Corporate M&A 2024 Comparisons

Indonesia’s M&A landscape has shown itself to be resilient and dynamic, especially in the aftermath of the COVID-19 pandemic. After a notable decline in 2020, the M&A market rebounded strongly in 2021 with 103 transactions, representing a 186% surge compared to the previous year, albeit with a total transaction value of USD44 million. This upward trajectory continued in the first quarter of 2023 with 26 deals, an 18% increase in volume from the preceding quarter, with a transaction value of USD2.2 billion. Despite a 57% drop in value compared to the prior period, this level of activity still surpasses pre-pandemic figures and aligns with the market’s performance in the third quarter of 2022.

M&A activity in Indonesia is predominantly characterised by deals under USD500 million, indicating a vibrant market for small-to-midsize enterprises (SMEs). These smaller deals tend to be more successful due to lower risk, minimal financing needs, and fewer regulatory hurdles, making them an attractive segment for both local and foreign investors. 

Over the past year, various notable sectors and companies have been active in the M&A market, with technology companies emerging as key players. Early 2024 saw a surge in M&A activity involving start-ups, including a significant merger between Tokopedia, a prominent e-commerce platform in Indonesia, and TikTok. The agreement to merge these two businesses was finalised in December 2023, with the objective of bolstering the scale of Indonesia’s e-commerce market.

On the regulatory side, the Indonesian government has been proactive in enhancing the investment climate through legislative reforms aimed at attracting investment, simplifying business operations, and digitising registration and licensing processes. Key reforms include Law No 11 of 2020 regarding Job Creation, as further enacted by Law No 6 of 2023 (the “Job Creation Law”), and Law No 4 of 2023 regarding the Development and Strengthening of the Financial Sector (“Omnibus Law on the Financial Sector”), which have been instrumental in streamlining business conduct and encouraging investment in the country.

Technology, Media and Telecommunications

In the past year, the technology, media and telecommunications (TMT) sector experienced significant growth in M&A activity. This surge was largely driven by the COVID-19 pandemic, which accelerated the adoption of technology across various commercial activities, especially in e-commerce. The aftermath of the pandemic continued to fuel M&A activity in this space, highlighted by notable transactions such as the merger between Tokopedia and TikTok in 2023. PT Bukalapak Tbk expanded its e-commerce footprint by acquiring iPrice, a Malaysia-based e-commerce company, marking another significant move in the sector.

Banking

The banking industry in Indonesia saw several prominent M&A deals over the last 12 months, primarily focused on expanding retail banking services. Key transactions included PT Bank UOB Indonesia’s acquisition of Citibank Indonesia’s consumer banking business, PT Bank Danamon Indonesia Tbk’s purchase of Standard Chartered Bank Indonesia, and PT Bank OCBC NISP Tbk’s acquisition of PT Bank Commonwealth. These strategic moves underscore the banking sector’s efforts to strengthen retail operations and enhance service offerings in Indonesia.

Data Centres

Another emerging trend involves the acquisition of data centres in Indonesia, highlighted by BDx Indonesia’s notable acquisition of approximately 40 data centres owned by PT Indosat Tbk (ISAT), in a transaction valued at IDR2.6 trillion. These data centres include carrier-neutral co-location and edge sites situated in key cities such as Jakarta, Surabaya, Batam, Medan, Makassar, Bandung, and Semarang. This surge in acquisitions can largely be attributed to the Indonesian government’s initiative to introduce a regulation mandating the storage of personal data within Indonesia. It has been reported that this regulation will amend Government Regulation (GR) No 71 of 2019 regarding the Implementation of Electronic Systems and Transactions, which currently permits electronic data storage abroad.

In Indonesia, acquisitions are categorised into two main types: asset acquisitions and share acquisitions.

Share Acquisitions

Share acquisitions can occur either directly, by purchasing shares from existing shareholders, or indirectly, through the company’s board of directors (BOD) issuing new shares. This is regulated under Law No 40 of 2007 regarding Limited Liability Companies, as last amended by the Job Creation Law (the “Company Law”).

