Pengertian dan Latar Belakang M&As

1. Mergers & Acquisitions (M&As)
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Mergers & Acquisitions (M&As)
Modul III

2. I N Wisnu Wardhana-M&As-IMTelkom
Modul III
Pengertian dan Latar Belakang M&As

3. Pengertian dan Latar Belakang M&As
Pengertian dan Latar Belakang M&As:
Global Perspectives
Corporate Objective
Alternative to grow (to have a growth)
M&As as ‘the fastest way’
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Global Perspectives:
Teori comparative advantage
Kerjasama regional
Aliran FDI
M&As Vs. Greenfield
Keuntungan M&As
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4. Absolute to Comparative Advantage
Suppose country A is better than country B at making
automobiles, and country B is better than country A at
making bread.
It is obvious (the academics would say “trivial”)
that both would benefit if A specialized in
This is arguably the single most powerful insight into economics
David RicardoAdam Smith
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that both would benefit if A specialized in
automobiles, B specialized in bread and they
traded their products. That is a case of Absolute
Advantage (Adam Smith)
But what if a country is bad at making
everything? Will trade drive all producers out of
business? The answer, according to Ricardo, is
no. The reason is the principle of Comparative
Advantage
Both trade and GDP fell in the late
1920s, before bottoming out in 1932.
After World War II, both have risen
exponentially, most of the time with
trade outpacing GDP. (1950 ~100,
Trade and GDP; Log Scale).

5. Comparative Advantage – cont’
It says, countries A and B still stand to benefit from trading with each
other even if A is better than B at making everything. If A is much
more superior at making automobiles and only slightly superior at
making bread, then A should still invest resources in what it does best
— producing automobiles — and export the product to B. Then…
B should still invest in what it does best — making bread — and
export that product to A, even if it is not as efficient as A. Both would
still benefit from the trade. A country does not have to be best at
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The theory dates back to classical economist David
Ricardo. It is one of the most widely accepted among
economists. It is also one of the most misunderstood
among non-economists because it is confused with
absolute advantage.
It is often claimed, for example, that some countries have
no comparative advantage in anything. That is virtually
impossible. Think about it…
still benefit from the trade. A country does not have to be best at
anything to gain from trade. That is comparative advantage.

6. Comparative Advantage – cont’
Country A Country B
Comparative advantage
Using all its resources, country A can produce 10m private motor cars or 5m commercial vans,
and country B can produce 20m cars or 7.5m vans.
In this case, country B has the absolute advantage in producing both products, but it has a
comparative advantage in cars because it is relatively better at producing them.
Economic theory suggests that these two countries should trade because both countries have a
‘comparative advantage’
Increased world output
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Country A Country B
Motor cars 10 20
Commercial vans 5 7.5
Increased world output
If the two countries specialize and employ the principle
of comparative advantage, combined output is: Cars = 20
Vans = 5 = 25 million units.
If we take the previous example, if countries A and B
allocate resources evenly to both goods combined
output is: Cars = 10 + 5 = 15 Vans = 3.75 + 2.5 = 6.25 =
21.25

7. Global ~ Trade Under the Goverments of WTO
The bulk of the WTO's current work comes from the
1986-94 negotiations called the Uruguay Round and
earlier negotiations under the General Agreement on
Tariffs and Trade (GATT).
The World Trade Organization (WTO) is the only global
international organization dealing with the rules of
trade between nations. At its heart are the WTO
agreements, negotiated and signed by the bulk of the
Regional Co-Operation
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agreements, negotiated and signed by the bulk of the
world’s trading nations and ratified in their
parliaments.
The goal is to help producers of goods and services,
exporters, and importers conduct their business.
Nevertheless, there are several arguments confess the adverse impact of being traded globally, as a mean
of the international trading to be decelerated:
The temptation to ward off the challenge of competitive imports is always present.
Protection ultimately leads to bloated, inefficient producers supplying consumers with outdated,
unattractive products (Protectionism).
Non-Discrimination Principle (Most Favoured Nation), Grant someone a special favour and you have to do
the same for all other WTO members.
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8. Regional Co-Operation – Cont’
WTO’ regulations provided by the agreement has made transactions across the
national border relatively to be decelerated.
Rationale for communities to create cooperation/regionalism.
Regionalism purpose is widening market and advancing competition through
removing barriers to trade among member countries
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AFTA as regionalism in ASEAN enhance economic liberalization by way of AEC
and framework Agreement on AIA.
The fact that different from European Union, which started as an
inward-looking approach to regionalism. ASEAN integration is
primarily equipped toward open regionalism, given that the
significant counter-parts of economic exist outside the region.
NAFTA (North America, Free Trade Area)
Andean Community (Latin America)
MERCOSUR (South America)
SADC (South Africa Development Community)
SAARC (South Asia)
ASEAN (South East Asia Nations)
AFTA & China

