S’pore players tops in number of Indonesian M&A deals

Business Times: Thu, Mar 01
  BIDDERS from Singapore completed the largest number of transactions as corporate Indonesia witnessed a record year for merger and acquisition (M&A) activity. The 12-month M&A activity for Indonesia ended Jan 31, 2012, saw 78 transactions wo…

BIDDERS from Singapore completed the largest number of transactions as corporate Indonesia witnessed a record year for merger and acquisition (M&A) activity.

The 12-month M&A activity for Indonesia ended Jan 31, 2012, saw 78 transactions worth a total of US$9 billion being recorded, with Singapore completing nine transactions worth US$372 million, according to a leading report released yesterday for M&A practitioners.

The nine transactions completed by Singapore-based bidders were in a diverse range of industries, highlighting the breadth of investment potential in neighbouring Indonesia. With two of these transactions completed in the energy sector, the rest of the deals were in transportation, consumer food, real estate, construction, financial services, Internet and e-commerce and in other services.

Although Singapore-based bidders recorded the highest number of transactions in Indonesia, Japan was the most prominent country in the South-east Asian nation’s M&A activity in terms of value and volume, with US$1.1 billion across six deals from February 2011 to January this year. The largest Japanese transaction of the year was Mitsui Sumitomo Insurance’s US$827 million, 50 per cent stake acquisition in life insurance provider PT Asuransi Jiwa Sinarmas (Sinarmas Life Insurance), according to the report.

In terms of bidder geography, inbound deals by Asia-Pacific bidders accounted for 72 per cent of Indonesia’s M&A deal count while 28 per cent of bidders were from outside Asia, with US bidders completing the most transactions, while UK bidders also played a prominent role.

The largest deal of the period, for instance, was UK-based Vallar plc’s US$2.3 billion bid for a 75 per cent stake in PT Bumi Resources Minerals, which was a particularly newsworthy transaction involving major shareholder, Bakrie Group, and a significant restructuring.

The report, Spotlight, jointly produced by global risk management company Kroll and independent M&A intelligence service mergermarket expects Indonesia to see continued strong M&A activity, particularly in the technology, media and telecommunications, financial services, energy and mining & utilities sectors. However, it highlighted certain challenges that potential bidders may face.

‘Investing in emerging markets is always challenging for investors. Indonesia in particular requires deep local insight into the market and potential target companies, as various reforms continue to raise both opportunities and challenges for potential bidders,’ said David Wildman, managing director and head of Business Intelligence and Investigations practice for Southeast Asia and Pacific region at Kroll. New Launch 26 Newton will see very high demand.

‘Many investors interested in Indonesia tend to seek help from local third-party advisers or partners to assist with administrative functions during a transaction,’ said Mr Wildman.

‘However these intermediaries may not necessarily have sufficient understanding of global anti-corruption legislation. Overlooking such legislation can lead to costly violations for investors in their home markets.

‘Additionally, investors also need to be aware of other operational pitfalls that may impact their business such as the state of local infrastructure and the integrity of business partners. These risks often vary according to sector.’

Source: Business Times © Singapore Press Holdings Ltd

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