MERGER &

ACQUISITION

F. HELIANTI SASTROSATOMO
 Definitions according to Law No. 40/2007
• Article 1 number 11 :"Acquisition” means a legal act which is conducted by a legal entity or individual
person for taking transfer of shares of a company which has effect of transferring control over
aforementioned company”.
• Article 1 paragraph 9: “Merger” means a legal action which is taken by one or more companies to
merge with another existing company with the result that the assets and the liabilities of the merging
company is transferred by the law to the surviving company and thereafter the merging companies’
status as legal entities is terminated by the law.
• Article 1 paragraph 10: “Consolidation” means a legal action taken by two or more Companies to
consolidate themselves by means of establishing a new Company which by operation law obtains the
assets and liabilities of the consolidating Companies and the consolidating Companies’ status as legal
entities cease by operation of law.”

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Laws & Regulations
A. Law No. 40 of 2007 regarding Limited Liability Companies
B. PP No. 27 of 1998 regarding Mergers, Consolidations and Acquisitions of Limited Liability Companies, on
obligation to announce of proposed M&A to the public and employees.
C. Law No. 13 of 2003 on Manpower. Rights of employees in a merger, consolidation, acquisition or change of
entity status (going public or delisting).
D. For companies under BKPM (PMA/PMDN), any M&A transactions must be reported to and will require
approval from BKPM.
1. Law No. 25 of 2007 jo Perpres No. 44/2016 regarding Negative List, provides thresholds of shares that can
be owned by foreign investor, i.e:
a. finance companies: 85 percent;
b. insurance: 80 percent; and
c. plantation: 95 percent.
2. Regulation of BKPM No. 6 of 2016 regarding Guidelines and Procedures for Investment Principle License
(including procedures for M&A).

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Laws & Regulations
Fair Competition
E. Law No. 5 of 1999 of KPPU:
1. PP No. 57 of 2010 on Merger or Consolidation and Shares Acquisition Which May Cause the Monopoly
Practice and Unfair Business Competition, Business Competition Supervisory Agency;
2. KPPU Regulation No. 11 of 2010 on Consultation on Merger or Consolidation of Business Entity, and Unfair
Business Competition; and
3. KPPU Regulation No. 2 of 2013 on Guidelines on Merger, Consolidation of Business Entity and Acquisition
of Shares Which May Cause Monopoly Practice and Unfair Business Competition.
which govern the consultation and post-notification requirements for mergers, consolidations and
acquisitions, along with guidelines that, inter alia, provide for scrutiny of contemplated M&A transactions
Note:
KPPU regulation is in the process to be amended, inter alia, post notification requirement proposed to be pre-
notification.

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 Laws & Regulations
Capital Market
F. Law No. 8 of 1995 on Capital Market (“Capital Market Law”) and several regulations issued by the Financial Service Authority (Otoritas Jasa Keuangan or
“OJK”).
These regulations shall apply if the related companies are listed in the IDX:
1. OJK Regulation No. 54/POJK.04/2015 on Voluntary Tender Offers.
2. OJK Regulation No. 74/POJK.04/2016 on the information disclosure before M&A.
3. Bapepam regulation Number IX.H.1 on requirement to carry out a tender offer and to make divestment after completion of a tender offer when the
new controller to own more than 80% of shareholding.
4. OJK Regulation No. 11/POJK.04/2017 regarding Reporting of Substantial Shareholdings in Public Companies when any shareholder who has direct or
indirect ownership of 5% or more should report the any change of 0.5% or more of its shares.
5. OJK Regulation No. 31/POJK.04/2015 on Disclosure of Material Information or Fact by Issuers or Public Company. After M&A completion, the public
company shall announce the business combination in a newspaper and on the company website within two working days.
For affiliated transactions, there will be additional requirements:
6. Bapepam regulation No. IX.E.1. regarding Affiliated Transactions and Conflict of Interest on Certain Transactions, as attached to the Decree of
BAPEPAM-LK No. No. Kep-412/BL/2009 dated 25 November 2009. This Rule provides that a publicly listed company conducting an M&A transaction
must appoint an institution registered at OJK to appraise the transaction. In the event that OJK finds a conflict of interest, the transaction will require
approval by the independent shareholders through a vote at a GMS.
7. Bapepam Rule IX. E.2 on Material Transaction and Change of Main Business as an attachment to the Decree of Bapepam LK Kep-614/BL/2011.
provides that disclosure of material transactions with a value of between 20 and 50 per cent of the public company’s equity must be published
within two business days of signing the transaction documents; if the value exceeds 50 per cent, approval from the GMOS is also necessary. The Rule
also requires the results of material business transactions and changes in core business to be reported to Bapepam within two working days of
completion

