Corporate M&A 2021 Comparisons

Last Updated April 20, 2021

Law and Practice


ABNR Counsellors at Law is one of Indonesia’s longest-established law firms (founded 1967), and pioneered the development of international commercial law in the country following the reopening of its economy to foreign investment after a period of isolationism in the early 1960s. ABNR has over 100 partners and lawyers (including two foreign counsel), making it one of the largest independent, full-service law firms in Indonesia and one of the country’s top-three law firms by number of fee earners, providing the scale needed to simultaneously handle large and complex transnational deals across a range of practice areas. The firm also has a global reach as the exclusive Lex Mundi (LM) member firm for Indonesia since 1991. LM is the world’s leading network of independent law firms, with members in more than 100 countries. ABNR’s position as LM member firm for Indonesia was reconfirmed for a further six-year period in 2018.

Deal activity has been picking up pace again compared to 12 months ago when deals started to slow down due to COVID-19. Inbound work remains the dominant deal activity, and covers a wide range of industries, including finance, land, health, telco, distribution activities, e-commerce, TMT and others.

Top trends would be in the health sector, with M&A in hospitals (specialist), clinics and laboratories. Foreign direct investment (FDI) in laboratories is picking up with joint ventures of foreign lab businesses entering into the Indonesian market, particularly due to the need for COVID-19 PRC testing. There has also been interest in distributors of chemical and other ingredients for pharma manufacturing, including for the production of COVID-19 PCR reagents.

The industries experiencing the most M&A activity in the last 12 months have been the health, finance, and e-commerce industries, with the majority of deals occurring in these sectors.

Companies are acquired mostly by direct acquisition from existing shareholders (equity deal), although asset deals have been seen due to legacy issues in the target company. There are some potential capital market deals also being considered.

There is no “primary regulator” for M&A. In general, M&A involving FDIs do not need any prior governmental approval unless being specifically required by the relevant ministry, for example, in the oil and gas and mining sectors there are specific approvals required.

Restrictions on foreign investments typically in the following forms:

  • 100% closed to FDI;
  • minimum Indonesian shareholder requirement (joint venture); or
  • special requirements of having co-operation with micro, small, medium enterprises.

In February 2021, Indonesia revamped its policy with regard to foreign investment by moving away from a highly protectionist stance to a more open stance with the issuance of the so called “Positive List” being Presidential Regulation No 10 of 2021.

The antitrust regulations in place in Indonesia are:

  • Law No 5/1999 on the Prohibition of Monopolistic Practices and Unhealthy Business Competition (the Indonesian Competition Law);
  • Government Regulation No 57/2010 on Mergers, Consolidation and Acquisition of Shares that may result in Monopolistic or Unfair Business Competition Practices (GR 57/2010); and
  • Indonesian Competition Commission (KPPU) Regulation No 4/2012 on Guidelines for the Imposition of Penalties for Late Notification of a Merger, Consolidation of a Company or an Acquisition of Shares in a Company (the Guidelines on Penalties for Late Notification), among others.

The primary regulation of concern for acquirers is Law No 13 of 2003 on Manpower (as amended) which provides the opportunity to workers to seek termination due to a change of control, in the event there is a change to the terms and conditions of employment (remuneration and benefits) as caused by the company post completion. However, this concern has partly been addressed by the new Job Creation Law which give more certainties to the share holders to maintain the employees in connection with acquisition of a company.

In general, the review on FDIs will be conducted post completion by the “post-audit” committee, which are ad-hoc in nature and is made of several government bodies of the Trade Ministry, Investment Board (colloquially known as the BKPM), and the relevant line ministry. Otherwise, the FDI is to be specifically regulated and supervised by the line ministry or other government institution supervising the industry (eg, Indonesian FSA or central bank), in accordance with the relevant regulations.

Recently, the government introduces Law No 11 of 2020 on Job Creation and numerous implementing regulations, particularly residential Regulation No 10 of 2021 on Investment and Business Lines related to business sectors that are open, conditionally open, or closed for foreign investment. These new regulations revolutionary change from the previous restrictive foreign-investment paradigm to one that is essentially permissive, with many sectors that were previously reserved for local player or must be co-owned with local player are now fully open or have more relaxed foreign ownership limitation.

Further, the new regulation identifies 245 business fields as priority sectors to be assisted by fiscal and non-fiscal incentives. Fiscal incentives comprise tax holidays and allowances, plus investment and customs and excise facilities. Non-fiscal incentives include licensing, infrastructure, energy, raw-material, immigration, labour and other facilities. It is expected that the generally more relaxed approach to foreign investment above would inevitably lead to more M&A transactions. 