Asset Acquisitions

Asset acquisitions are increasingly popular, especially for individuals or entities looking to acquire specific business units. This method involves a more varied process, depending on the type of asset being transferred, as each asset class is governed by different legal requirements. For tangible assets, the process typically involves signing a sale and purchase agreement or a transfer agreement, followed by the physical handover of the assets. Intangible assets require the execution of a deed of assignment to transfer ownership. Meanwhile, the acquisition of land and buildings necessitates the signing of a deed of transfer in the presence of a land deed officer and subsequent registration of the deed in the Land Registry.

Sale and Purchase Agreements

These transactions are generally formalised through a sale and purchase agreement executed by the parties involved, whether they are acquiring or disposing of the company or its assets.

In Indonesia, the main regulatory bodies overseeing M&A include the Ministry of Law and Human Rights (MOLHR) as the main regulator, the Investment Coordinating Board (Badan Koordinasi Penanaman Modal or BKPM) for investments, the Financial Services Authority (Otoritas Jasa Keuangan or OJK) for public offerings and transactions conducted by financial service companies, and the Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha or KPPU) to ensure fair competition.

However, the specific regulators involved can vary depending on the industry of the company involved in the M&A transaction.

In February 2021, Indonesia updated its foreign investment policy to be more welcoming, moving away from previous restrictive measures. This was officially introduced through the “positive investment list” under Presidential Regulation (PR) No 10 of 2021, later amended by PR No 49 of 2021 (PR 10/2021 as amended).

This new regulation specifies that foreign investors can only engage in large-scale business activities, that is, entities with a net worth or total assets exceeding IDR10 billion, excluding the value of their land and business premises. The regulation categorises business sectors into three groups for foreign investors: completely closed, open with requirements, and those requiring partnerships with local micro, small and medium enterprises (MSMEs). 

Sectors completely closed to foreign investment include:

• the cultivation and industry of Class I narcotics;
• gambling and casino operations;
• fishing of endangered species listed in Appendix I of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES);
• the collection or use of coral for building materials, aquariums, and souvenirs/jewellery, including live or recently dead coral;
• the manufacture of chemical weapons;
• the production of chemicals harmful to the ozone layer; and
• the alcohol-containing liquor industry, alcohol-containing beverages industry (wine), and malt-containing beverages industry.

In Indonesia, antitrust regulations crucial for mergers and acquisitions include the following:

• Law No 5 of 1999 regarding the Prohibition of Monopolistic Practices and Unfair Business Competition, as last amended by the Job Creation Law (the “Antimonopoly Law”).
• GR No 57 of 2010 regarding Mergers, Consolidations of Business Entities, and Company Share Acquisitions that could lead to monopolistic practices and/or unfair business competition.
• KPPU Regulation No 3 of 2023, regarding the Assessment of Mergers, Consolidations, or Acquisitions of Shares and/or Assets that may result in monopolistic practices and/or unfair business competition (KPPU Regulation No 3/2023).

The recently implemented KPPU Regulation No 3/2023 introduced several changes to KPPU Regulation No 3 of 2019 on the Assessment of Mergers or Consolidations of Business Entities or Acquisitions of Shares in Companies (KPPU Regulation No 3/2019). These changes include the following.

Corporate Actions (Assessments of Mergers, Consolidations and Acquisitions of Shares and/or Assets Which May Result in Monopolistic and/or Unfair Business Competition Practices)

KPPU Regulation No 3/2023 expanded the scope of criteria for corporate actions that must be notified to the KPPU, namely:

• meeting of the asset and/or sales value threshold;
• change of control;
• transactions that are not classified as transactions between affiliated actors;
• transactions between actors that own assets and/or make sales in Indonesia;
• asset acquisitions that increase the ability of business entities that acquire the assets to control certain markets; and
• asset acquisitions that are not classified as exempted asset acquisition transactions.

Submission of Notifications

Previously, under KPPU Regulation No 3/2019, notifications were to be submitted to the KPPU using designated forms outlined in the regulation’s appendix, which were required to be filled out and submitted by mail. With the revised framework under KPPU Regulation No 3/2023, notifications on corporate actions must be submitted electronically by business actors through the official notifications website of the KPPU.

