Raja Saor Blog: Things to be noticed in organizing acquisition

Memori van Toelichting

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Identification of issues:
Scope of work of the company: investment (it is merely a holding company)
Acquisition motive: business recovery from crisis, by business expansion.
Type of Acquisition: cross-borders acquisition
Target field: Mining and Plantation. The public company and affiliates.
The possible targets = private and state public company Mining and Plantation, i.e. PTPN (PT. Perkebunan Nusantara), Chevron Co., Schlumberge, etc.

Indonesian Law disable the existence of Holding Company concept, viz: a company whose activity is just giving an participation on financial capital in other company, without having any own business activity (scope of business work). Thus, SIC is prohibited in directly acquire Indonesia company. It firstly has to create child company which then will make it eligible as a law subject (principal) that is capable to held acquisition.
After that, SIC could define the company target. It could be private public company or state’s one (BUMN).

It is relatively will be more complicated to acquire an BUMN because it needs such a long stage on bureaucracy procedure, think of the huge of public interest behind it. Thus, I, as the lawyer of SIC will recommend to just acquire the private public company.

Things to be noticed in organizing acquisition:

1. the local culture where the acquisition will be held. Different nation will have different culture, view, behavior and custom. Miscount because of different perceptions will bring the business deals into destruction.
2. investment climate and monetary policy of the nation target.
3. other things relate to the acquisition mechanism, such as:
- accounting and marketing principle occurs
- company organization
- the method and financing principle of the company
- the rights and power of Stakeholders
- amount of spare finance.
- How depreciation practice
- Position of subsidiary and affiliate
- Capital financing and any other costs
- How the post-acquisition practice

(Munir Fuady, hukum tentang Akuisisi, Take Over dan LBO, hal 191)

Since acquisition belongs to Material Transaction as what is arranged in Peraturan Bapepam No. IX.E.2 about Material Transaction so it requires the approval of General Assembly of stakeholders not only from the acquiring company but also the acquired one.
In addition the acquisition has to pay attention on any other party’s interest that is firmly protected by Indonesian Company Law, viz:
- Company, not only from the acquiring company but also the acquired one.
- Minority Shareholders
- Employers
- creditors
- Society and fair competition

Because the company target is an public company, every single process of the acquisition is under the rule of Peraturan Bapepam Nomor IX.H.1 about the Taking Over of Public Company and Peraturan Bapepam Nomor IX.F.1 about Tender Offer.
Some law duty settled by the two rule:
- The necessity to held tender offer
- If there is any conflict of interest, it is obliged to apply Peraturan Bapepam about Conflict of Interest
- The necessity of information disclosure.