There have been no significant changes to takeover law itself, which is part of the law regulating limited liability companies. It is expected that there will not be any significant changes in the coming 12 months.

This is not customary in Indonesia.

It is mandatory for companies in Indonesia to report any change in shareholdings to the Minister of Law and Human Rights in order for it to be recorded in the company registry maintained by the Minister, regardless the percentage or materiality. This information can be accessed by the public through the database of the Minister of Law albeit with some prescribed fees. In addition, disclosure in regard prospective shareholding must also be made to the public by way of announcement in a national newspaper, if one contemplate to acquire a company and result in the change of control in the relevant company.

As regards listed companies, disclosure regarding shareholding must be made for shareholders with at least 5% shareholding in a listed company, meaning it is separated from “public” shareholding in that company. There are generally administrative requirements.

Typically, the articles of association of a company contains provisions related to shareholdings, such as a need to secure GMS approval to transfer shares or a need to first offer the other shareholders before a shareholder can transfer its shares to other parties. These requirements may have an impact or provides a hurdle in the context of stakebuilding, inter alia to reach the necessary quorum thresholds mandated in the articles of association. In addition, the law also prescribes an increase in shareholding by way of subscription of new shares or converting debts into shares are subject to GMS approval.

In terms of external factors, depending on the line of business of the target company, a need to secure approval from certain governmental body to purchase shares or increase shareholding in a company may also prove as a hurdle, either in terms of level of scrutiny or timing of the process.

In the context of M&A, deals involving derivatives are generally allowed and common.

There is no specific disclosure or filing/reporting obligation related to purchase or subscription of derivatives. Disclosure must be made however, when converting debt (including from debt securities) into shares in a company, by way of newspaper announcement. Reporting/filing under the competition laws to the KPPU is subject to certain thresholds and criteria generally apply (not specific to derivates). 

In terms of acquisition of a non-listed company, there is generally no requirement to make known the purpose of the acquisition or the intention regarding control of the company even in the newspaper announcement and the announcement made to employees in regard such acquisition. However, in certain business sectors such as financial services, the purpose and intention of acquisition must be disclosed particularly to the authority as part of the assessment by the authority.

This depends on the type of the company. When acquiring a private company (non-listed companies), the only disclosure obligations are to make announcement in national newspaper and to the employees of the relevant company itself in 30 days before the GMS to resolve on the plan. This will be the stage after parties enter into a definitive transaction document such as conditional shares purchase or subscription agreement.

If the acquisition is related to publicly listed company, the disclosure would depend on the materiality of the transaction, but in some cases it depends also to whether or not the buyer decides to announce to the public (through newspaper or the stock exchange website) that it is in negotiation with the seller. If the buyer elects to announce the negotiation, it must announce information and development of the negotiation within two business days after the development in the negotiation (typically evidenced by a signing of a definitive agreement, eg, a CSPA). Once the acquisition is effective, the buyer must announce the completion in a newspaper or stock exchange website at the latest one business day after such completion (if it resulting from increase of capital without pre-emptive rights) or after the latest share distribution (if from rights issue).

The timing of disclosure and the legal requirements are generally the same.

The scope may vary from one transaction to another, but the usual ones would cover the following aspects.

  • Corporate documents – this includes review of deed of establishment, articles of association and its amendments, as well as documents related to the past transfer of shares in the target company. 
  • Licences – review of the following licences held by the company:
    1. general licences, ie, those that should be possessed by any limited liability in general such as Business Identification Number (NIB), Tax ID (NPWP), etc; and
    2. business licences, ie, those specifically related to the business activities performed by the target company.
  • Manpower – review of general compliances with manpower regulations such as reporting requirement, compliance with minimum wage, as well as sample of employment contracts between the company and its employee.
  • Agreements – review of material agreements where the company is a party to, with the primary aim to check if there is any limitation/restriction in the agreements that may be relevant to the proposed transaction, eg, restriction on increase of capital, transfer of shares or obligation to notify counterparty if any changes to the shareholdings, etc.
  • Assets – general review of assets, with emphasise to verify the validity of the ownership check if any fixed assets are being secured as collateral to any creditor.
  • Insurance – general review of insurance policies maintained by the company.
  • Litigation – to check if the company as an entity, its directors and commissioners, or any of its assets are currently being involved in or threatened with any dispute with third party.

Generally, the scope remains the same from before the pandemic, but we note that more and more is specifically asking to review termination or force majeure clauses in the contracts involving the target company.

It is very common that exclusivity is demanded by a bidder to the seller for certain period of time in which they expect the deal to be closed. In market practice, the typical exclusivity period may range from three to six months since the initial MOU.

Definitive agreements are permissible and common.

