Indonesia is a key destination for private equity investment and has high potential for mergers and acquisitions, according to global consulting firm Bain & Company. (JG Photo/Nur Yasmin)

Indonesia Has High Potential for Mergers and Acquisitions: Bain & Co

BY :NUR YASMIN

AUGUST 22, 2019

Jakarta. Indonesia is a key destination for private equity investment and has high potential for mergers and acquisitions, according to global consulting firm Bain & Company.

The company found that Indonesia-focused assets attract significant interest from regional investors, especially growth capital in the internet and technology sector.

"Indonesia and Vietnam have the most potential in Southeast Asia, but many executives are turning to scope deals, as companies struggle to find organized growth," Usman Akhtar, a Jakarta-based partner of Bain & Company's private equity practice, said on Thursday.

Private equity deals in Southeast Asia increased by 87 percent last year, compared with the 70 percent average over the past five years, but there were no details on a specific number.

Merger and acquisition value also increased in Indonesia, due to key mega-deals worth $14 billion by local businesses in 2018. Among them is state-owned mining holding company Inalum's  $3.9 billion acquisition of a 51 percent stake in Freeport Indonesia,  the local entity of United States-based mining giant Freeport McMoran. Another was state-owned cement producer Semen Indonesia's $1.8 billion acquisition of Holcim Indonesia, the local unit of its Swiss competitor LafargeHolcim.

These deals made domestic corporates the main drivers of the Indonesian merger and acquisition market in 2018.

Bain & Company's report titled "M&A in Disruption," also finds that global scope deals had outnumbered scale deals in 2018, representing 51 percent of all strategic deals valued over $1 billion.

"Many executives are turning to scope deals as companies struggle to find organic growth. In Indonesia, we believe this trend is underleveraged, but can grow in the future," Usman said.

He added that corporates must be careful, because the heavy concentration is currently on tech deals, which also have high pricing. The internet and technology sector dominated the private equity deal landscape in Southeast Asia by 63 percent in 2018.

"For companies to get ahead, they must focus on repeatable M&A capabilities across strategy, screening, due diligence and integration," said Suvir Varma, a senior advisor at Bain & Company.

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