Business Law

ENGLISH FOR ACCOUNTING

  BY:

 ARMAYUNITA 

ANDI NUGROHO

ELISA WENTARI

SEFRIYATNO

WAHYU FADHYLLAH

 

ACCOUNTING DEPARTMENT

POLITEKNIK NEGERI UJUNG PANDANG

MAKASSAR

2013

 

Chapter 1

Introduction

1.1  Background

The era of globalization has led to the development of the business. Each company increasingly encouraged to compete with other companies with competing to enter the market opportunities that exist. Each company should also be ready to compete with foreign companies. This suggests that competition in the business world is no longer a local or national scale, but also international. This requires companies to develop a corporate strategy in order to survive and thrive. The objective of this effort is to create value for investors or also for shareholders.

To address this phenomenon, we need a proper strategy that the company is ready and able to compete with other companies. For that every company should have a precaution in the face of all the developments that will come with the policies applied by the company, in order to continue to operate and continue to exist in the world of business.

Strategies that can be applied by the company in developing its business activities is to expand the business, both internally and externally. Internal expansion can be done by adding production capacity or build new business division. While externally expansion can be done by combining self with another company or acquisition of another company.

Form of takeovers of other companies is the implementation of mergers and acquisitions. External growth through merger and generate greater profitability soon, because the existing revenue streams and do not need to be created first. Profitability of the creation of mergers and acquisitions in addition is the most important reason to achieve profitable growth, as well as to fulfill the wish of the management or the business manager raised the status of the company.

Activities merger, consolidation and acquisition is loaded with business strategy, indirectly had an impact on the market structure. Therefore, it is necessary to control the activities of merger, consolidation and acquisition potentially monopolies and unfair business competition. For these reasons, the KPPU emphasized. The antitrust agencies evaluate merger activity, mergers and takeovers could lead to unfair competition. For example, if the merger, consolidation and acquisition that resulted in a market share of more than 50 percent, then the potential for unfair competition is not impossible to happen.

In general, there are two things that stipulated in Government Regulation No. 57 of 2010. First, the obligation to give notice entrepreneurs in writing to the KPPU effective date juridical merger, consolidation and acquisition. Second, the assessment of whether or not the breach of a merger, consolidation and acquisition.

1.2  Problem Statement

Based on the above background, it can be the formulation of the problem as follows:

1.      Is there a breach of the merger between PT Tri Ployta Indonesia Tbk and PT Chandra Asri;

2.      Consultation merger between PT Tri Polyta Indonesia Tbk and PT Chandra Asri to the KPPU.

1.3  Objective of the Paper

The objectives to be achieved are:

1.      To know is there any breach of the merger between PT Tri Polyta Indonesia Tbk and PT Chandra Asri;

2.       To determine whether PT Tri Polyta Indonesia Tbk and PT Chandra Asri must deposit form merger to the KPPU consultation.

 1.4  Significant of the Paper

1.      provide advice to the  companies that would merger

2.      Doing link and match between the theory and practice of business law that occurred in the field

3.      Provide additional information to the reader especially about business law

 

Chapter II

Literature Review

2.1    Review of Literature

2.1.1   Definition of Merger

Merger is a business strategy which is implemented by combining two or more companies agree to unify its operations on the basis of a relatively balanced, because they have the resources and capabilities that together can create a stronger competitive advantage.

According to Brian Coyle, a merger can be interpreted broadly or narrowly. In a broad sense, the merger also refer to any form of takeover of a company by another company, the current business activities of the two companies merged. More narrow sense refers to two companies with similar equity, combining the resources that exist in the two companies into one establishment. Shareholders or owners of both companies before the merger becomes the owner of shares of the merged company, and top management from both companies remain in senior positions within the company after the merger.

As according to Morris, the merger can be easily understood as a structural form that is similar to the takeover. All rights and obligations of the merged company transferred by law to take over the company. In a merger transaction is actually happening is the transfer of the rights and liabilities of the acquired entity to take over the company. the takeover of common stock, the rights and obligations of the acquired entity remains separated in an independent company that is different from the acquiring company in a merger, it was created a new company that will absorb all rights and liabilities of the acquired entity.

2.1.2   Type Merger

Mergers based on economic activity can be classified into five types, namely:

1.         Horizontal merger

Horizontal merger is a merger between two or more companies are engaged in the same industry. before the merger of these companies are competing with each other in the market / industry alike. One of the main objectives of horizontal mergers and acquisitions is to lessen competition or to improve production efficiency through merger activity, marketing and distribution, research and development and administrative facilities. Effects of horizontal mergers are increasingly concentrated market structure in the industry. If there are only a few businesses, the market structure could lead to bntuk ologopoli, would even lead to a monopoly.

2.         Vertical mergers

Vertical merger is the integration involving companies engaged in the process steps produsi or surgery. Mergers and acquisitions of this type carried out if the company is located in the upstream industry enters downstream or vice versa. Mergers and acquisitions vertical done by companies is to integrate the efforts of suppliers and / or users of the product in order to stabilize the supply and user.