The above regulations also establish that a post-merger filing obligation is mandatory for mergers, consolidations, or share acquisitions that meet certain criteria, known as the threshold test and control test. The head of the KPPU also provides specific guidelines under the Antimonopoly Law to prevent anti-competitive actions.

The threshold test mandates a post-merger filing if the transaction meets one of the following conditions: 

• the combined asset value of the involved parties in Indonesia exceeds IDR2.5 trillion (about USD159 million); or
• the combined sales or turnover value of the parties in Indonesia exceeds IDR5 trillion (about USD318 million).

The control test specifies that a post-merger filing is necessary if the merged or surviving entity: 

• holds more than 50% of shares or voting rights in the company; or
• holds 50% or less of shares or voting rights but has the capacity to influence the company’s management and/or policies.

Transactions between affiliated entities do not require a merger filing in Indonesia. 

In Indonesia, the primary labour regulations include Law No 13 of 2003 regarding Labour, which has recently been updated by the Job Creation Law (the “Labour Law”), along with its implementing regulations, including GR No 35 of 2021 regarding Temporary Employment Agreements, Outsourcing, Working Hours and Breaks, and Termination of Employment Relationships.

When a company undergoes a corporate action like a merger, employees must be informed of these actions in writing. Specifically, if a merger occurs and an employee chooses not to continue the employment relationship or the employer decides not to retain the employee, the employee is entitled to certain compensation, which includes severance pay (uang pesangon), service appreciation pay (uang penghargaan kerja), and compensation for rights (uang penggantian hak). These compensation amounts are calculated based on the employee’s length of service and other relevant regulations.

If the companies involved in a merger each have a collective work agreement, the agreement that is more favourable to the employees will be applied. 

There are no national security review requirements for commercial M&A transactions in Indonesia.

There have been at least three significant developments in Indonesia in the past three years related to M&A.

Foreign Direct Investment

In May 2021, Indonesia made significant changes to its foreign investment policies through PR 10/2021 as amended. This regulation opened up several sectors to foreign investment, making it easier for international investors to own businesses in Indonesia and likely boosting M&A activity in the country. Key sectors that saw restrictions eased for foreign investment include the following.

• Construction: now fully open to 100% foreign ownership.
• Logistics and distribution: also open to 100% foreign ownership, with the exception of specific freight and courier services.
• Pharmaceutical and medical devices: foreign investors can now fully own companies in this sector, although certain raw materials and pharmaceutical products remain restricted.
• Technology, media and telecommunications (TMT): this sector is open for full foreign ownership, excluding private television broadcasting and programming.
• Energy and mining: specific services related to construction, surveying, and power generation within this sector are now open to 100% foreign ownership.

These changes signify a more lenient approach to foreign investment in Indonesia, potentially attracting more international investors and enhancing the country’s economic growth through increased M&A activity.

Notarisation Requirements for Share Acquisition Documentation

Under the Company Law, share acquisition documentation (ie, share transfer agreement) may be executed in private and it is not mandatory for the documentation to be made in notarial deed form as long as the share acquisition does not result in a change of control.

However, recent practices indicate a shift in legal norms. A significant legal development is the now-established requirement for share acquisition documentation to be executed in notarial deed form regardless of whether the share acquisition results in a change of control. Failure to do this will cause the MOLHR not to issue its approval and/or acknowledgement in respect of the share acquisition.

Personal Data Notification Requirement

Indonesia introduced its first comprehensive personal data protection law, ie, Law No 27 of 2022 regarding Personal Data Protection, on 17 October 2022. A key rule in this law requires any legal entity going through a merger, acquisition, separation, consolidation, or dissolution to inform the people whose personal data it handles. This means the company must notify these individuals about the transfer of their personal data both before and after these corporate actions take place. The law allows for this notification to be made directly to the individuals affected or through a public announcement in the digital or print media. The specifics on how to conduct this notification will be detailed in future regulations that have not yet been enacted.

