In 2016, Indonesia recorded 71 deals worth of USD 1.9 billion. In 2017, the amount increased significantly to USD 4 billion with 81 deals recorded. And, in 2018 69 deals were recorded with a staggering amount of USD 10 billion. Although records are impressive, it is important to note that mergers and acquisitions in Indonesia are complex processes. Thus, successful execution of both mergers and acquisitions require a significant amount of resources and time.
Merger and Acquisition: The Difference
As the name says, merging happens when two or more items become one. In business, merger takes place when two or more business entities or corporations become a single entity. The main purpose of this activity is scale and productivity efficiencies in major areas of business operations.
As for acquisition, it happens when a strong company (usually a large one) buys a smaller company (usually with weaker financial ability) in order to create a company that is cost-efficient and competitive in the market.
Reasons for Doing Mergers and Acquisitions in Indonesia
In general, companies that merge together are able to achieve cost efficiencies when it comes to delivering products and services, administration tasks as well as marketing and sales in business operations.
Benefits that can be enjoyed from doing mergers and acquisitions in Indonesia include improving company productivity through staffing efficiencies and market expansion through penetrating new markets that result in growing revenues.
Procedures of Mergers and Acquisitions in Indonesia
In general, the procedures of mergers and acquisitions in Indonesia are summarised as follows:
- The acquirer and the target company prepare an M&A proposal in newspapers.
- The target company conducts an extraordinary general meeting of shareholders with the presence of at least 75% shareholders.
- Creditors approve the proposed M&A transaction.
- Determine the fair market value of the merger shares conversion formula through a valuation of shares.
- Third parties (as required by law and agreements) give approval.
- Relevant agencies (BKPM, OJK and Ministry of Law and Human Rights) approve the merging or acquired companies.
- Any relevant industry regulator gives approval (depending on the business nature of the target company)
From a regulatory perspective, a merger or an acquisition takes at least 30 days to be successfully completed. However, it may take longer due to negotiation and due diligence processes.
The Required Documents
To acquire a company in Indonesia, the documents to be prepared include:
- Announcement
- GMS resolutions
- A sale and purchase agreement
- A deed of transfer
- Shareholders register
- A certificate of collective shares
- Approval from Ministry of Law and Human Rights or other relevant agencies
- Business Identification Number
To merge with another company in Indonesia, the documents to be prepared include:
- A merger plan
- Announcement
- A deed of merger
- Shareholders register
- A certificate of collective shares
- Approval from Ministry of Law and Human Rights or other relevant agencies
- Business Identification Number
Mergers and Acquisitions in Indonesia with Cekindo
Cekindo’s mergers and acquisitions services in Indonesia are designed to help our clients achieve their strategic goals through identification of opportunities and later seizing the most suitable and profitable ones to merge with or acquire other businesses. Our comprehensive services comprise the valuation, negotiation and completion stages, including financial audit and legal due diligence.
Fill in the form below to learn more about Cekindo’s mergers and acquisitions services. Our consultants are also available offline. Visit us in one of our offices in Jakarta, Bali and Semarang. We will be happy to answer your questions.
