Indonesia has firmly positioned itself as one of Southeast Asia’s most attractive destinations for cross-border investment. With a GDP exceeding USD 1 trillion and a projected rise to become the world’s fourth-largest economy by 2050 according to PwC’s The World in 2050 report the country offers compelling opportunities across sectors ranging from digital technology and natural resources to financial services and infrastructure. For foreign investors looking to enter or expand in this market, mergers and acquisitions in Indonesia are among the most effective pathways, but they also require careful legal navigation.
The Indonesian M&A landscape has evolved considerably in recent years, shaped by legislative reforms, new investment rules, and a more streamlined regulatory environment. Understanding the legal framework behind these transactions is not a formality; it is the foundation for any deal that aims to close successfully and operate compliantly over the long term.
The Legal Foundation Behind Mergers and Acquisitions in Indonesia
The primary statutory framework governing M&A transactions in Indonesia is built around Law No. 40 of 2007 on Limited Liability Companies (the Company Law), supplemented by Government Regulation No. 27 of 1998 on Mergers, Consolidation, and Acquisition of Limited Liability Companies. Together, these instruments define the fundamental concepts of mergers, consolidations, acquisitions, and spin-offs under Indonesian law.
For foreign investors specifically, Law No. 25 of 2007 on Investment and the Positive Investment List introduced under Presidential Regulation No. 10 of 2021, as part of the sweeping Omnibus Law reforms, governs which sectors are open or restricted to foreign capital. Under the current regime, foreign investment is permitted in over 200 business sectors, though some remain partially or entirely closed. Business sectors are classified into priority sectors, fields with specific requirements, fields requiring partnerships with local MSMEs, and fully open fields.
A merger in Indonesian law refers to a legal act by which one or more companies merge into an existing company, resulting in the dissolution of the merging entity while the surviving company continues. An acquisition, by contrast, involves a legal entity or individual taking over the shares of another company, which may or may not result in a change of control. These distinctions matter significantly for the regulatory steps that follow.
See Also: What Happens When a Local Partner Breaches a Shareholder Agreement in Indonesia?
Deal Structures Available to Foreign Investors
Foreign investors approaching the Indonesian market through M&A typically have several structural options to consider, each with its own legal implications.
Share Purchase — The most common route involves acquiring existing shares in a target company. This preserves the company’s existing contracts, licenses, and operational continuity. However, the buyer also assumes all existing liabilities, making thorough due diligence indispensable.
Asset Purchase — Investors can acquire selected assets while leaving behind unwanted liabilities. This can be a cleaner approach when the target carries significant legal or financial risks, but it typically requires new licenses and tax registrations to be secured before operations can begin.
New Share Subscription — Rather than purchasing existing shares, an investor subscribes to newly issued shares, injecting fresh capital directly into the company. This is common when existing shareholders seek growth financing rather than an exit, though it requires careful negotiation over the resulting shareholding structure.
Joint Venture via PT PMA — Many foreign investors in restricted sectors enter through a joint venture established under a PT PMA (Perseroan Terbatas Penanaman Modal Asing), a foreign investment limited liability company. This structure pairs foreign capital with local market access, though its effectiveness depends heavily on the quality of the shareholder agreement underpinning it.
Step-by-Step: The Legal Process for Mergers and Acquisitions Indonesia
While every transaction has its nuances, the general legal process for M&A in Indonesia follows a recognisable sequence of steps.
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Preliminary Assessment and Sector Verification
Before any negotiation begins, a foreign investor must confirm whether the target sector is open to foreign participation under the Positive Investment List and whether any foreign ownership caps apply. This step is foundational; proceeding without clarity on this point can unwind an entire transaction later.
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Legal Due Diligence
Legal due diligence is among the most critical phases of any M&A transaction. This process involves a comprehensive review of the target company’s corporate documents, licenses, land rights, tax compliance records, employment obligations, intellectual property ownership, and any pending litigation. Land rights require particular attention in Indonesia: most companies hold Hak Guna Bangunan (right to build) rather than outright ownership, a distinction that carries material implications for foreign investors. Intellectual property is another common risk area, as trademarks and patents are frequently registered in the names of founders rather than the corporate entity.
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Drafting and Negotiating Transaction Documents
Once due diligence is complete, the parties proceed to negotiate and draft the core transaction documents, including the Share Purchase Agreement (SPA) or Asset Purchase Agreement, representations and warranties, conditions precedent, and disclosure letters. Under Indonesian law — specifically under SEMA No. 3 of 2023 and the broader Language Law No. 24 of 2009 — agreements involving an Indonesian party must be written in Bahasa Indonesia. Where international parties are involved, a corresponding version in the foreign party’s language or in English is also required. Failure to observe this requirement can affect the enforceability of the agreement in court.
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Corporate Approvals
An M&A transaction in Indonesia requires internal corporate approvals at both the target and acquiring entities. The Board of Directors of the target company plays a central role in preparing the merger or acquisition plan, while the Board of Commissioners provides oversight and approval. A General Meeting of Shareholders (GMS) approval is required from the shareholders of the target company. In public company transactions, additional disclosure requirements apply under the Capital Markets Law and OJK (Financial Services Authority) regulations.
