ESTIMATING THE SYNERGY VALUE OF MERGER BETWEEN PT XL AXIATA TBK (EXCL) AND PT SMARTFREN TELECOM TBK (FREN)

• Main Author: Malvin Lehman, Andrew
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/83948
• Institution: Institut Teknologi Bandung

Mergers and acquisitions (M&A) have been recognized as strategic tools to enhance corporate value, competitiveness, and operational efficiency. The merger between EXCL and FREN is investigated to determine whether the consolidation would produce a positive synergy value, thereby justifying the merger from a financial perspective. The primary method employed in this research is the Discounted Cash Flow (DCF) analysis, focusing on Free Cash Flow to Firm (FCFF). The analysis includes evaluating individual company valuations, projecting financial conditions, and assessing the combined firm's valuation with and without synergy effects. Key findings from the valuation indicate that both EXCL and FREN have significant individual firm values, which are further enhanced when combined. Specifically, by the end of 2023, EXCL's firm value is calculated at Rp. 36,855,638,000,000, which is 1.89 times its market value, suggesting overvaluation. Similarly, FREN's firm value stands at Rp. 26,530,312,000,000, 1.62 times its market value. When merged, the combined firm value is estimated at Rp. 63,385,950,000,000 with synergy, compared to Rp. 59,689,098,000,000 without synergy. This results in a synergy value of Rp. 3,696,851,000,000 by 2025, or Rp. 2,233,874,000,000 in 2023 terms. The research concludes with recommendations for EXCL and FREN to focus on efficient integration processes, robust risk management, and clear operational strategies to maximize the merger's benefits.