The Current Landscape of M&A Transactions in Indonesia
Maneuvering through legal complexities and bureaucratic hurdles has been one of President Joko Widodo’s major plans for Indonesia. By initiating the improved government regulations implementing deregulation policies, the mergers and acquisition (M&A) market has been positively impacted. One example is the business licensing processes and the newly introduced Online Single Submission System (OSS), which has high relevance and usage of corporate proceedings.
This OSS system also acts as a gateway for various government services at different levels. The regulations are implemented for the latest services on integrated electronic business licensing to ease the process of mergers in the country. The large-scale amendment of the Omnibus Law legislation plays a part in Jokowi’s efforts in making business licensing mechanisms even more straightforward and effective.
Private businesses are still dominating the M&A transactions in Indonesia rather than public companies. This occurs as the public M&A usually takes more time due to complex regulatory frameworks and procedures. The financial technology industry is still shown to be the most active sector in deal volume. However, the energy sector contributes to the highest number of transactions in terms of deal value.
Understanding the Common Deal Structure of M&A Transactions in Indonesia
In Indonesia, acquisitions usually occur by purchasing shares in a company from a shareholder who wants to liquidate or form the company itself. As for foreign investors, they cannot enter a legal partnership due to ownership limits. However, a foreign entity is allowed to acquire all shares of a company or, in some cases, conduct a joint venture with an Indonesian company or a local partner.
Business units usually have their assets transferred during asset acquisitions. Mergers or amalgamations are historically less common in Indonesia, especially when the surviving company dissolves the target company. With the government working hard to relax the regulations for mergers and acquisitions in Indonesia, most foreigners still need guidance on navigating their way to a successful merger and acquisition through this detailed process.
2021’s Most Notable M&A in Indonesia
Amidst a pandemic, Indonesia still managed to create headlines for all the right reasons in the year 2021. This was caused by rather big names in the business going into mergers and acquisitions from a number of different sectors. Not only was it in the financial sector, but in fact, some of the most significant of these mergers and acquisitions came from the telecommunications and property sector.
Here are some of them that are worth noting:
Indosat Ooredoo and Hutchison Tri Indonesia
As one of the biggest names in Indonesia’s telecommunications industry, Indosat Ooredoo has gone through a number of ownership changes to where it is today. Officially announced on 4 January 2022, Indosat Ooreedoo and Hutchison Tri Indonesia merged, becoming Indosat Ooredoo Hutchison.
The deal that has been going around since September of 2021 is supposedly valued at approximately USD 6 million. In their explanation to the Indonesian Stock Exchange, this merger creates operational synergies that will be beneficial for consumers and create value for stakeholders and fellow shareholders.
Blibli and Ranch Market
A part of the distinguished Djarum Group, Blibli is a well-known e-commerce company that was established back in 2011. This deal saw Blibli acquire 51% of PT Supra Boga Lestari, the parent company of Ranch Market and Farmers Market.
Blibli purchased the shares from 7 major stakeholders with an estimated value of over USD 123 million. According to the management, this acquisition was to develop the business further and expand the company’s ecosystem to be the leading e-commerce company in Indonesia.
Gojek and Tokopedia
Probably the most phenomenal Indonesian M&A in recent times, the two unicorns of Indonesia Gojek and Tokopedia merged into one company called GoTo. The company now runs three major services: on-demand services, digital payment systems, and a marketplace. The total value of this merger remains undisclosed. However, the combined gross transaction value of GoTo in 2020 reached over USD 22 billion.
A Guide to Successful Merger and Acquisition Transactions
Buying out or merging with a company is much more than a financial transaction. It is a well-planned business decision with regulation complexities that companies are willing to go through to bolster their positions for the years ahead. Here is a list of things that needs to be considered before getting into mergers and acquisitions.
Choose the Right Partner
When choosing a partner, decision-making skills play an important role in succeeding the M&A transactions. With a wrong partner, long-term decisions can be detrimental to the business resulting in disharmony within the company.
Trust Between Parties
Mutual trust between management regarding the shared success of both parties ensures that the mergers or acquisitions are done smoothly and leads to favorable outcomes.
Proper due diligence is key to a successful merger or acquisition process. Studying the company in-depth provides a good understanding of the history, missions, values, and culture to make an informed decision for an adequate valuation.
Quality of the Plan
As it should, the structured plan of the two companies must be communicated mutually hence, bulletproof. A third party can be invited to help with a detailed plan of action considering compelling micro and macro analysis backed and logic.
Execution of the Plan
One of the most crucial factors in implementing the high-quality plan devised is practicing the right strategy as per the plan is vital for the business’s success. Otherwise, predicted costs may inflate, creating confusion and misunderstanding among the parties.
Swiftness of Integration
Keeping the connection between the parties is essential, as it promotes long-term trust. Being swift while the integration process should be kept as a primary goal.
Swiftly Proceed With a Merger or Acquisition
The complexity of doing M&A might have an impact on current company growth. Therefore, finding suitable services to your needs will be an essential support to proceed swiftly. As one of the seasoned and trusted advisers in Indonesia, Cekindo has a comprehensive merger and acquisition service covering valuation, negotiation, completion, financial audits, as well as legal and due diligence.
Reach out to our consulting team by completing the form below.