Mergers & Acquisitions (M&As) on the Rise in Indonesia
The number of mergers and acquisitions in Indonesia rose 5.4 percent year-on-year (y/y) to 136 deals up to August 2017, mostly involving technology companies. In terms of value, on the other hand, M&As in the first eight months of the year actually fell 9.9 percent (y/y) to USD $6.8 billion. However, not all M&A deals in Indonesia have revealed the value of the deal.
The biggest deals were made in the electronic commerce (e-commerce) technology sector. For example, China's e-commerce giant Alibaba Group Holdings injected USD $1.1 billion into local Indonesian e-commerce platform Tokopedia. Or, Indonesian ride-hailing startup Go-Jek that saw a USD $1.2 billion injection, led by Chinese internet giant Tencent Holdings Ltd.
Based on the latest research conducted by Bain & Company, the number of M&As in Indonesia's technology sector has been rising over the past couple of years. Whereas in 2013 there were only 12 M&As, the number rose to 28 in 2014, 55 in 2015 and 56 in 2016.
This recent rise in M&As in Southeast Asia's largest economy is related to rapidly rising smartphone and Internet penetration across Indonesia, hence opening up new markets and opportunities. Bain & Company stated that there are currently 133 million smartphone users in Indonesia (which is only about half of the total population thus there remains ample room for growth).
For domestic and foreign technology companies the Indonesian market is therefore promising. Not only Internet and smartphone penetration is rising rapidly, but the central government is also eager to improve infrastructure development. This would reduce the nation's notoriously high logistics costs, thus improve companies' competitiveness. Meanwhile, robust economic growth at +5 percent (y/y) levels enhances Indonesians' per capita GDP. Lastly, the stable rupiah exchange rate also makes it much more attractive for foreign investor to enter Indonesia through an M&A. However, also the big domestic conglomerates in Indonesia, such as the Lippo Group and Djarum Group, are increasingly focusing on the e-commerce industry.
Outside the e-commerce industry another big deal involved the tobacco industry. Japan-based cigarette manufacturing company Japan Tobacco Inc bought 100 percent of the shares in Karyadibya Mahardika and Surya Mustika Nusantara, both are subsidiaries of Gudang Garam, for a combined price of USD $677 million.
Number of Mergers and Acquisitions in Indonesia's Technology Sector:
| 2012 | 2013 | 2014 | 2015 | 2016 | |
| Number of M&As | 19 | 12 | 28 | 55 | 56 |
Source: Bain & Company