This will depend on the speed of the transaction, but typically deals to acquire private company (non-listed) are completed within three to nine months from the initial negotiation, followed by due diligence, preparation and signing of transaction documents, conditions precedent fulfilment, and signing of the mechanical documents (shares purchase agreement or GMS resolutions to approve increase capital/shares issuance). The length to acquire listed company is obviously longer, and it can take up to a year as there are various additional obligations imposed on this type of company compared to its non-listed counterpart.

In the early days of the pandemic, lockdown policies did hurt the timeline and caused delays particularly if the deal requires government/authorities’ involvement, eg, if approval or assessment from government is needed. The operation of the government is making steps towards its normal procedures, so it is expected that there will be less hindrance to deals timeline.

A mandatory offer is triggered anytime a change of control arises in a public company.

The most common consideration methods used in Indonesian M&A market is by cash. Value gaps occur mostly in financial institutions where non-performing loans play a big role in creating value discrepancies. Common tools are escrow arrangements to set-off any non-performing loans after within the space of one year and also outright carving out of non-performing loans at closing, to be acquired by the exiting/selling shareholders.

Typical conditions include governmental approvals, compulsory announcements and other statutory requirements. No restrictions on the use of offer conditions.

No information is available in this jurisdiction.

Business combinations can be conditional on the bidder obtaining financing. The reality is that buyers often require financial support in order to complete acquisitions. That said, acquisition in certain sectors, particularly financial services sectors, requires the funding for acquisition to come from the buyer’s own resource, ie, it cannot be sourced from external loans. The rationale behind this requirement is because the Financial Services Authority (OJK) wants to ensure that the player coming into Indonesia’s financial business landscape has an adequate capital and strong financial viability in the hope to prevent or minimise the risk of a collapse which may trigger a domino effect in the highly-regulated financial sector. 

The most common deal security measures are by way of inclusion of non-solicitation provisions in the transaction documents, albeit the terms may vary from one deal to another, eg, in terms of coverage of the provisions, time limitation, etc. In light of the ongoing pandemic, parties have put different levels of attention towards force majeure provisions in transaction documents to manage the risks, principally by making sure that the pandemic ongoing on the date of the transaction document cannot be classified as a force majeure event as it is already known to the parties from the beginning. Conversely, it seems that parties would like more flexibility towards conditions and timing of the deal so as to manage the risk of delays due to the current climate, particularly if regulatory body’s involvement is needed in the deal.

A party does not necessarily need to own 100% ownership in a company to gain full control of the company. Most of the corporate actions or resolutions reserved to the GMS under the Company Law require the approval of 75%, 66.6% or simple majority voting rights. In terms of shareholdings, a shareholder can also seek a control or additional control in the company via reserved matters arrangement which would enable it to have a say or veto certain action even with a minority shareholding.

Aside from that, a party can secure governance rights by having control of the board of directors, typically by the rights to nominate majority members of the board of directors or to nominate key member, eg, in charge of financial of the company. In addition, although has a lesser influence compared to the board of directors, a party may want to consider having the rights to nominate members to the board of commissioners, which is an organ of an Indonesian company which has power and authorities to supervise the board of directors.

Generally, shareholders can be represented by proxy in the GMS and also vote by proxy (if indeed they have voting rights shares). In the casting of votes, a vote cast by a shareholder shall apply to all of its shareholdings. It is not possible for a shareholder to split vote or to authorise more than one proxy for part of its shareholdings. In addition, In casting the vote, a shareholder cannot be represented by proxy who is a member of the board of directors, board of commissioners, or an employee of the company.

Indonesian law does not explicitly provide the ability to squeeze-out a minority shareholder. As such, the typical dilution method would only reduce the size of the shares of the minority shareholder but would not push it out entirely.

The necessity of irrevocable commitments depends on the transaction in question. However, any commitment of approval shall typically be required as a condition to closing. Should the approval be passed yet the deal not reach closing, the principal shareholder can simply unwind the approval.

A bid is made public if it targets or launched by a listed company, see 5.1 Requirement to Disclose a Deal. There is no requirement to publish a bid if it only involves non-listed companies, aside from the requirement to make announcement in the newspaper in regard a proposed acquisition. The main purpose of this announcement is to make the creditors aware of such acquisition and provide a chance to creditors if they would file an objection towards that.

In a private company, there is no need to disclose any information with regard to an issuance of shares unless the same would amount to a change of control. In a public company, there are statutory disclosure requirements anytime of there is a rights issuance.

There are not general regulatory requirements for bidders to provide financial statement, except for certain areas of businesses for instance in connection with financial institutions which must apply for an approval with the regulator which require them to produce audited financial statements. Audited financial statements prepared by Indonesian accountants will need to adhere to the Indonesian GAAP.

