Mergers and Acquisitions (M&A) in Indonesia Expected to Rise in 2016
RSM Indonesia, one of Indonesia's leading audit, tax and financial advisory firms, expects to see more mergers and acquisitions (M&A) in Indonesia in 2016 due to the improving global and domestic economic conditions, a stable rupiah exchange rate, and Indonesian's growing purchasing power. For foreign investors a M&A deal is one of the strategies to enter Indonesia. Up to early November, the total value of M&A deals in Indonesia in 2015 stood at USD $3.53 billion.
Interestingly enough, Wilijadi Tan, Partner Corporate Finance & Transaction Support at RSM Indonesia, said M&A deals are sometimes the result of companies' need to pay off debt and this motive is expected to be behind the estimated increase in M&As in Indonesia in 2016. Tan added that mergers and acquisitions are also influenced by changing regulations in Indonesia. For example, Indonesia's financial authorities now allow +40 percent foreign ownership of Indonesian banks in case they purchase two local banks and merge them into one (previously the limit for foreign ownership of foreign banks was set at 40 percent). Besides banking, other sectors that are attractive for foreign investors and may add to M&As next year are Indonesia's retail and healthcare sectors.
RSM Indonesia has already received requests from several foreign investors to acquire a local Indonesian company in the retail, healthcare and financial sectors. RSM Indonesia targets to handle between 15 and 20 mergers and acquisitions in 2016, up 50 percent from this year's estimated number of M&As arranged by the company. The transaction value of a M&A deal handled by RSM Indonesia typically ranges between USD $20 and $50 million per deal.
The value of M&As in Indonesia in 2014 was nearly USD $10 billion. As such, 2015 has been a weak year with M&A realization (up to early November) of only USD $3.53 billion.
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