Maximising M&A success with enhanced integration strategies, a Thought Leadership by PwC Indonesia

• Dealmakers in Indonesia prioritise strategic positioning (93%) for their deal objectives, while opportunistic transactions risk achieving suboptimal returns;
• Dealmakers primarily conduct due diligence for valuation adjustment (78%) and validating Target’s compliance (75%). Moreover, due diligence can be leveraged to uncover initial potential synergy levers and integration areas;
• While dealmakers traditionally prioritise cost synergies for their clear and measurable benefits, the dealmakers in Indonesia also recognise the importance of revenue synergy (95%) for sustainable growth;
• Dealmakers shall seek a capability-fit Target whose capabilities complement or enhance the Acquirer’s strengths;
• Dealmaker respondents initiate synergy identification and integration planning early – 52% during deal screening and 39% of Dealmaker in the due diligence phase – to ensure the factors are actionable post-signing and allowing risk mitigation planning.

Jakarta, 10 February 2025 – In 2021-2022, Indonesia reached its transaction value peak in the past decade, where the dealmakers are focusing on smaller transaction value. The trend persisted in 2023 however undergone significant decline influenced by various factors such as macro-economic challenges of interest rate cuts by the US Federal Reserve and Bank Indonesia, as well as wait-and-see approach in the election year. In 2024, after the election, Indonesia’s deal performance gradually recovered with approximately 20% higher achievement in Q1–Q3 compared to 2023, driven by the launch of pro-investment policies. Indonesia M&A landscape is expected to further develop with key trends like digital transformation, renewable energy, consolidation in the financial services sector, and the creation of investment super-holdings.

PwC Indonesia launched its latest thought leadership report, "Maximising M&A Success with Enhanced Integration Strategies." The publication highlights four crucial aspects in the deal-making process that demand a greater focus and deliberate decision-making from Dealmakers to enhance M&A success: deal intention, due diligence, synergy, and integration. The publication also unlocks the key trends and behaviours of Indonesian Dealmakers doing M&A from 40 Dealmakers across industries in Indonesia.

Indonesian Dealmakers exhibit distinct behaviours and preferences that shape their M&A strategies. Based on the report, aligning the deal objective and the organisation strategy creates optimal value and provides clear guidance on navigating the deal. In contrast, Dealmakers who pursue opportunistic transactions may achieve suboptimal returns. Dealmakers in Indonesia prioritise strategic positioning as primary objective (93%), followed by commercial (88%), financial gains (80%) such as investment returns and valuation improvements.

The publication underscores the importance of Dealmakers finding the right capability-fit Target to achieve M&A objective. Prioritise selecting a Target whose capabilities complement or enhance the Acquirer’s strengths. This allows the Dealmakers to unlock the potential synergistic value creation, enabling a stronger competitive position and delivering unique value to customers.

The Indonesian Dealmakers respondents primarily leverage due diligence to identify gaps and dealbreakers, mainly to adjust valuation (78%) and validate Target’s compliance (75%). However, successful Acquirers leverage due diligence to uncover initial potential synergy levers and integration areas, ultimately identifying potential area of value creation and planning to mitigate integration risks.

On the other hand, Dealmakers face increasing pressure to generate greater value from their transactions, making it essential to identify synergy and planning the integration early in the deal process. Our Indonesian Dealmakers respondents recognise the importance of early synergy identification and integration planning, with the majority (52%) begin synergy identification during the deal screening phase. Majority of them (39%) also initiating integration planning process during the due diligence phase. Mostly both synergy and integration planning complete post-closing due to transparency between Acquirer and Target, access to more comprehensive operational data and clearer regulatory guidance on permissible synergies.

Traditionally, cost synergies were prioritised by the Dealmakers for their clear and measurable benefits. Today, the Indonesian Dealmakers also recognise revenue synergies as powerful drivers of sustainable growth and competitive advantage. Majority (98%) are prioritising revenue synergy for the significant long-term impact, while cost synergies for immediate gains.

Successful integration requires a deliberate allocation of talent, time and finances to balance with the ongoing business operations effectively. If not managed properly, the integration process can strain the existing resources, lead to a misaligned priority, reduced morale, and delays in achieving integration milestones.

Radju Munusamy, PwC Indonesia Deals Strategy & Operations Partner, said, "Effective integration is crucial for M&A success. Our Dealmaker respondents in Indonesia understand the necessity of dedicating adequate resources to integration efforts, with 48% of them allocating 6-10% of their total deal value for this purpose. This commitment stems from the need to start integration planning early and execute it with top-notch capabilities. By focusing on early planning and resource allocation, Dealmakers can unlock substantial value and foster sustainable growth.”

When planning for integration, Dealmakers must consider three integral components—business process, people, and IT—as these form the backbone of operational continuity. Business processes drive how the business operates, people part covers the organisation and personnel who execute the business process, and IT ensure seamless business process system collaboration and connectivity across entities.

Business process integration involves designing the Target Operating Model (TOM) post-transaction and creating detailed implementation plans to minimise disruption during the transition. IT integration ensures alignment of systems, applications, infrastructure, and data for seamless information processing and collaboration. People integration focuses on aligning people to realize the transaction’s intended value, making talent retention critical to avoid value disruption. In line with global practices, Dealmakers in Indonesia prioritise organisational clarity (95%), effective communication (89%), and leadership retention (79%) as key talent retention programmes.

To close, Radju added, “Integration implementation can become complex, carrying the risk of delays if not properly understood and managed effectively, hence the necessity of early integration planning is a critical advantage for Dealmakers.”