Merger and acquisition (M&A) is the process when a business buys another business or combines with another business. This process of one business being bought by another business is also known as “takeover”. When takeover happens, the business has to go through corporate restructuring and a very critical aspect of corporate restructuring is to consider the impact on corporate finance such as mix and debt and equity. Specialized investment bankers and firms regularly deal with M&A transactions to merge smaller companies into the bigger ones. Apart from that, firms and investment bankers also perform the reverse and break up of companies through tracking stocks, carve-outs, and spin-offs.
MAM Corporate Solutions has over the years helped successful M&A deals in Indonesia, Singapore, Malaysia and other ASEAN countries. Our professional network makes it possible for us to successfully conclude M&A deals. MAM Corporate Solutions has presence in Indonesia, Singapore, Malaysia, UK and India, and our range of services including Audit & Assurance, Business Consultation, Cross-Border Taxation and most importantly Corporate Legal Services. This also includes supporting the M&A deals.
Why Mergers and Acquisitions happen?
For some companies M&A are the promising strategy for quick growth and huge profits and for others it might be a necessity to minimize the risk or to deal with competition. M&A also helps business to have easier access to financial resources. M&A also happen if a business is near its bankruptcy and needs intervention of another business.
When acquiring a company (known as target company), the primary objective of the buying company (known as predator) is to quickly expand the business and raise profits. However, M&A are also one of the riskiest transactions that businesses may perform. This is because predator company may buy the target company without having knowledge of certain aspects that may create problems or liabilities for the predator company after M&A for example undisclosed debts or any pending lawsuits the target company is facing in courts. Therefore, it is absolutely critical that target company is thoroughly investigated. The predator company must know the total assets (such as property, receivables and cash), liabilities (such as loan, bonds and parables) and contracts & agreements with third parties. This is important because once the company is acquired, predator company inherits all the assets and liabilities.
There are more issues that add to complexity of M&A transactions such as two companies being in different countries and therefore subject to different laws. M&A are also regulated by governments which can make these transactions even more complicated.
It was because foreign investors would wait until legislative and presidential election which was held on April 17 2019. The high degree of persistent global uncertainties was most likely reduce the foreign investors’ intention as well.
In last March, BKPM annual meeting gathered all 560 central and regional branches. In this meeting, which also invited Indonesian president Mr. Joko Widodo, the upgraded version of the system was released. Let’s hope that the latest will attract many foreign investors in Indonesia.
Financial due diligence by MAM Corporate Solutions
It is true that M&A are considered as one of the most complex business transactions. In global market today, the transactions become even more challenging because not all information is transparent enough.
Therefore, management of the buying company must ensure that it quantifies the risk of not being able to meet expected financial targets meet intended results. This is called financial due diligence. Financial due diligence is the most important step of M&A to secure the entire deal. The process consists of consultants and experts that help with evaluation of the all financial issues.
MAM Corporate Solutions has qualified and experienced team of Chartered Certified Accountants and consultants that support the M&A transactions and carry-out the financial due diligence. We analyze management information, carry out market analysis, projection of cash flows, investigate the company’s historical records to ensure that informed decisions are made by the companies.
- Import license (previously known as API-U) The awareness of regulatory and other compliance issues.
- The awareness of the possible problems and outcomes are predicted in advance.
- The identification of problems arising as a result of different cultures or management.
- Validation, evaluation and development of quantitative financial models to support critical decisions.
- Documentation of the process of target company’s business.
Legal due diligence by MAM Corporate Solutions
This involves the examinations of target company’s legal affairs to reveal any risks involved in the M&A transaction. Corporate lawyers and legal experts at MAM Corporate Solutions conduct the legal due diligence for companies that intend execute M&A transaction.
We ensure that:
- All potential risks are identified.
- All obligations and liabilities of the target company are identified.
- Buying company is able to understands how to exclude or limit the risk.
- Any possible warranties are negotiated, and
- The bargaining power of buyer is improved.
How MAM Corporate Solutions can help?
MAM Corporate Solutions offers complete support to companies in their process to successfully executive the mergers and acquisitions. Be it legal or financial due diligence, we provide all the necessary due diligence services to ensure informed decisions are made by the companies.
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