Tech takeovers drive M&A in Indonesia

White & Case LLP

White & Case LLP

The country’s vibrant digital economy and abundant natural resources look set to fuel dealmaking this year

Buoyed by healthy GDP growth and rising consumer confidence, Indonesian M&A has been on a roll in recent years. Southeast Asia’s largest economy has largely evaded macroeconomic headwinds such as high inflation and weakening demand, which have dampened growth in Western economies.

Dealmaking momentum slowed slightly in 2023 despite positive economic indicators, with a total of 150 deals valued at US$14.2 billion. Although down from the record highs posted in recent years, namely US$26 billion in 2021—the highest on Mergermarket record—and US$23 billion in 2022, this activity remains comparable to, or above, pre-pandemic levels.

M&A activity by value 2006 – 2023
Target location: Indonesia Bidder location: Global Sectors: All Sectors

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E-commerce offers wealth of opportunities

With an estimated 221.5 million internet users in Indonesia, demand for digital services is reaching new highs. The average internet user there spends four hours a day on their phone—twice the US average—according to McKinsey. Indonesia’s e-commerce market is the largest in Southeast Asia, currently standing at US$62 billion and forecasted to expand to US$160 billion by 2030.

To sustain its position in this lucrative market, Chinese short-form video app TikTok announced the acquisition of a 75 percent stake in Tokopedia, the e-commerce division of Indonesian tech giant GoTo. The US$1.5 billion deal—the largest targeting an Indonesian company in 2023—will combine Tokopedia and TikTok Shop Indonesia’s business under one entity.

Last year, the Indonesian government passed a regulation banning e-commerce sales on social media apps. With the takeover of Tokopedia, announced at the end of the year, TikTok will have a new route to address this regulatory hurdle while leveraging local expertise in Indonesia’s booming e-commerce market.

Investors flock to fintech

Indonesia’s large, digitally active population increasingly demands more from fintech service providers. The merger between local fintech company DigiAsia Bios and Stonebridge Acquisition Corp, an APAC-focused special purpose acquisition company, exemplifies the industry’s growth potential. Following the deal, DigiAsia, a “fintech-as-a-service” company with offerings such as digital wallets, utility bill payments and “banking-as-a-service,” listed on the Nasdaq exchange.

Valued at US$500 million, the deal will free up an estimated US$200 million in net cash to help fund the company’s expansion into Vietnam, Cambodia and the Philippines.

In another significant investment in Indonesia’s fintech space, digital credit platform Kredivo raised US$270 million in an oversubscribed funding round led by Japanese bank Mizuho. Kredivo, which offers credit services to underbanked consumers across Indonesia and Vietnam, will use the funds partly to support the launch of its new neobank, Kroo.

Growing dealmaker interest in Indonesia’s up-and-coming e-commerce and fintech industries resulted in the country’s technology, media and telecommunications sector generating the highest deal value across all sectors in 2023, with a total of US$5.2 billion of deals announced. Indonesia’s TMT sector has been the single biggest contributor to Indonesian M&A in both aggregate value and volume terms in the last four years. Perhaps no deal has better illustrated Indonesia’s strengths than the merger of Ooredoo Indosat and H3I. The US$6 billion transaction, announced at the start of 2022, created Indosat Ooredoo Hutchison, Indonesia’s second-largest mobile telecom company.

Capitalizing on and supporting the huge potential of Indonesia’s digital economy—the country features 14 unicorns, second in Southeast Asia only to Singapore—Indosat has performed exceptionally well since the merger. Total revenue in 2022 was up by almost 50 percent year on year and rose again in 2023 by ten percent, with the organization’s multimedia, data communication and internet business recording especially strong revenue growth last year.

Energy and mining M&A digs deep

Dealmaking in Indonesia’s energy, mining and utilities sector is also gathering pace. The sector posted the highest annual volume across all sectors in 2023, with a total of 31 announced deals, making this the highest annual figure since 2016.

Indonesia’s upstream market is set to be a hotbed for M&A activity, according to Rystad Energy, with US$2 billion of assets up for sale over the next two years.

The largest energy deal of 2023 saw UK supermajor Shell sell US$650 million of gas assets to Indonesia’s state-owned Pertamina and Malaysian counterpart Petronas. Together, they will acquire Shell’s 35 percent stake in the Masela block—one of Indonesia’s key strategic projects and home to the sought-after Abadi gas field.

Indonesia’s abundance in natural resources—particularly critical minerals such as nickel and copper—make its mining assets highly attractive to international buyers. Indonesian mining firm Aneka Tambang, also known as Antam, sold shares worth US$417 million in two of its local mining subsidiaries to China’s CATL, the world's largest electric vehicle battery manufacturer. The deal reflects the latter’s ambition to gain a foothold in Indonesia’s fast-growing EV market. A couple of days after the Antam-CATL deal was announced, Australia-based Nickel Industries acquired ten percent of the PT Huayue Nickel Cobalt project, on the Indonesian island of Sulawesi, for US$270 million. It is one of several acquisitions the Australian nickel producer is pursuing in Indonesia.

Boasting the world’s largest nickel reserves, Indonesia has set out its ambitious target of producing 600,000 EVs by 2030 as it looks to become a leading player in the global EV battery market.

Looking ahead

While Indonesia’s economic growth is projected to slow slightly in 2024 following softening commodity prices, the overall outlook remains positive. Easing inflation and a stable economy are both positive drivers of growth, with a five percent GDP growth projection for 2024 that remains well above the Western average.

This relative stability will continue to attract global dealmakers looking to capitalize on Indonesia’s growth opportunities, while gaining access to the wider Southeast Asian market. The country’s vibrant digital economy, along with its role in the global energy transition, will continue to provide a wealth of dealmaking opportunities.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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