The Two Sides of Bank Acquisitions
Every action that the companies take, do have two side effects either positive or negative. Acquisition definitely has it too, for economy development in Indonesia and for the company itself. The positive side indicates that Indonesia has a good prospective for investing because it has large population, dominated by young people that active internet user and savvy with technology-five times faster than average internet penetration in the world-. In another hand, it’s too risky for financial stability, if a crisis occur foreign capital can be pulled out quickly.
The positive effects for the companies are substantial so, it’s not surprising that many of them are open to be acquire or acquired. The growth through acquisition is faster, cheaper, have financial gain and less risky than the basic methods that used to grow a company. Most businesses that growing through acquisition will find a number of other competitive advantages as well, and easily make market penetration. In some cases, competitors can be eliminated entirely via acquisition.
PT Bank Danamon is an example that acquisition have positive effect to its company. The price stocks are increasing from Rp 5000 to Rp 5725 in one day, as a result from acquisition Bank of Tokyo-Mitsubishi UFJ (BTMU) last year. This year, they have plan to increase BTMU’s shares up to 40% in the next 6 months to expand its business in Southeast Asia.
The negative effects for the company are a few but it’s essential. The failure reason of acquisition are culture clash, financial fallout, and risk consistency. Each bank certainly has its people and its work culture so if the employee didn’t adapting to the new change it will disturbing company’s growth, financial fallout means return income to the stakeholders didn’t meet their expectation and the expected cost savings may never materialize due to developing factors, and every financial institution handles regulation differently, if the culture clash occur during acquisition it will negatively affects the profitability of the business down.
Bank Wonosari is an example that experience the failure of acquisition. They had failed to make a decision for capital budgeting because the acquisition cost was very expensive and beyond their budget, the return income target didn’t meet the expectation. So, the bank didn’t growth to become a competitive bank and it affected a lot to customer, employee, and the bank’s business continuity.
Acquisition in early 2019
Early this year, the Indonesia stock exchange has recorded two acquisition transaction. The changing between ownership local to foreign and foreign to local caused a huge foreign funds flow to Indonesia.
Based on RTI data, from 10 biggest net buy four of them are bank company and PT Bank Tabungan Pensiun Negara (BTPN) is the biggest out of all with the amount of Rp 14.27 trillion. It was purchased by Sumitomo Mitsui Banking Corporation (SMBC) and BTPN immediately merged with PT Bank Sumitomo Mitsui Indonesia (BSMI) then changing its name to PT BTPN Tbk. Acquisition in banking were preferred by foreigner especially Japan. Because lately the Japanese central bank is loosening monetary policy in there so, the bank liquidity is quite abundant and ready to flow into another country. Besides, the population in Japan didn’t increase significantly in the past few years, even decreasing. So, the bank companies didn’t grow much in there.
The bank’s merged will changes it shares and structure. Based on company’s information, bank shares will be 8.15 billion that consist of Sumitomo Mitsui Banking Corporation (SMBC) with 7.93 billion, PT Bank Negara Indonesia Tbk (BBNI) with 12.01 million shares, PT Bank Central Asia Tbk (BBCA) with 83.05 million shares, and public with 121,55 million. The changing of shares will make the market capitalization value of BTPN also changes.
If we refer to the trading session I, the market capitalization value of BTPN will reach Rp 30.17 trillion, with this BTPN has shifted the position of PT Bank Tabungan Negara Tbk (BBTN) and PT Bank CIMB Niaga Tbk (BNGA). Shares of BBTN were at Rp 2710 so the market capitalization value was Rp 28,41 trillion and BNGA’s shares were at Rp 1155 so the market capitalization value was Rp 28.74 trillion.
This acquisition certainly helps BTPN to grow besides, they’re in the middle of transitioning from a retired bank to financial technology/fintech. Therefore, acquisition with BSMI will give a large capital injection for digital development of BTPN. If the acquisition run smoothly, BTPN will expand faster and bigger than they are now. But the problem Is BTPN has different market focus than BSMI. BTPN is focusing on the retail and UMKM sector but BSMI is focusing on the corporate sector. if they don’t have written statement about this matter, maybe it will cause a problem in the future. Because if the different culture and financial integrity didn’t manage well it will be causing culture clash and financial fallout that have a damage impact to the company.
Acquisition is not like a coin that deciding your choice by lucked, but you can choose and maintaining it to get front side.
source :
https://investasi.kontan.co.id
https://www.bareksa.com
https://www.cnnindonesia.com
https://www.investopedia.com
https://tirto.id
Ariastiadi,2018. Strategi Akuisisi & Merger Perbankan di Indonesia-Wonosari. FEB-Universitas Airlangga.
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