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Notarisation of Share Transfer Documentation
A significant legal development in recent years has been the now-established requirement for share acquisition documentation to be executed in notarial deed form, regardless of whether the transaction results in a change of control. Without proper notarisation, the Ministry of Law and Human Rights (MoLHR) will not issue its approval or acknowledgement, effectively blocking the formalisation of the transaction.
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Regulatory Filings and Government Approvals
Several regulatory filings and approvals run concurrently or follow the execution of transaction documents. These include registration through Indonesia’s Online Single Submission Risk-Based Approach (OSS-RBA) system for investment licensing, notification to the KPPU (Komisi Pengawas Persaingan Usaha) , Indonesia’s competition commission — where applicable thresholds are met (combined assets exceeding IDR 2.5 trillion, or combined annual sales exceeding IDR 5 trillion), and sector-specific approvals where the target operates in regulated industries such as banking, insurance, fintech, or telecommunications. Changes to a company’s shareholding must also be submitted to the Ministry of Law for updating the company registry.
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Public Announcement
In mergers, acquisitions, or consolidations, prospective purchasers must publicly announce the proposed corporate actions in a nationally circulated daily Indonesian newspaper. This transparency requirement is an integral part of the regulatory process and must be completed within the prescribed timeframes.
Competition Law and KPPU Compliance
Antitrust compliance is an area that foreign investors should engage with early rather than as an afterthought. Law No. 5 of 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition, reinforced through the Job Creation Law, underpins Indonesia’s merger control regime. KPPU Regulation No. 3 of 2023 provides updated guidance for both regulators and business actors on compliance with merger control principles.
Notably, the KPPU filing requirement is post-transaction; the notification must be submitted after closing. The calculation of asset and sales thresholds is based on Indonesian operations only, and affiliated transactions are generally exempt. Where only one party meets the threshold, a KPPU notification is not required. Transactions involving public companies whose shares are acquired through portfolio transactions on the domestic capital market are also exempt from certain foreign investment restrictions.
Sector-Specific Considerations for Foreign Investors
The regulatory requirements for mergers and acquisitions in Indonesia vary considerably by industry. Sectors such as banking, insurance, fintech, peer-to-peer lending, and telecommunications are subject to specific regulations from the OJK (Otoritas Jasa Keuangan) and Bank Indonesia. In the financial sector, for example, the OJK now requires early consultation from the outset of any M&A planning involving banks or insurance companies, and has authority under Law No. 4 of 2023 to direct financial service institutions to pursue mergers in certain circumstances.
In the energy and mining sectors, Indonesia’s position as the world’s leading nickel producer has attracted significant foreign M&A interest, particularly from Chinese and Australian investors targeting electric-vehicle battery supply chains. The technology and telecommunications sectors remain equally active, with the landmark TikTok-Tokopedia merger in early 2024 and an anticipated XL Axiata-Smartfren merger, valued at approximately USD 6.5 billion, indicative of the scale of activity in this space.
Personal data protection has also become an important compliance layer. Since October 2024, Law No. 27 of 2022 on Personal Data Protection requires any company undergoing a merger, acquisition, or dissolution to notify affected personal data subjects of the transfer of their data, both before and after the transaction.
Post-Closing Obligations and Integration
Closing a transaction is not the end of the legal process, it is the beginning of a new set of obligations. Following closing, the acquiring entity must update business licenses and permits under the OSS-RBA system, notify relevant sector regulators of any changes to the company’s ownership or control, revise any registrations tied to import, export, or sector-specific identification numbers, and ensure employment-related obligations are addressed in accordance with Indonesian manpower law.
For transactions involving public companies, investors whose shareholdings reach at least 5% of voting shares must report any decrease in ownership to the OJK within five business days of the change. These reporting obligations are set out under OJK Regulation No. 4 of 2024 and apply consistently to foreign and domestic investors alike.
Why Legal Counsel Matters in Every Stage of an M&A Transaction
Indonesia’s legal framework for mergers and acquisitions is comprehensive, but it is also dynamic. Regulations are updated regularly, sector restrictions shift with successive presidential regulations, and the interpretation of unclear provisions often depends on the positions taken by relevant government authorities. For foreign investors, this means that transactions require not only legal knowledge but also practical familiarity with how the rules are applied on the ground.
From preliminary sector assessment and due diligence through to regulatory filings, notarisation, and post-closing compliance, each phase carries legal consequences that can affect the viability, timeline, and value of a transaction. Engaging experienced corporate counsel with specific expertise in Indonesian M&A law — from the earliest planning stage — remains the most reliable way to protect an investment and ensure a transaction that is both legally sound and commercially sustainable.
At Warga Negara Partner Asia, our corporate legal team has extensive experience advising local and international clients on mergers and acquisitions across a range of sectors. We work closely with our clients to understand their commercial objectives, navigate the regulatory landscape, and structure transactions that deliver lasting value. If you are considering an M&A transaction in Indonesia, we welcome the opportunity to discuss how we can support your goals.
