Learning about Corporate Law : What is Mergers and Acquisitions? And Why Do Companies Perform Mergers and Acquistions?

By. Diva Lailita


Basically, before talk deeper about corporate law, we must also understand about Mergers and Acquisitions as the basic yet necessary when learning and understanding about corporate law itself. Merger happens when 2 company are combined to become one new company. In a simple picture of merger, PT. A + PT. B = PT. C. Therefore, PT.C is the new company as the result of merger between PT. A and PT. B. Meanwhile Acquisitions is happens when 1 company “acquire” another company. In other simple picture, acquisitions happens when PT. A + PT. B = PT. B. This means that acquisitions does not resulting to a brand new company, but one company acquire another company. In Indonesia, mergers and acquisitions are both regulated under company law, which is Law Number 40 Year 2007 concerning Company Law. Based on the law, it is explained that mergers and acquisitions shall be performed based on General Meetings (RUPS/Rapat Umum Pemegang Saham) of its company.

Actually, companies choose to do mergers and or acqusitions because of several purposes, such as efficiency and taxation matters. In order to make the discussion gets easier to be understood, we will give some parable as below.

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1. Company’s Efficiency

Example :
• PT. A (engaged in a cat food production)  Have 500 Employees, Have 2 Factories, and Spent 1 Billion Rupiah/Month for all of its company matters.
• PT. B (engaged in a cat food production)  Have 1000 Employees, and Spent 3 Billion Rupiah/Month for all of its company matters.

The efficiency that the companies will get when both PT. A and PT. B do merger and acquisition is especially goes to its employees. When they are merged or acquisition, the company can reduce the amount of its employee which also resulted to reduce its company’s outcome per month, regardless of how they reduce the number of their company.

2. Company’s Taxation Matters

When both company do the mergers and acquisitions, then it is very possible that the company will reduce the amount of their taxation fees, for example from 5 millions from each company, becomes 2 millions.
Therefore, based on the above reasons or purposes, many companies choose to perform mergers and/or acquisitions. Moreover, example of well-known companies in Indonesia that performs Acquisition is Uber as part of acquisitions with Grab. While example of merger is Bank Mandiri, as the merger of Bank Exim, Bank Bumi Daya (BBD) , and Bank Pembangunan Indonesia (Bapindo).

In addition, the regulations of merger and acquisitions which performed by bank are specifically regulated under the special regulation, which is Government Regulations (PP) Number 28 Year 1999 concerning Meger, Consolidations, and acquisitions of Bank. The existence of this Government Regulation has given more legal certainty considering that Bank is an entity which its main activity is to collect as well as distribute public funds, which different with non-Bank entities.

To conclude, we can consider that mergers and acquisitions are one of the basic yet necessary understandings when learning about coorporate law, because starting from its understanding about mergers and acquisitions, then we can enhance and steep into other legal corporate matters which will resulting to an MoU, Non- disclosure agreement, as well as Due Diligence.

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