9. FDI Flows
Regionalism introduces new mechanisms, a free investment, outward-
looking, comprehensive, and market-driven economy. transform the
region into an area with free movement of goods, services, investment,
skilled labour, and capital (such as, Five free of flows of ASEAN AFTA).
As a result, FDI inflow emerges to the countries where such a regionalism
come into effect and deregulated their investment’ instruments.
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Source: ASEAN Secretariat Database
Though, ASEAN foreign
direct investment
inflows declined in
2008 as the global crisis
puts an end to five
consecutive years of
ASEAN FDI expansion
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10. FDI Flows – cont’
ASEAN FDI – Sources of Investment Flows
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Intra-ASEAN flows remained resilient. Intra-ASEAN FDI flows
went against the grain to increase by 13.4% in 2008 to
US$10.7 billion.
Source: ASEAN Secretariat Database

11. M&As Vs. Greenfield
Foreign direct investment (FDI) or foreign investment refers to the net inflows of
investment to acquire a lasting management interest in an enterprise operating
in an economy other than that of the investor.
It is the sum of equity capital, reinvestment of earnings, other long-term capital,
and short-term capital as shown in the balance of payments. It usually involves
participation in management, joint-venture, transfer of technology and
expertise.
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There are two types of FDI: inward foreign direct investment and outward
foreign direct investment, resulting in a net FDI inflow (positive or negative) and
"stock of foreign direct investment", which is the cumulative number for a given
period. Direct investment excludes investment through purchase of shares.[FDI is
one example of international factor movements.
FDI is a long-term active participant from foreign
countries. There are two ways
in which FDI flows (in common):
M&As
Greenfield

12. M&As Vs. Greenfield – cont’
Conforming to study by Harzing *, the reasons to distribute capitals between those modes of FDI
Flows
Firms with lower R&D by Acquisition.
Developed countries (similar business practices) Cross border
thru Acquitting cross border M&As thru Green-field investmentsOr
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* Harzing, A.W.K., Managing the multinationals: An international study of control mechanisms, Cheltenham: Edward Elgar,
425 pp. ISBN 1-84064-052-9.1999
Developed countries (similar business practices) Cross border
M&As.
Acquisitions encouraged by imperfections of capital markets.
In developing countries The advantage lies more in rapid market
entry, local market knowledge, established distribution systems and
contacts with the government, suppliers or customers.
For firms to choose Cross border M&As instead of entry through Greenfield investment
there has to be a supply of suitable target companies to acquire.

13. Merger Wave
The Intensity of
Cross border M&As
The driving force of Cross border M&As.
M&As Vs. Greenfield – cont’
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The fact, the ratio of the value of international cross border M&As to the value of global FDI is
about 80%.
Most FDI Flows are conducted through Cros Border M&As
Source: UNCTAD World Investment Report 2009
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14. Keuntungan M&As
The Benefits from conducting M&As are manifold:
Greater Value Generation, M&As often lead to an increased value generation for
the company. It is expected that the shareholder value of a firm after mergers or
acquisitions would be greater than the sum of the shareholder values of the parent
companies.
Leads to tax gains, and can even lead to a revenue enhancement through market
share gain. Companies go for M&As from the idea that, the joint company will be
able to generate more value than the separate firms.
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able to generate more value than the separate firms.
Leverages and stimulates a growth, this scenario can prove to be really beneficial
to the companies when they are weathering through the tough times.
Gaining Cost Efficiency, When two companies come together by merger or
acquisition, the joint company benefits in terms of cost efficiency. A merger or
acquisition is able to create economies of scale which in turn generates cost
efficiency.
M&As can increase revenue and can reduce the cost
of capital, thru expansion (market share) and
eliminating such double activities.

15. Keuntungan M&As – cont’
Air France and KLM were two distinct national carriers before combining in 2004 to create the Air
France-KLM group.
The Air France-KLM combination made sense on several levels. Although KLM was struggling
financially before the takeover, the two airlines had very complementary networks: out of 106
long-haul destinations, only 36 were common to both networks. The merger therefore gave the
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long-haul destinations, only 36 were common to both networks. The merger therefore gave the
new group a much larger pool of destinations that it could offer.
The Merger
‘combination’ approach was adopted to avoid merger by
absorption and preserve the two national policies and cultures
of the airlines.
All parties remain convinced that this ‘combination’ has been a
success, bringing into being one of the largest and most
successful airline groups currently operating, and enabling Air
France-KLM to use this combination as a tool to grow in the
future in a range of different airline markets.

