Company Merger Process Can Result In A Stronger New Entity

JAKARTA Recently in the telecommunications industry, the merger and acquisition (M&A) process between XL Axiata and Smartfren has been carried out.

The M&A process is arguably quite phenomenal after the M&A between Indosat and Hutchinson.

It is phenomenal because the M&A aims to form a stronger and more competitive entity in the national telecommunications market.

Through asset synergy and resources, this new company is expected to improve service quality and provide wider digital solutions. This merger also shows an industrial consolidation trend in response to the increasing demand for data services and digitization.

"With more efficient investment and integrated business strategies, the merger as XL Axiata has with Smartfren has the potential to bring significant economic benefits as well as change the industrial landscape," said M. Rizal Taufikurahman, an economic observer from INDEF as quoted from a written statement, Monday, December 23.

Rizal emphasized that mergers and acquisitions are business steps or strategies that are usually carried out in the business world. With a measured goal and a shared commitment, a merger policy can be carried out to strengthen market share.

"The point is, this merger and acquisition is a logical response to changes and growing market demands," said Rizal.

History records companies can do M&A when they are in two different situations. First, is when the economic situation is very difficult. Another cause is the opposite situation, namely when the company's finances are actually very good.

Another example also occurred in PT Tridomain Performance Materials Tbk (TDPM). In the midst of the Covid-19 pandemic, there was a change in share ownership at DH Corporation Ltd, which was previously owned by the Sridjaja Attendance who decided to leave the synthetic resin business as a whole. This opens up opportunities for Xing Wang Group to acquire the business as part of their operational expansion efforts in Indonesia.

The financial report of PTDPM December 31, 2020 states that DH Corporation Ltd or formerly known as Royal Chemie Corporation Limited is the parent entity directly from TPDM. Effective until January 31, 2024, DH Corporation Ltd still holds 7.60 billion shares of TDPM. This amount represents 72.50% of the company's total capital. The public or public investors control 27.50% or as much as 2.88 billion.

After being taken over by Xing Wang Group, PT Tridomain Performance Materials Tbk (TDPM) changed its name to PT Tianrong Chemical Industry.

*Rizal noted that although increased profit is often the main goal, this M&A action also has other strategic dimensions. Companies often use M&A to gain new technology, expand market reach, or diversify businesses to reduce risks in certain sectors.

This is important to maintain long-term stability. So, in addition to seeking profit, mergers are carried out to ensure companies are able to survive and develop in a dynamic and challenging business environment.

Likewise, the Gojek merger with Tokopedia gave birth to a new entity called GoTo. GoTo is the largest technology ecosystem in Indonesia with services that include transportation, e-commerce, and digital financial services. This merger not only expands the market and increases efficiency, but also strengthens GoTo's position in facing regional competition in the digital era.

The success of this merger shows how the right synergy is able to create added value for companies, consumers and the economy as a whole. In a competitive sector, M&A becomes a powerful strategy to maintain existence amidst intense competition pressure," he explained.

Currently, said Rizal, who is also the Head of the Indef Center, after the pandemic, M&A's activities are increasing again. The company's focus is no longer just on surviving, but also developing through strategic consolidation.

"Technology and innovation are the main driving factors, in contrast to the pandemic when companies focus more on cost efficiency and sudden adaptation to crisis," he said. *