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 Laws & Regulations
Capital Market
G. Law No. 8 of 1995 on Capital Market (“Capital Market Law”) and several regulations issued by the Financial Service Authority (Otoritas Jasa
Keuangan or “OJK”).
These regulations shall apply if the related companies are listed in the IDX:
1. OJK Regulation No. 54/POJK.04/2015 on Voluntary Tender Offers.
2. OJK Regulation No. 74/POJK.04/2016 on the information disclosure before M&A.
3. Bapepam regulation Number IX.H.1 on requirement to carry out a tender offer and to make divestment after completion of a tender offer
when the new controller to own more than 80% of shareholding.
4. OJK Regulation No. 11/POJK.04/2017 regarding Reporting of Substantial Shareholdings in Public Companies when any shareholder who has
direct or indirect ownership of 5% or more should report the any change of 0.5% or more of its shares.
5. OJK Regulation No. 31/POJK.04/2015 on Disclosure of Material Information or Fact by Issuers or Public Company. After M&A completion,
the public company shall announce the business combination in a newspaper and on the company website within two working days.

For affiliated transactions, there will be additional requirements:

6. Bapepam regulation No. IX.E.1. regarding Affiliated Transactions and Conflict of Interest on Certain Transactions. Public listed company
conducting an M&A transaction must appoint an independent third party appraiser registered at OJK to appraise the transaction. For
conflict of interest transaction, require approval from the independent shareholders through GMS.
7. Bapepam Rule IX. E.2 on Material Transaction and Change of Main Business, provides disclosure of material transactions with a value of 20
to 50% of equity if the value exceeds 50%, approval from the GMS is also necessary.

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 Laws & Regulations
Tax Law
H. Relevant Tax regulations:
1. Law No. 36 of 2008 regarding Income Tax:.
i. No. 43/PMK.03/2008 of 13 March 2008 on the Opportunity to Use Book Value for Transfer of Assets in Relation
to Merger, Consolidation or Spin-off with certain conditions; and
ii. Regulation No. PER-28/PJ/2008 of 19 June 2008 on Requirements and Procedure to Use Book Value for Transfer
of Assets in a Merger, Consolidation or Takeover. In the event that the transfer of assets using book value is not
approved by the Directorate General of Taxation, then the transfer of assets shall be valued at the market price,
and the difference between the book value and the market value (capital gains) will be subject to corporate
income tax at the rate of 25% (flat rate).
2. Law 42 of 2009 regarding VAT that The transfer of assets is subject to VAT at 10% of the market value, pursuant to Articles
4(1) and 7(1).
3. Law 20 of 2000 on Income Tax of transfer of land and building jo PP No. 71/2008 dated 4 November 2008. Disposal of
land and buildings subject to (i) final income tax of the NJOP or transfer amount whichever is higher and (ii) land or
building title acquisition duty (BPHTB) of the NJOP or transfer amount whichever is higher. The rate of income tax and
BPHTB usually 5%, but now Income Tax could be 2,5%, depending on the local regulations.

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 Laws & Regulations
Other sectors
I. There are specific laws and regulations pursuant to each industrial sectors (mining, banking, etc).
For example: banking sector:
1. PP No. 28 of 1999 regarding Merger, Consolidation and Acquisition of Banks. Indonesia has acknowledged the single-
ownership principle of the Indonesian banking industry, known as the Single Presence Policy.
2. BI Regulation No. 14/24/PBI/2012 on Single Presence Policy. A controlling shareholder of an Indonesian bank is allowed
to be the controlling shareholder of only one bank. A controlling shareholder is defined as a legal entity, an individual or a
business group that holds 25% or more of a bank’s issued shares, or holds less than 25% of a bank’s issued shares but has
direct or indirect control over the bank.
3. BI Regulation No. 14/8/PBI/2012 on Share Ownership of Commercial Bank. This sets out maximum share ownership over
Indonesian banks, around 20 to 40% (differentiated if the shareholder is a bank, a financial institution or an individual).
Ownership exceeding such limit, shall be subjected to BI approval. Further, for prospective foreign investors committing
to the country’s economic growth, should obtain approval from the authority of its country of origin and be subject to
certain ratings set out by BI. Then the negative list not applicable.