16. Pengertian dan Latar Belakang M&As
Pengertian dan Latar Belakang M&As:
Global Perspectives
Corporate Objective
Alternative to grow (to have a growth)
M&As as ‘the fastest way’
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Corporate Objective:
Directional Objectives
Performance Objectives
Internal & External Objectives
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17. Corporate Objectives Structure
CORPORATE OBJECTIVES
Directional objectives:
Market leadership
Market spreads
Customer services
Performance objectives
Growth
Profitability
Internal objectives:
Efficiency
Personnel
Most common to be
considered by board
Corporate (or business) objectives are set
at the high level and are quite distinct
from any more detailed functional
objectives set for the functional areas of a
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Efficiency
Personnel
External objectives:
Social responsibility
FEATURES OF CORPORATE OBJECTIVES
The strategic objectives identified by most organizations share several
features:
They address both financial and non-financial issues
They can be reached with a stretch
They incorporate the dimension of time
They reduce conflict
They can be measured
They avoid unintended consequences
objectives set for the functional areas of a
business.

18. Directional Objectives
Market leadership is the position of a company with the largest market share or highest
profitability margin in a given market (respective market) for goods and services. Market
share may be measured by either the volume of goods sold or the value of those goods.
Own and control the relevant technology in whatever market you are in, either
through the use of patent or other proprietary protections.
Adopt, and implement better technologies immediately, whenever they become
available, regardless of whether or not any other organizations are currently using
them.
Be the first to use a technology or create a category for a product. Then, make it an
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Be the first to use a technology or create a category for a product. Then, make it an
industry standard.
Examples of digital market leadership include:
Microsoft's position of the operating system (Windows) and Web
browser (Internet Explorer) markets.
Apple's share of portable media player sales (iPod).
Comcast's dominance in broadband Internet access (cable
modems) in many areas of North America.
Friendster, followed by MySpace and now Facebook's position
(social networking).
Blackberry follow by Android, and now recently IPad (for gadget
lifestyle)

19. Directional Objectives – cont’
Market spreads, is widening and enlarging the position of a company to serve market for
goods and services in order to maintain its position and strengthen its competitiveness.
Product differentiation
Market penetration
Market intelligent, etc.
Customer services, is the provision of service to customers before, during and after a
purchase. According to Turban et al. (2002),
“Customer service is a series of activities designed to enhance the level of customer
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“Customer service is a series of activities designed to enhance the level of customer
satisfaction – that is, the feeling that a product or service has met the customer
expectation.“
The Ten Commandments of Customer Service:
1. Know who is boss
2. Be a good listener
3. Identify and anticipate needs
4. Make customers feel important and appreciated
5. Help customers understand your systems
6. Appreciate the power of "Yes“
7. Know how to apologize
8. Give more than expected
9. Get regular feedback
10. Treat employees well

20. Performance Objectives
Profitable Growth, a term most often used by CEOs when describing their firm's
strategic objective. Profitable growth is the combination of profitability and growth,
more precisely the combination of Economic Profitability and Growth of Free cash
flows. Profitable growth is aimed at seducing the financial community; it emerged in
the early 80’s when shareholder value creation became firms’ main objective.
Nine major influences on growth & profitability:
1. The higher the rate of investment intensity the lower the return on investment
2. The higher the productivity the more profitable the business will be
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1. The higher the rate of investment intensity the lower the return on investment
2. The higher the productivity the more profitable the business will be
3. A high relative market share has a positive effect on profit
4. Growth in the served market has a positive effect upon absolute monetary measures of
profit and a neutral effect on percentage measures of profit
5. High quality has a generally favorable effect on profit
6. Extensive research and development tends to have a positive effect on profit if the
business already has a strong market position
7. Businesses in mature and stable markets benefit from vertical integration (vice versa)
8. Increases in wages, materials and other costs have a complex impact on profit
9. Striving to achieve the benefits of any of the above frequently has an opposite effect on
profits

21. Internal & External Objectives
Internal Objectives, also referred to as an organic objective for organization to have
a growth through its strategies, commonly, the strategies focused on making the
core business better and better. i.e. Developing new products, increasing efficiency,
hiring the right people/personnel, better marketing etc.
On the other hand, an external objective, is a growth strategy which could be
handed through more concerned with organization’s social responsibility (see UUPT
40/2007 concerning CSR)
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Invented Here:
Maximizing Your Organization’s
Internal Growth and Profitability
To succeed in a market where consumers increasingly demand customized
goods and services, you cannot rely on any one formula.
Instead, you must look within your own organization to invent, develop, and
deliver the distinctive competencies that ensure growth and profitability.