The regulations governing takeover law in Indonesia are outlined in the Company Law. There have been no amendments or changes to takeover law in the past 12 months.

Stakebuilding, where a bidder buys shares in the target company before initiating an official offer, is uncommon in Indonesia. However, there are instances where stakebuilding strategies occur in Indonesia. In such cases, if a bidder opts to build a stake in a target company, they can do so either by directly increasing their shareholding or through derivatives. The direct increase in shareholding is the more traditional approach, but the use of derivatives is gaining popularity for commercial or tax considerations. 

In general, the MOLHR maintains a comprehensive registry containing corporate information on all limited liability companies in Indonesia, including details of their shareholding. Additionally, any changes to a company’s shareholding composition must be recorded in and acknowledged by the MOLHR and documented in this registry, where such information is accessible to the public. A buyer intending to acquire a controlling stake in a non-public company will also need to announce the transaction publicly through a nationally circulated newspaper before the buyer and seller can close the transaction.

Additionally, an obligation to disclose arises when an investor holds a 5% interest in the outstanding shares of an Indonesian public company. Once a shareholder surpasses this 5% threshold, they are required to report to the OJK regarding any subsequent transfers of shares, for as long as their ownership remains above 5%. If their ownership drops below the 5% threshold, the shareholder must still report this decrease in ownership (eg, if ownership changes from over 5% to under 5%). After this reporting, no further disclosure is necessary for subsequent transfers of shares, provided the ownership remains below 5%.

Any increase or change in shareholding in most non-public companies requires shareholder approval, and usually, the articles of association of a company include provisions concerning shareholding.

The Company Law sets out the minimum quorum and voting requirements for shareholder meetings. However, higher thresholds can be established in the articles of association, which take precedence over those outlined in the Company Law. The requirements provided may have an impact on or be a hurdle to stakebuilding. For example, securing shareholder approval can pose challenges, albeit not consistently, especially in companies with a large number of shareholders where meeting the quorum requirements can be challenging. Other obstacles may include obtaining the necessary licences or approvals from relevant government authorities to incorporate foreign elements into the shareholding structure, particularly in industries such as the payment industry.

Many acquisition transactions are preceded by an agreement involving derivatives, such as a subscription agreement to convertible or exchangeable bonds or a call/put option agreement. These are allowed under Indonesian law and there are various reasons for pursuing such agreements. The most notable reason is tax efficiency, while another is security (eg, to secure repayment in a loan arrangement). 

There is no disclosure requirement when the stakebuilding is carried out using derivatives (eg, convertible bonds, call/put options). However, in certain instances, reporting or filing with the Indonesian competition commission (KPPU) may be necessary when derivatives are exercised or converted into shares, subject to specific thresholds. Disclosure by way of newspaper announcement is required when converting debt (including from debt securities) into shares in a company.

When a buyer intends to acquire a controlling stake in a non-public company, they must publicly announce the transaction through a nationally circulated newspaper before the buyer and seller can finalise the deal. However, there is typically no obligation for the buyer to disclose their intention regarding control of the company.

However, this provision might differ for heavily regulated industries such as the financial sector, where disclosure of the purpose and intention of the acquisition is required. For example, in the case of a strategic investor seeking to acquire and control a specific bank, they are required to disclose their intentions regarding the future direction of the bank’s business during their “fit and proper” test.

Disclosure obligations depend on the type of company, such as non-public and public. As previously stated, the acquisition of a non-public company obliges companies to announce the transaction through a nationally circulated newspaper before closing the deal.

For an acquisition related to a public company, companies are also obliged to announce the transaction through a nationally circulated newspaper or on the stock exchange website. In addition, a prospective controller has the option to announce negotiations with the seller in a nationally circulated newspaper. This announcement is usually made if the buyer expects a rise in the price of the public company’s shares, which would affect the minimum price at which the buyer must purchase the shares during any subsequent mandatory tender offer (MTO). If the prospective controller chooses not to disclose information resulting from the negotiations to the public, it is imperative that the parties involved maintain confidentiality regarding the information generated from these negotiations.

