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Indonesia’s appetite for foreign and domestic capital shows no sign of slowing. As the authors explored at length in a 2025 article, M&A in Indonesia: Risks, Rewards and Roadmaps, M&A remains the preferred route for investors looking to establish a lasting commercial presence in one of Southeast Asia’s most dynamic economies.

Three sectors continue to anchor that momentum: power, mining, and healthcare. Indonesia’s power sector is an increasingly compelling proposition, thanks to the country’s vast and largely untapped renewable energy resources. Mining, meanwhile, remains the backbone of the Indonesian economy: its abundant natural resources, paired with an aggressive downstream industrialisation push, continue to offer investors a long runway for value creation. The healthcare sector has likewise seen a meteoric growth, underpinned by Indonesia’s large population and implementation of the national universal healthcare programme.

Such sectors, however, operate under tightly choreographed regulatory regimes that can determine whether a transaction gets off the ground at all. This briefing maps out the key rules of the road for M&A in each, and the practical roadmap investors should follow before signing.

Renewable IPP acquisitions under PLN rules

Indonesia’s state electricity company Perusahaan Listrik Negara (PLN) is at the centre of the country’s power sector, mandated to generate, transmit and distribute electricity nationwide. Most independent power producers (IPPs) enter the market by contracting directly with PLN under a power purchase agreement (PPA), and a growing share of these IPPs are renewable energy projects, reflecting PLN’s drive towards the government’s energy transition targets. This has made IPP acquisitions an increasingly attractive route into Indonesia’s expanding renewable energy market.

However, Indonesia’s power sector remains tightly controlled. Under prevailing laws, IPPs are prohibited from transferring shares before reaching their commercial operation date (COD). But there is one exception for transfers to an affiliate that is at least 90% owned by the project sponsor or the transferring shareholder, furnished with PLN’s approval.

The rationale is straightforward. PLN awarded the project to a sponsor it vetted for technical and financial capability, and a pre-COD ownership change risks bringing in a party without that same pedigree.

Post-COD, the rules loosen considerably. Shares can be transferred to unaffiliated buyers, still subject to PLN’s approval, with subsequent notification to the Directorate General of Electricity or the Directorate General of New, Renewable Energy and Energy Conservation, as applicable.

Pre-COD status drives deal rules

Before signing anything, investors eyeing an IPP acquisition should first pin down exactly where the target sits in its lifecycle: pre-COD or post-COD, since that single fact determines which rules apply. From there, expect PLN, as the project’s offtaker, to scrutinise the deal closely.

In practice, PLN typically requires the incoming party to demonstrate, with supporting financial and technical information, that it can step into the seller’s shoes and keep PPA commitments on track.

PLN’s approval, though, is only half the equation. Financing arrangements deserve equally close attention, since a change of control can trip consent requirements buried in loan documents. Indonesian lenders typically underwrite IPPs based on the sponsor’s financial standing and technical expertise, so they too will want assurance that an incoming shareholder can keep the project bankable.

Get this wrong, and the consequences bite. An unauthorised change of control can constitute an event of default under the financing documents, opening the door for lenders to exercise contractual remedies, including step-in rights or enforcement over security.

Mining and energy M&A approvals

Export restrictions on certain raw minerals have not slowed M&A in Indonesia’s mining sector – if anything, the opposite is true. Nickel, bauxite and cobalt assets are in particularly high demand, driven by the global appetite for EV batteries and the government’s own ambitions to build an integrated EV battery ecosystem.

That demand has put a premium on getting regulatory mechanics right. Any transfer of shares in a mining company first requires approval from the Ministry of Energy and Mineral Resources (MEMR). A check designed to ensure a change of control does not come at the expense of the company’s regulatory obligations.

Timing matters here, too. A mining company still in its exploration phase generally cannot transfer shares, which makes identifying a target’s operational stage an early and essential step. It can determine whether a deal is even feasible, let alone advisable.

Clearing the exploration-stage hurdle is only the first step. MEMR approval also calls for a stack of administrative, financial, and technical deliverables, including a draft sale and purchase agreement, evidence of payment of non-tax state revenue and/or royalties, final exploration report, and data on the mining reserves.

Foreign investors face one further layer: Indonesia’s mandatory divestment regime applies once foreign shareholding in a mining company exceeds 50%. Accordingly, foreign shareholders must progressively sell down their stake to domestic parties after production begins, eventually landing at 49% foreign ownership.

Mining divestment caps shape acquisitions

For foreign investors specifically, the divestment regime is the first variable to model in any acquisition involving a majority stake in a mining company already in production. In practice, where a target has been producing for several years before a foreign investor arrives, MEMR tends to cap foreign ownership at 49% from the outset, leaving little room to negotiate a higher stake later.

That said, foreign capital has not been priced out of mining M&A. Investors continue to find their way in through carefully structured transactions and joint ventures that secure meaningful commercial upside while staying within Indonesia’s foreign ownership framework.

Mining remains a closely watched sector, which makes early diligence non-negotiable. Investors should first establish whether the target has kept its environmental obligations current, maintains robust health and safety practices, has a workable relationship with surrounding communities, and is up to date on its statutory payments to the government.

Ownership and licensing in pharma M&A

As Indonesia holds Southeast Asia’s largest pharmaceutical market, M&A consistently embodies a popular pathway for investors seeking to establish a firm commercial standing in this sector. Under the Positive Investment List, both pharmaceuticals and the distribution of medical devices are open to 100% foreign ownership.

Market access, however, is only half of the story. Pharmaceutical and medical products remain subject to extensive licensing and registration requirements, including distribution permits and approvals from the Indonesian Food and Drug Authority. Additionally, Indonesia’s increasing emphasis on domestic component level (Tingkat Komponen Dalam Negeri or TKDN) requirements limits reliance on imported inputs and production models.

For pharmaceutical products, TKDN calculations generally attribute, among others, a 50% weighting to the use of domestically sourced raw materials and a 30% weighting to research and development activities conducted domestically. By contrast, TKDN calculations for medical devices generally allocate an 80% weighting to manufacturing activities and a 20% weighting to product development activities conducted domestically.

Regulatory endurance for investors

For investors, the starting point is not market access, but regulatory endurance. Investors should first determine whether they possess the operational capability to sustain their operations and comply with the evolving regulatory requirements imposed by the Ministry of Health and the Indonesian Food and Drug Authority.

Compliance with the TKDN regime warrants equally close vigilance. The government’s localisation agenda increasingly favours domestic manufacturing, local sourcing and technology transfer.

Investors must therefore carefully structure their domestic supply chains and operational footprint to ensure that their manufacturing, research and development, and procurement activities satisfy the applicable TKDN thresholds. Failure to do so may jeopardise the validity of the relevant business licences and expose investors to regulatory sanctions, including the suspension of business activities, and even the revocation of relevant licences.

Regulatory complexity preserves M&A upside

Power, mining, and healthcare are not easy sectors to enter. They sit under the close watch of multiple regulators and demand a level of diligence that goes well beyond a standard share purchase. But that complexity is precisely what keeps the opportunity intact. It has kept casual entrants out and maintains attractive returns for investors willing to do the groundwork.

Indonesia’s ambitions to become a global hub for EV and battery manufacturing and the rapid expansion of its life sciences sector all point to continued, likely accelerating M&A activity. For investors prepared to navigate the regulatory terrain, it is a rare opportunity: a seat at the table in one of the world’s most resource-rich and fastest-growing economies.

DEHENG ARKO
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Setiabudi, South Jakarta City, Jakarta 12940
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Email: info@armilarako.com