesia, Cekindo has a comprehensive service covering valuation, negotiation, and completion, as well as financial audits and legal due diligence. 

Reach out to our consulting team by completing the form below.