Not all companies have a complete business fields ranging from input supply to marketing. To ensure that the supply of inputs to run smoothly then the company could be acquired or merged with suppliers. Mergers and acquisitions is divided vertically in two forms namely backward integration or downward (backward / downward integration) and integration forward or upward.

3.      Conglomerate mergers

Conglomerate merger is a merger of two or more companies each of which is engaged in unrelated industries. Conglomerate mergers and acquisitions occur when a company is trying to diversify its business by entering the field of business areas that are totally different from the original business. If this conglomerate mergers and acquisitions carried out continuously by the company, then formed a conglomerate. A conglomerate having business Bisang very diverse in different industries.

4.      Eksensi Merger Market

Market extension merger is a merger by two or more firms to jointly expand the market area. Mergers and acquisitions purpose is mainly to strengthen the marketing network for each company's products. Mergers and acquisitions extension market is often done by companies across the state in order to expand and market penetration. This strategy is to access foreign markets quickly without having to build production facilities from scratch in a country that will be entered. Mergers and acquisitions market extensions made ​​to overcome export limitations due to lack of supply of products provide flexibility to consumers lar country.

5.      Existence merger Products

Existence merger merger product is made ​​by two or more companies to expand product lines of each company. After the merger the company will offer more types and product lines that will reach a broader consumer. Merger and acquisition is done with less leverage the power of research and development departments of each to get synergy through effectiveness research so that more productive in innovation.

2.1.3        Critical Success Factors Mergers and Acquisitions

1.         Factor Markets and Marketing

According to Neil Kay (1997), companies can succeed in doing merer and acquisitions where there is similarity or complementarity in terms of market he described as rket lingkages. One of the expected outcomes of the mergers and acquisitions is synergy generated by the increased access to the company's new market that has not been touched.

Sources of potential in this market opportunity by combining the market share occupied each for these (cross marketing). With a broader product line, each company can sell more products to the customers of that has been done. This allows cross-merketing quickly each company to increase its earnings very quickly. Thus enabling cross-selling that will boost corporate earnings results mergers an acquisitions. For example, cross merketing suggestion is one of the brand power products will give effect to the other products obtained from the results of mergers and acquisitions.

Corporate sustainability is highly dependent on the positive market response to what they have to offer. Despite having the ability to produce quality goods or services, but if the market does not give a positive response then the company will not earn a profit. While profit is the basis for the sustainability of a company.

2.         Technological factors

According to Neil Kay (1997), companies can conduct mergers and acquisitions where there is similarity or complementarity in terms of resources and production technology was described as technological linkages, which include the incorporation of the production process due to the same process as was the case in horizontal mergers. The product development process can also be a means of achieving synergy in an organization's information technology. When technology is used at the potential synergies can be created.

By making the process of mergers and acquisitions in a healthy and voluntarily, the potential synergies will generate economies of scale and scope that are useful. Can also be defined as the technologies in production and innovation capabilities possessed by perusaaan reflected qualification of human resources, skills and expertise yamg they have, the type of products they offer as well as capital goods equipment they use.

3.         Organizational Culture Factors

Organizational culture is one of the non-economic aspects are very important to consider when two or more companies doing mergers and acquisitions. In many kasusu mergers and acquisitions in different companies, cultural issues often become a very crucial issue. Cultural backgrounds are very different among employees can lead to employees are reluctant to cooperate, each trying meakukan something by way of this method over the company they have done their time, to be able to adapt often takes a long time.

Organizational culture is defined by Robins (2000) as a common perception held members of the organization. Schein (1997) states that organizational culture refers to a system of shared meaning held by members that distinguishes the organization from other organizations. While Kotter and Heskett (1992) explains that within the organization, culture and way of presenting lue shared by those involved in the organization. Value itself is seen as a fundamental beliefs about what should or should not do and what is important and what is not important to the organization.

The cultural differences can lead to conflict. As a result of cooperation is not easily awakened, weak organizational cohesiveness, synergy is not created, ultimately the productivity of the company resulting from the merger and acquisitions also become worse than before.

Organizational cultural differences would be resolved. Because it's own culture is something that can be changed. But it takes time and a good ability to manage change. So before mergers and acquisitions carried out would need to be prepared cultural transition model can be accepted and followed by all the components in each company to be mergers and acquisitions.

4.         Finance factors

One of the reasons why mergers and acquisitions do is hope for the resource synergies through the merger of several companies. From the financial side, this synergy Traffic generate meaningful earnings results mergers and acquisitions greater than the ability to generate profits of each company before the merger and acquisition. Synergy is at the beginning of a merger condition. This then allows the synergies resulting from the merger and acquisition of companies able to finance mergers and acquisitions as well as capable of providing premium dividend to shareholders and the company.

Synergistic effect of a merger and acquisition activity that is rooted in sua in terms of operational synergies and synergies in terms of financially. Operational synergies may occur in the form of increased revenue and reduced costs.