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Due Diligence
Finance, Tax and HR matters
Subject Discussion/Matters Covered
Finance • Valuation
• Appraisal
• Financial statements
• Financial Impact
• Consultants Fee

Tax • Tax analysis

• Tax impact

H&R • CLA/Company Regulation

• Communication
• Organizational structure and assessment of people
• Compensation & Benefit
• Grading
• Cultural alignment

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Due Diligence
Legal Due Diligence
Subject Discussion/Matters Covered
Legal A. Corporate Documents
 Articles of Associations, amendments
 Board of management
 Affiliated transaction
 Corporate approvals
 Corporate Licenses
B. Operating Permit & Licenses
 Potential impact
 Fee and Expenses

C. Third party
 Review all agreements
 Potential impact

D. Disputes
 Ongoing disputes
 Potential disputes
 Clearance from Courts

E. Asset Movable/Immovable
 Ownership
 Mortgage/lien
 Other relevant issues

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Due Diligence
Supporting Consultants
Subject Discussion/Matters Covered
Supporting Consultants • Appraiser
• Tax Consultant
• Accountant
• Legal Consultant
• Notary

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Strategy
A. M&A should start with a strategic planning process and addressing
issues to achieve the objectives.
B. In practice, the strategy will depend on the due diligence result.
Whether the structure will be merger, acquisition of consolidation
both from cost and commercial perspectives.

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Objective of the M&A
1. to improve efficiency and effectiveness in the day-to-day operations of the
surviving company;
2. to eliminate inactive companies resulting in efficiency of reporting and related
costs thereto.
3. to eliminate significant administrative burdens in various intercompany
transactions such as: (i) operational costs, (ii) taxation, including transfer pricing
and (iii) accounting/financing.
4. To improve the company value and benefit to all stakeholders

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 Timeline: Private Companies
Legends: 1. The Notary issues the
1. BD :Business Day; Deed of Statement of
2. BKPM :Foreign Investment the Circular
Coordinating Board Resolution;
3. CD :Calendar Day; 1. Announcement on the The relevant company 2. Execution of the Deed
4. MOLHR :Minister of Law & M&A in 1 (one) applies for BKPM approval of M&A; Receive Acceptance of
Human Rights; newspaper with national on the change of 3. Submit Notification to Notification from MOLHR
circulation; shareholder’s composition MOLHR;
2. Announcement to the (for PMA/PMDN)
employees of the
target/merged company;
Appoint supporting
consultants

ASAP
Min 30 CD ± 14 CD ASAP

Latest date for creditors

Max 2 BD Max 14 objection
filing CD to the
M&A Max. 30 CD

Commencing legal and

financial due diligence;
Issuance of shareholders  The company
circular resolution of the announces the
target /merged company completion of M&A
approving the M&A in 1 newspaper
 Post notification to
KPPU
 Timeline: Public Companies
Legends:
1. BD :Business Day;
2. BKPM :Foreign Investment 1. The Notary issues the
Coordinating Board 1. Announcement on the
Deed of Statement of
3. CD :Calendar Day; M&A in 1 (one)
the Circular
4. MOLHR :Minister of Law & newspaper with national Application for BKPM
Resolution;
Human Rights; circulation; approval on the change of
2. Execution of the Deed
2. Announcement to the shareholder’s composition Receive Acceptance of
of M&A;
employees of the (for PMA/PMDN) Notification from MOLHR
3. Submit Notification to
target/merged company;
MOLHR;
3. Disclose the CSPA to OJK
and IDX
Appoint supporting
consultants

ASAP
Min 30 CD ± 14 CD ASAP

Max 2 BD ASAP
Max 2 BD Max 14 CD
The receipt of BKPM
approval before closing

Commencing legal and Max. 30 CD

financial due diligence;
Signing CSPA • Announcement of
Latest date for creditors Shareholders resolution of Acquirer/surviving company
filing objection to the the target /merged announces the Material the completion of
M&A. company approving the Transaction (if its material) in 1 M&A in 1
M&A newspaper with national newspaper
circulation
• Post –notification to
KPPU
Q&A

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