22. Pengertian dan Latar Belakang M&As
Pengertian dan Latar Belakang M&As:
Global Perspectives
Corporate Objective
Alternative to grow (to have a growth)
M&As as ‘the fastest way’
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Alternative to grow:
Impact From Regionalism Vs. Corporate Objective
Corporate Growth
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23. Alternative to Grow - Impact From Regionalism Vs. Corporate Objective
Impact From Regionalism Vs. Corporate Objective
Basic principle for a Corporation is a “Growth”
Direct effect:
Regional Co-operation (for outward looking co-operation) became
more integrated, and barriers to trade decreased, inevitably, the
benefits of regional integration efforts become more well-known and
established, finally, higher level of FDI flows can be expected.
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established, finally, higher level of FDI flows can be expected.
Hence,
Regionalism has enacted its liberation of the regional Economic Community
with such free movements, inter alia, goods, services, investment, skilled
labour, and capital, intended to facilitate all elements (i.e. corporation, etc.
see ASEAN, EEC, etc) to conduct business operations in the region and
the ultimate goal is to form the region as a single market and a production
base for corporations/organizations to have a potential growth to reach
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24. There are some ways to reach corporate objective (a growth):
Organic growth:
Strengthen product/share penetration
Hiring/Change personnel
Focusing on core business
Cost optimization (efficiency)
Change in marketing stretegy
Etc.
Un-organic growth:
Alternative to Grow – Corporate’s Growth
Companies seeking to expand
are faced with a choice
between internal or organic
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Un-organic growth:
M&As:
Mergers
Acquisitions
Joint Venture
Synergy
Alliance
Cartel
Diversification
Portfolio re-engineering
Real Option?
Holding company?
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between internal or organic
growth and Un-organic growth.

25. Pengertian dan Latar Belakang M&As
Pengertian dan Latar Belakang M&As:
Global Perspectives
Corporate Objective
Alternative to grow (to have a growth)
M&As as ‘the fastest way’
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M&As as ‘the fastest way’:
Organic Vs. Un-organic Growth
Why M&As is a faster choice
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26. M&As as ‘The Fastest Way’ - Organic Vs. Un-organic Growth
M&As, as the fastest way
An organization substantially broadens the scope of one or more of its
business in terms of their respective customer group, customer functions and
alternative technologies to improve its overall performance
One of the most fundamental motives for a corporation is growth.
Corporations seeking to expand are faced with a choice between organic and
un-organic growth, Corporation may grow within their own industry or they
may expand outside their business category
If a corporation has a window of opportunity that will remain open for only a
limited period of time, slow internal growth may not suffice. As the company
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limited period of time, slow internal growth may not suffice. As the company
grows slowly through internal expansion, competitors may respond quickly
and take market share. Advantages that a company may have can dissipate
over time or be whittled away by the actions of competitors
There are many opportunities that must be acted on immediately lest they
disappear. Being first to develop the concept provides a certain limited time
advantage. If not properly taken advantage of, it may slip by and become an
opportunity for larger competitors with greater resources
Internal growth may be a slow and uncertain process. Growth
through un-organic (such as a M&As) may be a much more rapid
process, although it brings with it its own uncertainties.

27. M&As as ‘The Fastest Way’ – The appealing choice
M&As to facilitate growth is when a corporation wants to expand to another
geographic region, it may be quicker and less risky to expand geographically
through acquisitions than through internal development
If a company developed a new merchandising concept. Being first to develop the
concept provides a certain limited time advantage. If not properly taken advantage
of, it may slip by and become an opportunity for larger competitors with greater
resources.
Corporate managers are under constant pressure to demonstrate successful
growth. This is particularly true when the company and the industry have achieved
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growth. This is particularly true when the company and the industry have achieved
growth in the past. However, when the demand for an industry’s products and
services slows, it becomes more difficult to continue to grow. When this happens,
managers often look to M&As as a way to show growth. It often is hoped that such
acquisitions will lead not only to revenue growth but also to improved profitability
through synergistic gains.
Thus, Internal expansion may be much slower
and difficult. Mergers, acquisitions, joint
ventures, and strategic alliances may be the
fastest and lowest-risk alternatives.