In practice, efforts to increase revenue is more difficult than the effort to reduce production costs. This is because the latter is more visible and more easily scalable so identified. While synergies in terms of financially related to the possibility of lower cost of obtaining capital for the company resulting from the merger and acquisition than the cost to the company prior to the merger and acquisition.

Planners mergers and acquisitions are likely to see cost reduction as the primary source of operational synergies. This cost reduction more economies of scale derived from the decrease in the cost per unit of product produced by the increase in production volume or scale of its operations. Cost per unit of product are high fixed costs arising from operations that only produce output slightly.

Process that increases the amount of output which then lead to declines in the cost per unit is usually called spreading overhead. Another source that can reduce the cost of labor is the specialization pengingkatan and management, as well as the use of more efficient capital goods, which may not occur at low output levels.

2.2    DISCUSSION

2.2.1 Is there a breach of the merger between PT Tri Polyta Indonesia Tbk and PT Chandra Asri.

In accordance with the mandate of Article 28 and 29 of Act No. 5 of 1999, the Supervisory Commission and the competition will exercise control over the merger, consolidation or acquisition, and in particular for the merger, consolidation or acquisition and the resulting reduction in the level of competition in the relevant market and can lead to loss of community:

In Article 28, paragraphs 1 and 2 reads:

1.         Business actors shall be prohibited merger or consolidation of business entities that may result in monopolistic practices and or unfair business competition.

2.         Business actors shall be prohibited takeover of another company if such action may result in monopolistic practices and or unfair business competition.

And article 29, paragraph 1 reads:

Merger or consolidation and business entities and or acquisition of shares referred to in Article 28, which resulted in the value of assets and or sales value exceeds a certain amount, shall be notified to the commission.

On the basis of the Business Competition Supervisory Commission (KPPU) has appealed to the proposed merger between PT Tri Polyta Indonesia Tbk (TPIA) and PT Chandara Asri consulted to the KPPU.

This is done to avoid the impact of the merger vertical both sides believe in having a market share of petrochemical products is strong. KPPU reminded that the merger of emotion in accordance with the provisions stipulated in Government Regulation No. 57 of 2010 concerning the merger or consolidation of business entities and corporate takeover that resulted in monopolistic practices and unfair business competition.

But in fact, the second merger of national petrochemical producers were not violate the Act No. 5 of 1999 on the prohibition of monopolistic practices and unfair business competition because of the merger effort made ​​to improve economic efficiency and increase competitiveness in the national welfare. It is also approved by the Director of Basic Chemical industry Ministry of Industry.

Competition in the petrochemicals sector in the international arena today is pretty tight. Indonesia is currently competing with neighboring countries like Thailand, Malaysia, and Singapore.

On the contrary, if the merger activity has the potential occurrence of monopolistic practices and unfair business competition, the KPPU is authorized to cancel the merger.

2.2.2        Consultation merger between PT Tri Polyta Indonesia Tbk and PT Chandra Asri to KPPU

Business Competition Supervisory Commission (KPPU) for the umpteenth time urges the entire company or business that will merge or pre nontifikasi give notice to KPPU. The purpose of the pre-order nontifikasi know the purpose of a merger or acquisition of businesses that will be done.

Previously, the Commission has published the Commission Regulation (Perkom) number 1 out 2009 on Nontifikasi Pre-Merger Consolidation and Acquisition. However, the new Government Regulation in terms of pre-nontifikasi Perkom converted into nontification post. In post nontification, the company will conduct a merger, consolidation or acquisition shall notify KPPU of the date of the corporate action is effective legally.

In government regulation no.57 of 2010 mentioned category of companies that must report. One was about the minimum (threshold) value of assets and the value of sales that want to do a merger, consolidation and acquisition. According to Article 5 paragraph (2) and paragraph (3), businesses are required to report events merger, consolidation and acquisition to KPPU if the combined asset value of more than Rp 2.5 trillion or sales value of more than Rp 5 trillion.

In chapter 7 of Government Regulation no.57 of 2010 there were exceptions that reporting obligations in the event of a merger, consolidation and acquisition of businesses conducted between affiliated companies.

Currently PT Barito Pacific Tbk has a 77.93% stake in Tri Polyta, whereas in Chandra Asri, Barito holds 70% stake, which is based on the concept of affiliate shares, which if the Vendor has more than 50% stake in the company will be merged , corporate action was excluded.
So there is no mistake the opinion KPPU said that the merger can only be given after the agency received a report on the plan through consultation form accompanied with complete data for later conducted a survey early. 

Chapter III

Conclusion and Suggestion

3.1    Conclusion

1.    Merger of the two national petrochemical producers were not violate the Act No. 5 of 1999 on the prohibition of monopolistic practices and unfair business competition because the merger was to improve economic efficiency and increase competitiveness in the national welfare.

2.    PT Tri Polyta Indonesia Tbk and PT Chandara Asri has no obligation to give notice in writing to KPPU relating to the proposed merger.

3.2    Suggestion

Any company that would do the merger without exception, should give notice in writing to KPPU to consult on the proposed merger so that the impact of this merger can be analyzed from the beginning.