Legal Literacy - This article discusses the basic concepts of mergers, acquisitions, and consolidations, as well as their impacts on companies, markets, and other stakeholders.

In the dynamics of global business, three concepts that often become the center of attention are mergers, acquisitions, and consolidations. These phenomena reflect complex business strategies and are often a major highlight in the corporate world.

Mergers, acquisitions, and consolidations are important strategies used by companies to achieve various business objectives, such as expanding market share, increasing operational efficiency, accessing new resources, or even reducing competition. In the context of today's economic globalization, increasing competition and rapid changes in technology and markets require companies to remain adaptive and innovative in implementing these strategies.

Through an in-depth understanding of mergers, acquisitions, and consolidations, it is hoped that readers can gain broader insights into how corporate dynamics evolve, how strategic decisions are made, and how these things affect the business ecosystem as a whole.

Merger

Article 1 number 9 Law on Limited Liability Companies jo. Article 109 number 1 Job Creation Law defines a merger as a legal act performed by one or more companies to merge with another existing company, resulting in the assets and liabilities of the merging company being transferred by law to the company receiving the merger, and subsequently, the legal entity status of the merging company terminates by law.

An example of a company that carries out a Merger is

  • The merger of PT Aplikasi Karya Anak Bangsa (Gojek) with PT Tokopedia (Tokopedia). The merger of Gojek and Tokopedia in Go-To on May 20, 2021.
  • PT Toyota Astra Motor is one example of a merger company that was inaugurated on April 12, 1971. With a merger with three companies, namely PT Multi Astra, PT Toyota Mobilindo, and PT Toyota Engine Indonesia, PT Toyota Astra Motor was born as a Toyota vehicle importing company.
  • Bank CIMB Niaga is the result of the merger of two financial institutions, namely Bank Lippo and Bank Niaga. This merger was carried out in response to Bank Indonesia's policy requiring banks to have single ownership. To meet these requirements, on June 3, 2008, the two banks merged and formed a new entity named PT CIMB Niaga, Tbk.

Acquisition

Article 1 number 11 of the Limited Liability Company Law jo. Article 109 number 1 of the Job Creation Law defines an acquisition as a legal act carried out by a legal entity or individual to take over shares of a company, resulting in the transfer of control over the company.

An example of a company that carries out an Acquisition is

  • PT XL Axiata Acquires PT Link Net. In June 2022, Axiata Group Berhad and XL Axiata completed the acquisition of 66.03% of Link Net shares with a value of RM2.63 billion or approximately IDR 8.72 trillion. This acquisition is part of XL's efforts to expand the provision of digital and convergence services to the community.
  • Djarum Group Acquires PT Solusi Tunas Pratama Tbk (SUPR). A well-known Indonesian company that has carried out an acquisition is the Djarum Group. Through its company PT Sarana Menara Nusantara Tbk (TOWR), the Djarum Group officially acquired 94.03% of the shares of PT Solusi Tunas Pratama Tbk (SUPR) with a transaction value reaching IDR 16.73 trillion.
  • Medco Group Acquires ConocoPhillips. Mining sector issuer PT Medco Energi Internasional Tbk. The oil and gas issuer founded by businessman Arifin Panigoro succeeded in acquiring all shares issued by ConocoPhillips Indonesia Holding Ltd. (CIHL) with an acquisition value reaching USD 1.35 billion or equivalent to IDR 19 trillion (exchange rate of IDR 14,632 per USD).

Consolidation

Article 1 number 10 of the Limited Liability Company Law jo. Article 109 number 1 of the Job Creation Law defines consolidation as a legal act carried out by two or more companies to merge by establishing a new company which by law obtains the assets and liabilities of the merging company and the legal entity status of the merging company terminates by law. In simple terms, consolidation can be interpreted as the merger of two or more companies by establishing a new business and dissolving the old business.

An example of a company that carries out Consolidation is

  • in the banking sector there is Bank Mandiri; the result of the merger of Bank Bumi Daya, Bank Dagang Negara, Bank Ekspor Impor Indonesia, and Bank Pembangunan Indonesia. Bank Mandiri was inaugurated on October 2, 1998 and has been running until now. When the merger was carried out with these four companies, Bank Mandiri automatically joined BUMN (State-Owned Enterprises). This is because the four banks that carried out the merger were four state-owned banks. Therefore, Bank Mandiri automatically became a BUMN.
  • in the non-banking sector, there is SmartFren; the result of the merger of PT Mobile-8 Telecom Tbk and PT Smart Telecom.
  • Indonesian Professional Reinsurer (IPR), the result of the consolidation of PT. Reasuransi Internasional Indonesia (Reindo), PT. Reasuransi Nasional Indonesia (Nas Re), PT. Tugu Reasuransi Indonesia (Tugu Re), and PT. Maskapai Reasuransi Indonesia (Mare

Differences Between Mergers, Acquisitions, and Consolidations

Mergers, acquisitions, and consolidations are three concepts that are often associated with the merging or integration of companies, but they differ in terms of objectives, structure, and process. Here are the fundamental differences between the three:

1. Merger

  • A merger occurs when two comparable companies agree to combine and form a new entity.
  • In a merger, both companies typically have a relatively balanced size, strength, and profile.
  • The main objective of a merger is to create synergy between the two companies, improve efficiency, and strengthen their competitive position in the market.

2. Acquisition

  • An acquisition occurs when one company (the buyer) purchases a majority of the shares or assets of another company (the target).
  • In an acquisition, the acquiring company can take control of the target company, although it does not always have to purchase all of the shares.
  • The objectives of an acquisition can vary, including expanding the market, accessing specific technology or expertise, or achieving efficiency through the pooling of resources.

3. Consolidation

  • Consolidation is the process of combining or integrating several companies into a larger entity.
  • In a consolidation, the companies involved lose their identities as separate entities and become part of a larger entity.
  • The objective of consolidation is often related to strengthening market position, improving operational efficiency, and creating added value for shareholders.

Although all three involve the merging of companies, the fundamental difference lies in the structure and processes involved in the integration, as well as the strategic objectives that the companies involved want to achieve. In practice, these three concepts can often overlap, depending on the context and specific conditions of the transaction carried out.

Impact on Companies, Markets, Stakeholders

Mergers, acquisitions, and consolidations have an equal impact on companies, markets, and other stakeholders. Internally, this merging process often results in significant structural changes, such as organizational restructuring, elimination of job positions, and changes in corporate culture. On the positive side, this integration can result in operational synergies that increase cost efficiency and productivity.

However, on the other hand, this process can also create uncertainty among employees and affect the company's stock value. At the market level, mergers, acquisitions, or consolidations can cause shifts in industry structure, affect competition, and affect the supply and demand of goods and services. This can bring significant changes for suppliers, customers, and the community as a whole.

Therefore, careful management is needed to manage the social, environmental, and economic impacts of corporate mergers, as well as to pay attention to the interests of all stakeholders involved in this process.