COMPANY MERGER VALUATION OF STATE-OWNED ENTERPRISE: CITILINK AND PELITA AIR

• Main Author: Yusuf Pradana, Dwisapto
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/80894
• Institution: Institut Teknologi Bandung

State-Owned Enterprises (SOE) are business entities owned and operated by a government of a country. SOEs play a crucial role in a nation's economy as they operate in strategically important sectors. In June 2023 Minister of SOE has announced the merger of Citilink and Pelita Air to increase the number of plane in Indonesia and decrease logistic cost. Merger is one of the fastest ways to stimulate company’s growth due to the synergy, however 70% to 90% of merger and acquisition case is failed due to acquisition cost that is too high and companies are failing to identify costs in the integration process. This research is conducted by analyzing the business environment, discounted cash flow valuation, and risk analysis through sensitivity analysis, scenario analysis, and monte carlo simulation. Citilink is known for safety, affordable ticket, and standard service. However, the operation is limited domestically. With travel recovering post-pandemic, there's a potential for growth, but fuel price and upper limit ticket price regulation is limiting the growth potential. Citilink and Pelita air merger is expected to increase the citilink value by 15%, from $2,4 million to $2,7 million. The project is considered risky with 40% probability of reducing company’s value, however if the leaders are able to control cost of revenue, cost of capital, revenue growth, expense, change in working capital, synergy, and other income, the probability of success increased significantly.