Merger and Acquisition: Key Differences, Legal Aspects, and 2025 Market Trends
Budihardjo Hardisurjo & Partners | Law Firm
Mar 17, 2025
Merger and acquisition (M&A) are two corporate strategies often used by companies to expand operations, improve efficiency, and strengthen market positions. Although frequently considered similar, they have fundamental differences, particularly in legal and operational aspects.
Definition
Based on Law No. 40 of 2007 on Limited Liability Companies (UU PT), the definitions of these terms are as follows:
Merger
A merger is a legal act performed by one or more companies to merge into an existing company. As a result, the assets and liabilities of the merging company are legally transferred to the surviving company, and the merging company's legal status ceases to exist.
Acquisition
An acquisition is a legal act performed by a legal entity or an individual to acquire shares of a company, resulting in a transfer of control over the company.
Key Differences Between Merger and Acquisition
Legal Entity Status | Assets and Liabilities Transfer | Shareholder Status | |
Merger | The merging company ceases to exist as a legal entity, while the surviving company continues to operate. | The merging company's assets and liabilities automatically transfer to the surviving company. | Shareholders of the merging company become shareholders of the surviving company. |
Acquisition | The acquired company remains a legal entity; only its control changes. | There is no direct transfer of assets and liabilities; the change occurs through share ownership. | Existing shareholders may remain or change depending on the acquisition agreement. |
The Importance of Legal Due Diligence Before M&A
Before engaging in a merger or acquisition, companies must conduct legal due diligence. This process involves a thorough examination of the legal, financial, and operational aspects of the target company to identify potential risks and ensure regulatory compliance. Legal due diligence helps businesses understand the liabilities they will assume, enabling them to make informed decisions and mitigate future risks.
Merger & Acquisition Trends in 2025
In 2025, M&A activities are expected to increase significantly, both globally and in Indonesia:
Global:Â The global M&A transaction volume is projected to reach US$4 trillion, a 15% increase from the previous year, driven by improved financing conditions and a surge in initial public offerings (IPOs).
Southeast Asia:Â M&A activity in Southeast Asia is expected to rise due to geopolitical stability and increased foreign investment. The e-commerce sector in the region is also anticipated to consolidate through M&A deals.
Indonesia:Â In Indonesia, the e-commerce sector shows strong consolidation potential. Intense competition is pushing companies to consider mergers and acquisitions as strategies to strengthen their market position and improve operational efficiency.
Case Study: Grab and GoTo Merger Talks
A recent example is the ongoing merger discussions between Grab and GoTo, two major tech companies in Southeast Asia. These companies are exploring a potential merger to reduce prolonged losses and strengthen their market position. Although no final agreement has been reached yet, this move reflects the ongoing consolidation trend in the regional tech industry.
Mergers and acquisitions are essential strategies for companies seeking growth and competitiveness in dynamic markets. Understanding the differences between the two and the importance of legal due diligence can help businesses make informed decisions and mitigate risks. With the projected rise in M&A activities in 2025, companies must stay vigilant and ready to seize emerging opportunities.
