Understanding of consolidation in business, characteristics, and for example

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Understanding of consolidation in business, characteristics, and for example

Understanding of consolidation in business characteristics and for example

The business world continues to change over time, as well as the perpetrators in it must adjust to deal with various circumstances. There are a number of possibilities that will be faced so that they need a strategy as a solution. One step that is generally taken is consolidation. Check out the understanding of consolidation, characteristics, and examples of practices in the discussion below.

Consolidation can actually be applied in various fields of life. But the understanding of consolidation in the business world with other fields will be different. For example, in the realm of sociology there are consolidated actions, namely a gain of society because it consists of various elements (religion, ethnicity, race, and so on).

Meanwhile, in the world of accounting consolidation is a union of financial statements between the parent and subsidiaries. The concept will be different if applied to business, especially the company.

Understanding of consolidation on business

The definition of consolidation on business is a condition in which two companies or more melting into one to produce new companies. Each party must stop its operational activities while and sit together to evaluate. Evaluation is not only seen from the side of its productivity, but also management and other factors.

After that, the discussion followed by a short and long-term strategy to be taken. These strategies must be stated in detail so that they know what the shared goals will be achieved, priority, and the role of each party. That way, finally the company was born with more perfect new management.

By seeing the understanding of the above consolidation, it can be concluded simply that this action is a step to strengthen the business through the merger of several things to be something new. So every company that joins completely leaving its part and unites myself.

This benefits the company whoseirities in bankruptcy because they do not have to experience liquidation. Instead, it actually joins other companies and produces greater strength to face business competition.

The purpose of consolidation is not only to avoid liquidation and survive in the midst of business competition, but also some of the following:

  • The development strategy for a startup so as not to stagnant or decline.
  • Improve business performance by expanding the network and combining various experiences to minimize poor risks.
  • Creating new creativity and innovation in the community so that the new market segment is formed too.

Apart from a number of other plus benefits and pluses, this new born company will face challenges. One of the heavy things that will be felt is the difficulty of introducing new companies in the middle of a familiar community with the previous company. Then a short and long-term marketing strategy is needed.

Business Consolidation Characteristics

Actually there are many types of merge companies in the business world. Each has different characteristics so that the target of the target is not the same. Understanding the understanding of the above consolidation can be more comprehensive if you know the characteristics too. The following consolidation characteristics must be known:

1. Crash the old company

When discussing the sense of consolidation above, it is strongly emphasized the smelting process between two companies or more. That is, the companies involved no longer maintain identity, management, business processes, and whatever it is related to the old “self”. The old company was completely dissolved and did not leave anything.

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The most easy example is Bank Mandiri. The bank is formed from several banks, namely Exim Bank, Bapindo, BDN (Bank Trade), and EPB (Earth Power Bank). It can be seen now that Bank Mandiri does not have a single identity of the four banks. Bank Mandiri is present as a new bank, not innate from melting banks.

2. There is no liquidation process

Even though companies will join almost bankrupt or have fallen, they will not be liquidated. Although status is dissolved, there are no sales activities of the company’s assets and a number of other liquidation activities. Therefore, payment of debt and other obligations will be joint dependents. Usually the party who has greater capital will help.

The shareholders will sit together and discuss whether to agree to the consolidated concept designed. Because this will affect the implanted capital will be transferred to where and what is used for. The results of the agreement from the shareholders were poured in a statement when the GMS (shareholder general meeting).

3. New status

New status is not only from the name, brand, and identity only. But overall it was completely new, including in terms of his legal entity. The consolidated design that was approved when the GMS would be made a new deed by a professional notary. The language used is mandatory Indonesian because this new company was born in the country of Indonesia.

Starting from the deed was born, the legitimate all assets and liabilities of old companies were transferred to a new company. Actually this will apply automatically, so shareholders don’t need to be surprised if the capital ownership status will change too. In addition, by making a consolidated deed and a new company formed, all the legal foundations of old companies are no longer valid.

An example that can be found is the formation of the IPR (Indonesian Professional Reasurer) as a result of consolidation from Reindo (PT Reinsurance International Indonesia), NAS Re (PT Reinsurance Indonesia), Tugu Re (PT Tugu Reinsurance Indonesia), and Marein (PT Reasuransi Company Indonesia) .

At a glance the difference in consolidation with mergers and acquisitions

In the opening section it is mentioned that there are several strategies to merge companies in the business world. Besides consolidation, there are terms of mergers and acquisitions. Both are quite popular also carried out by several companies to “congratulate”. For more details, see the following explanation:

1. Consolidation.

The definition of consolidation with mergers and acquisitions is clearly different, as well as the company produced. If consolidation is a combination of two or several companies to form a new company, then the mergers and acquisitions are just just different processes.

Mergers and acquisitions do not eliminate old companies. They were not dissolved even though management finally remained different.

2. Merger

In the practice of merger there are parties who take over all other company assets and liabilities. So there is a company status as a party that does a merger, while the other is a mergger. This happened to Bank Lippo and Bank CIMB Niaga in 2008.

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Bank CIMB Niaga’s capital ownership is 60%, but Lippo Bank is only 40%. So, after the merger process, Bank CIMB Niaga still operates because the capital is bigger and Bank Lippo stops because the entire assets have moved.

3. Acquisition

Acquisition is almost similar to the merger, which is the takeover of one company against other companies. Here one company bought other company assets, but did not stop the company’s operations. Even so, it will change it because it will automatically be underdeveloped under the company that bought it.

Examples are PT Axis Telekom Indonesia. PT XL Axiata Tbk acquired the company so that Axis did not go bankrupt. The same thing happened to Danone who acquired the acquisition of Aqua, as well as Coca Cola who acquired Pizza Hut.

By understanding the characteristics and differences with the form of combining other companies, the sense of consolidation will be easier to understand. There are many examples of consolidated practices in Indonesia and abroad.

The reason is because consolidation is considered one effective way to overcome the company’s problems in terms of capital, management, technology, to their desire to master the market. Therefore, consolidation can be reached as an alternative route in addition to saving the company from bankruptcy only.

Another thing that needs to be considered in carrying out the process of consolidation in business is ensuring the health of the business of business will be combined. One way to see business financial health is to look at the related business financial statements and ensure that the business is carrying out the accounting that is in accordance with the standards that apply in Indonesia.

If in business processes have not carried out books, it is certain that in the future it will be difficult to monitor financial data in detail.

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