JAKARTA, Indonesia, Aug. 22, 2019 /PRNewswire/ -- Indonesia remains a key destination for Private Equity investment in South East Asia and an area of potential growth for M&A, according to findings presented by Bain & Company in Jakarta today, with significant interest in Indonesia-focused assets and a particular focus on growth capital. M&A has also rebounded as corporates are now spending cash on balance sheets, however the area is still dominated by a few 'mega-deals' in the country.
Indonesia-focused assets have been of significant interest to regional investors, particularly growth capital and particularly in the internet and tech sector. While private equity deal count, at 14 deals excluding real estate and infrastructure, was up 17 percent in 2018 over the last five year average, larger deals propelled 2018 deal value to 136% higher than the last five year average.
M&A value also increased across Indonesia even as overall deal count dropped, due to several key mega-deals leading to $14B in deals done by Indonesian businesses. This made domestic corporate the main driver of the Indonesian M&A market in 2018, leapfrogging them over foreign acquirers.
The majority of these deals focused on acquiring new capabilities or opening up new product or service segments, rather than intending on making companies bigger or generating cost synergies. According to Bain & Company's inaugural M&A report, M&A In Disruption, released earlier this year, scope deals around the world outnumbered scale deals for the first time ever in 2018 and represent 51 percent of all strategic deals larger than a billion in deal value – possibly the biggest development in the M&A industry in the last decade.
"Many executives are turning to scope deals as companies struggle to find organic growth," explained Usman Akhtar, a Jakarta-based partner in Bain & Company's Private Equity practice. "Locally, we believe this trend is still underleveraged, but it could prove to be an important area of growth in the future. However, given high pricing and a heavy concentration of tech deals, corporates will need to tread carefully."
Bain & Company has worked on more than 1,500 M&A projects globally with both strategic buyers and sponsors in the last year alone and has identified what the best are doing to succeed. This includes:
Further, the firm's extensive research over the last two decades has uncovered an enduring truth: a repeatable M&A capability, developed through consistent M&A activity over economic cycles, contributes to higher shareholder returns. This finding holds up year after year, across industries. Deal success and failure is more a matter of cumulative experience and capability in doing deals, and less a function of standalone deal circumstances.
"In order for companies to get ahead they must focus on repeatable M&A capabilities across strategy, screening, due diligence & integration. It's essential, but not easy," said Bain & Company Senior Advisor Suvir Varma. "Companies will need to adapt and modify their diligence and integration playbooks, as they pursue scope deals for growth and, potentially, more transformative capability-driven scope deals."
Editor's note: To receive a copy of detailed data, or arrange an interview with Mr. Varma or Mr. Akhtar, please contact: Juliana Ong at juliana.ong@bain.com or +65 96987403.
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