Indonesian market practice regarding the timing of disclosure is commonly in accordance with the requirements stipulated under applicable laws and regulations.

Although not specifically required by any laws and regulations, companies typically perform due diligence on a target company prior to an acquisition. The due diligence commonly covers the following:

• corporate documents;
• compliance with general and industry-specific licensing and reporting requirements;
• tax;
• assets;
• material agreements;
• employment;
• intellectual property; and
• disputes.

It is common for offerors to demand an exclusivity period during the earlier stages of deals (eg, during term-sheet negotiations and due diligence). This exclusivity period typically lasts for three to six months from the signing of a term sheet.

Definitive agreements are generally permitted and are commonly used in Indonesia.

The acquisition or selling of companies typically takes around three to six months, which covers the term-sheet negotiation stage, due diligence, share purchase agreement negotiation stage, fulfilment of conditions, and closing. This process may take longer if the acquisition is made through a rights subscription over a public entity which requires a general meeting of shareholders to be convened to obtain the shareholder approvals, as well as if there are hurdles throughout the pre-closing stage, especially during the due diligence process.

The mandatory offer threshold is not applicable to M&A transactions involving non-public companies. However, for M&A transactions involving public companies, a mandatory offer threshold is required following a change of control resulting from the transaction.

In the Indonesian M&A landscape, cash is the predominant form of consideration, especially in direct acquisitions and new rights subscriptions from public companies. When considering acquisitions through the subscription of newly issued shares by non-public target companies, the consideration must be either cash or in kind. In direct acquisitions from existing shareholders, the consideration can take the form of either cash or shares in another company. Some of the common tools in bridging value gaps include escrow agreements, holdbacks of a certain percentage of the deal, and the carving out of non-performing loans.

A new controller of a publicly listed company is obliged to make an MTO to the remaining minority shareholders as a result of acquiring a controlling stake from an existing controller of the public company. A common condition for a takeover offer includes regulatory approvals. To date, there is no restriction regarding the use of offer conditions.

In the context of tender offers in Indonesia, there is no minimum acceptance condition for MTOs. This is because bidders are mandated to present the offer only after securing a controlling stake and gaining control of the company. Specifically, they must acquire shares from each participating minority shareholder. Therefore, the concept of a minimum acceptance condition becomes irrelevant due to the requirement to purchase shares from all eligible minority shareholders.

In many M&A settings, buyers commonly require third-party financing to acquire shares in a target company. It is a permitted and common practice for the buyer and seller to agree that the buyer has secured proper financing prior to the completion of an acquisition. This condition is particularly important in scenarios involving publicly listed targets or situations such as a voluntary tender offer (VTO), where a statement on the availability of funds is required before announcing an offer. Additionally, if the acquisition is in the financial services sector, the OJK requires that the funding for the acquisition originates from the buyer’s resources rather than external loans.

Deal security measures are permitted in Indonesia, although they are uncommon. One example is break fees. In smaller transactions involving individual local vendors, some vendors may stipulate break fees as part of the deal terms. These break fees typically amount to half of the costs incurred by the vendors, including legal fees and other related expenses.

A controller is not required to possess 100% ownership of a target company to exert control over the company. With ownership of more than 75% of the shares, a shareholder would hold sufficient voting power to approve any corporate actions subject to shareholder approval under the Company Law.

Resolutions at a general meeting of the shareholders (GMS) are commonly passed by consensus. If consensus cannot be reached, a resolution must be approved by more than half of the shares in attendance or represented. However, certain corporate actions require higher approval thresholds, such as the amendment of a company’s articles of association, which requires approval at a meeting where at least two thirds of the company’s voting shares are represented and at least two thirds of the shares in attendance must approve the resolution. Additionally, GMS approval is required for certain significant corporate actions like mergers, consolidations, acquisitions, bankruptcy, dissolution of the company, and transfers or pledges of the company’s assets, as security for loans comprising more than 50% of the company’s net assets in one or more related or unrelated transactions. In this instance, at least three quarters of the shares in attendance must approve the resolution.

