Asian bidders drive Indonesian inbound activity and investors remain vigilant
HONG KONG, March 1, 2012 – Kroll, the world’s leading risk management company, and mergermarket, the leading independent Mergers and Acquisitions (M&A) intelligence service, today jointly published the second issue of Spotlight Asia, Kroll’s quarterly newsletter for M&A practitioners. This issue focuses on the intricacies and key issues facing foreign investors investing and operating in Indonesia, a developing market with abundant investment opportunities and one that has recorded steady and strong growth in M&A activity.
Despite the fact that Indonesia is still a developing country with ongoing reforms, international investors have shown keen interest in this market over the past 12 months. Twelve-month M&A activity ending 31 January 2012 set a mergermarket record for Indonesia with 78 transactions worth a total of US$9 billion recorded. Notably, half of recorded deals were inbound transactions, recording 65 percent of total deal value (US$5.8 billion). Combined with an expected US$20 billion in foreign direct investment in 2011, it is clear that foreign investors are ambitious in Indonesia.
In terms of bidder geography, inbound deals by Asia-Pacific bidders accounted for 72 percent of Indonesia’s M&A deal count over the past 12 months ending 31 January 2012, with bidders from Japan being the most prominent. Twenty-eight percent of bidders were from outside Asia and the largest deal of the period was UK-based Vallar Plc’s US$2.3 billion bid for a 75 percent stake in PT Bumi Resources Minerals.
“Investing in emerging markets is always challenging for investors,” said David Wildman, managing director and head of Business Intelligence and Investigations practice for Southeast Asia and Pacific region at Kroll. “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.”
The business environment in Indonesia is becoming more sophisticated and corporate governance has improved in recent years. As the world’s largest exporter of thermal coal, Indonesia benefits from a wealth of natural resources, while the country also benefits from a young population and strong domestic consumption due to rising incomes. As a result, the technology, media and telecommunications, financial services and energy, mining and utilities sectors are expected to see continued M&A activity. Investors nonetheless remain cautious when investing in the country and pay particular attention to issues such as infrastructure, transparency, policy changes and bureaucracy.
“Many investors interested in Indonesia tend to seek help from local third party advisors or partners to assist with administrative functions during a transaction,” said 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.”
Spotlight Asia, Kroll’s quarterly newsletter for M&A practitioners, published by Remark, aims to analyze topical issues in the M&A space. Each newsletter will feature a different geography in the Asia-Pacific region with data and statistics provided by mergermarket. The next quarterly newsletter will feature M&A activity in India.
The February 2011 newsletter is available for download here.
About Kroll
Kroll, the world's leading risk management company, provides a broad range of investigative, intelligence, financial, security and technology services to help clients reduce risks, solve problems and capitalize on opportunities. Headquartered in New York with offices in 52 cities in 29 countries, Kroll has a multidisciplinary team of more than 2,800 employees and serves a global clientele of law firms, financial institutions, corporations, non-profit institutions, government agencies, and individuals. Kroll is an Altegrity company. Kroll's website is http://www.kroll.com.
About mergermarket and Remark
mergermarket is an independent Mergers and Acquisitions (M&A) intelligence service with an unrivalled network of dedicated M&A journalists based in 62 locations across the Americas, Europe, Asia-Pacific, the Middle-East and Africa. Unlike any other service of its kind, mergermarket specializes in providing forward-looking origination and deal flow opportunities integrated with a comprehensive deals database – resulting in real revenues for clients. Visit www.mergermarket.com.
Remark, the publishing, market research and events division of The Mergermarket Group, offers a range of services that give clients the opportunity to enhance their brand profile and to develop new business opportunities. Remark publishes more than 50 thought leadership reports and holds more than 70 events across the globe each year, which enable its clients to demonstrate their expertise and underline their credentials in a given market, sector or product.
Remark is part of The Mergermarket Group, a division of the Financial Times Group. To find out more visit www.mergermarket.com/remark/ or www.mergermarket.com/events/.
Media contacts:
Kroll: Daniel Billings, dbillings@kreabgavinanderson.com, +852 3753 6030
Mergermarket: Michel Chau, michel.chau@mergermarket.com, +852 2158 9706