There is generally no requirement to disclose the transaction documents in full. Only certain information is required to be disclosed, for example in regard to pricing in terms of acquisition of listed company. Possible disclosure of certain terms of the transaction documents may also be necessary to be made to the authority, particularly if the transaction requires an approval from the relevant authority. 

The board of directors is in charge of the operations of the company and to represent the company (within and outside the court), and to bind the company with third party. The board of directors must perform its fiduciary duty not specifically to shareholder, but rather to the company that is to act based on the best interest of the company in accordance to its articles of associations.

It is common for boards of directors to establish a special or ad hoc committee to help them with an M&A transaction. However, such committee is not meant to address issue of a conflict of interest, but rather to assist with the matter of the deal generally. In fact, a director is not allowed to represent a company if conflict of interest arises, and in such an event another director should represent the company.

If somehow all directors have conflicts of interests, the rule is to have the board of commissioners represent the company. However, if the board of commissioners also have conflict of interests, Indonesian Company Law provides the right to the shareholders to appoint another party.

Indonesian Company Law adopts similar concept to the business judgement rule in that it provides that the board of directors shall conduct management of the company in the best interest of the company and within the objectives and purposes of the company. That said, the boards of directors shall not be held liable for losses if:

  • it can substantiate that the losses do not result from their fault or negligence;
  • it has conducted the management in good faith and prudence in the interest of the company and within the objectives and purposes of the company;
  • it has no conflict of interest whether directly or indirectly in the acts of management that result in losses; and
  • it has taken preventive measures against the arising or continuation of losses.

Notwithstanding the above, Indonesian Company Law provides the rights to the shareholders having or representing at least 1/10 of voting rights to, in the name of the company, institute legal proceedings in the district court against a member of the board of directors who due to their fault or negligence has resulted in losses to the company.

Therefore, it is up to the trial process in courts whether it can be proven if there is any fault by the board of directors in the losses suffered by the company, by taking into account the general carves out regarding liability of the directors as noted above.

The typical independent advices sought after by directors in the context of M&A include legal, finance, tax, and valuation advices. Whilst previously independent advice was only sought after by the buyer’s side, recent trends in Indonesian market suggests that more and more sellers are seeking independent advices too, for instance through vendor due diligence, albeit typically with different level of scrutiny compared to when it is done for the buyer’s side.

Generally, conflicts of interest have not been the subject of judicial scrutiny.

This is not applicable in Indonesia.

This is not applicable in Indonesia.

This is not applicable in Indonesia.

This is not applicable in Indonesia.

This is not applicable in Indonesia.

This is not applicable in Indonesia.

This is not applicable in Indonesia.

This is not applicable in Indonesia.

Shareholder activism is not really popular in Indonesia. Nevertheless, Indonesian Company Law provides a protection towards shareholders, including minority shareholders by giving them a right to request the company to buy its shares at a reasonable price in the event such shareholder do not approve the following acts of the company that harms such shareholder or the company:

  • amendments to the articles of association;
  • transfer or encumbrance of the majority of the net assets of the company; or
  • a merger, consolidation, acquisition, or demerger/spin-off of the company.

Because shareholder activism itself is not really popular in Indonesia, it is very seldom and almost unheard that a shareholder activist encourage company to enter into certain transaction or action.

Noting that shareholder activism is not common in Indonesia, we have not seen a shareholder activist interfere with the completion of transaction. Nonetheless, as pointed out in 11.1 Shareholder Activism, any shareholder has a right to request the company to buy its shares at a reasonable price if it does not approve of certain acts of the company, including M&A. However, it should be noted that the exercise of such right shall not put a stop to the transactions.

ABNR Counsellors at Law

Graha CIMB Niaga 24th Floor
Jl. Jenderal Sudirman Kav 58
Jakarta 12190

+62 21 250 5125

+62 21 250 5001
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Law and Practice in Indonesia


ABNR Counsellors at Law is one of Indonesia’s longest-established law firms (founded 1967), and pioneered the development of international commercial law in the country following the reopening of its economy to foreign investment after a period of isolationism in the early 1960s. ABNR has over 100 partners and lawyers (including two foreign counsel), making it one of the largest independent, full-service law firms in Indonesia and one of the country’s top-three law firms by number of fee earners, providing the scale needed to simultaneously handle large and complex transnational deals across a range of practice areas. The firm also has a global reach as the exclusive Lex Mundi (LM) member firm for Indonesia since 1991. LM is the world’s leading network of independent law firms, with members in more than 100 countries. ABNR’s position as LM member firm for Indonesia was reconfirmed for a further six-year period in 2018.