Additional governance rights may be established, provided they are agreed upon by the shareholders either in a shareholders’ agreement or in the articles of association. These rights may include specifying certain reserved matters requiring unanimous approval or creating a class of shares that grant specific rights to particular shareholders.

As a general rule stipulated in the Company Law, one share of a company bears one vote, where each share is issued under the shareholder’s name. The issuance of bearer shares is not allowed in Indonesia. Pertaining to voting by proxy, the Company Law allows shareholders to appoint a proxy to attend the shareholders’ meeting and cast a vote on the shareholder’s behalf via a power of attorney.

In the context of Indonesia, there is no explicit regulatory framework for implementing squeeze-out mechanisms, which involve the compulsory acquisition of shares from minority shareholders following a successful tender offer, or transforming a publicly listed company into a private one. To date, the OJK has not established definitive guidelines that outline the process for acquiring a publicly listed company with the intention of delisting it and converting it into a private entity. Instead, the OJK typically provides guidance through individual “letters” that detail the procedures and requirements for each specific case.

For a company to delist from the public market, it must obtain approval from a GMS as well as a “no objection” notice from the OJK regarding the tender offer statement submitted by the company.

In negotiating or signing a conditional share purchase agreement, obtaining an irrevocable commitment from the principal shareholder is common practice, particularly when shareholder approval is necessary. This commitment typically serves as a condition for closing the deal. If the deal does not proceed after obtaining approval, the principal shareholder may have the flexibility to withdraw their commitment.

A bid becomes public when it involves a listed company, either through an MTO following a change of control, or a VTO. The process requires the offeror to first publicly declare their intention to make an offer. This initial announcement is subject to review and approval by the OJK. The offeror is permitted to proceed with the MTO or VTO only after receiving a formal statement from the OJK indicating that there are no objections to the tender offer statement.

Regarding business combinations involving a non-public company, announcement through a nationally circulated newspaper is mandatory by law. Typically, the announcement will involve basic information regarding the buyer and the target company, as well as information regarding the change of control over the company. No other forms of disclosure are required.

If the share acquisition is made over a public company through the issuance of shares, such issuance will have to be disclosed by the target company in a nationally circulated newspaper and approved by a GMS.

Under the existing Indonesian legal framework, there are no requirements regarding the provision of a financial statement. However, there may be circumstances requiring the submission of audited financial statements, for instance, in areas involving financial institutions seeking regulatory approval. In this case, such financial statement must adhere to the Indonesian Generally Accepted Accounting Principles (GAAP).

Disclosure of transaction documents is not required, either in a non-public or public company merger or acquisition. The pricing, however, must be disclosed in an acquisition of a public company, particularly if an MTO must be conducted by the new controller following the acquisition. This is because the price to be offered by the new controller in an MTO must not be lower than the price used in acquiring the shares in the initial acquisition.

If a shareholders’ agreement is signed when acquiring a public company, it may become necessary to later disclose the key terms of the agreement to the OJK. This is typically the case when the buyer must demonstrate to the OJK that no change of control will result from the transaction and that an MTO will therefore not be necessary.

In a business combination in Indonesia, the board of directors is obliged to perform its fiduciary duty by acting in good faith in the best interest of the company. The board of directors’ primary duty is to be responsible for day-to-day operations and to represent the company. The directors’ duties are not owed solely to the company’s shareholders but to all stakeholders within the company as a whole. Simultaneously, the board of commissioners oversees and monitors the directors.

It is customary for a BOD to form a special or ad hoc committee to aid them in managing an M&A transaction. The board of directors can create a specialised team or committees to support them in supervising the M&A process, which may involve tasks such as identifying potential targets, drafting transaction documents, co-ordinating with external advisers, and negotiating deals. However, ultimately, the final decisions are typically made by the directors themselves.

These committees should not address conflicts of interest but rather, assist with the deal in a general capacity. According to the Company Law, a director cannot represent the company, including in an M&A context, if they have a conflicting interest with that of the company. In such cases, other directors in the company must represent the company (if the company’s BOD consists of more than one director). If all the directors are conflicted, the board of commissioners can represent the company. If both boards are conflicted, the shareholders can appoint another party to represent the company.

In Indonesia, the extent to which courts defer to the judgement of the BOD in takeover situations aligns with the principles embedded in the Company Law. While Indonesia does not formally recognise the term “business judgement rule”, the Company Law requires directors to manage the company based on good faith and in accordance with the company’s objectives and purpose. The Company Law further provides that directors will not be held liable for losses where:

• the losses are not attributable to the directors’ fault or negligence;
• the directors have managed the company in good faith and prudence, and in line with the company’s objectives and purpose;
• the directors have no conflict of interest, either directly or indirectly, in regard to the corporate action taken which resulted in the losses; and
• the directors have taken measures to avoid repetition or continuation of the losses.

Despite the above, the Company Law grants shareholders that hold or represent a minimum of one tenth of the voting rights the right to initiate legal proceedings at a district court on behalf of the company. This legal action can be taken against a board member whose fault or negligence has led to losses for the company. Consequently, court proceedings are required to establish the responsibility of the BOD for the losses incurred by the company, considering the liability factors as outlined earlier.

Directors involved in business combinations in Indonesia often seek diverse, independent outside advice, especially for legal, financial, and tax matters. It is standard practice for a company’s directors to consult with external counsel before finalising any definitive agreements in business combinations. Among others, the identification of the legal feasibility of the transaction along with potential legal issues is crucial. At the same time, financial and tax advice plays a vital role in quantifying financial risks.

Generally, and for the past year, conflicts of interest of directors, managers, shareholders, or advisers have not been the subject of judicial scrutiny in Indonesia.

Hostile bids are not recognised in Indonesia. As previously elaborated, acquisitions in Indonesia can be performed through direct or indirect acquisition.

Under the prevailing Indonesian regulatory framework, there are no defensive measures available for directors in the context of the acquisition of non-public or public companies.

No defensive measures are available for directors in the context of non-public or public company acquisitions.

In general, whatever measures directors take, their fiduciary duty to act in the best interest of the company remains in place, as discussed previously.

Directors cannot “just say no” or resort to actions that could prevent the acquisition of companies in which they hold office.

Litigation in connection with M&A deals is not common in Indonesia.

While litigation related to M&A transactions is relatively rare, the potential for disputes can arise after the transaction documents have been signed. Such disputes often occur if sellers fail to meet the warranties or undertakings stipulated in these documents. In such cases, buyers have a solid foundation to initiate legal action and file a claim in an Indonesian court.

This is not applicable, as litigation in connection with M&A deals is uncommon in Indonesia.

The prevailing Indonesian laws and regulations do not explicitly recognise the concept of shareholder activism. However, the Company Law does provide protection for shareholders, which includes minority shareholders. In the context of M&A transactions, minority shareholders are given the right to request that the company repurchases their shares at a reasonable price if a merger, consolidation, or acquisition of the company may cause the shareholders to suffer losses. Additionally, shareholders are entitled to file a lawsuit against the company if the company’s actions are considered unfair or unreasonable, and if they cause losses to the shareholders.

Apart from the rights that are explicitly granted based on the Company Law, shareholders’ rights may also vary based on the articles of association of the company, as long as their rights do not violate the provisions of the Company Law or other prevailing laws and regulations.

Specifically in the context of public companies, any transaction that carries a conflict of interest which may cause losses to the company, is subject to prior approval by minority or disinterested shareholders, where such approval is given through a general meeting of independent shareholders.

As previously stated, shareholder activism is not regulated under the Indonesian regulatory framework. The rights that are granted to shareholders, including minority shareholders under the Company Law and/or within each company’s articles of association, are commonly not intended to give the shareholders the ability to encourage certain corporate actions of the company. Corporate actions conducted by the company will still be subject to the outcome of the shareholders’ meetings, which does not guarantee the fulfilment of the outcome that minority shareholders are seeking.

The right of shareholders pertaining to the repurchase of shares at a reasonable price is only triggered when a corporate transaction has obtained the approval of the shareholders, but this right will not prevent the corporate transaction from proceeding.