The Meaning of Consolidation: Definition, Characteristics, and Examples of Consolidation Companies

Actually, what is meant by consolidation? In general, the meaning of consolidation is an action or effort made to unite, strengthen, and strengthen the relationship between two or more groups so that a stronger union is formed.

The purpose of doing consolidation is to unite every element that has certain similarities, for example, regional origin, religion, or groups that have the same goal.

The term “consolidation” is actually widely used in various fields of life, for example; social, business, accounting and others. Here are some of the uses of the term “consolidation” in several fields;

Consolidation in business, which is the fusion of two or more companies into a new company, where the new company takes over all the rights and obligations of each of the united companies.
Consolidation in accounting, i.e. merging reports of all assets, equity, liabilities and operational accounts of a parent company and subsidiary company into one form of financial statements.
Consolidation in sociology, which is a form of strengthening community membership in social groups consisting of various elements, such as religion, ethnicity, social status, gender, and others.

So, the core of the notion of consolidation is an activity undertaken to strengthen, strengthen, unite or connect several things into one.

The Meaning of Consolidation According to Experts

In order to better understand what consolidation means, we can refer to the opinions of the following experts:

1. Roman Nurbawa

According to Roman Nurbawa, the meaning of consolidation is the dissolution of two or more companies which are then replaced by new companies that financially take over all assets owned by the company that is dissolved.

2. Rudi Prasetya

According to Rudi Prasetya, the meaning of consolidation is the dissolution of two or more companies and replacing them with a new company. Each company that was dissolved was merged into one company.

3. Aliminsyah

According to Aliminsyah, the meaning of consolidation is the merging of businesses between two or more companies, in which to continue the combined business activities a new company is formed and all companies that have joined in stopping their activities.

4. Big Indonesian Dictionary (KBBI)

According to KBBI, the notion of consolidation is the merging of two or more companies into one company with the same vision.

5. Government Regulations

According to Government Regulation No. 28 of 1999, the meaning of consolidation is the merging of two or more banks by establishing a new bank and dissolving the old bank without first liquidating.

Characteristics of Consolidation

Consolidation has certain characteristics that distinguish it from the process of merging companies in other ways. The characteristics of consolidation are as follows:

Melting or merging of two or more companies occurs by forming a new company.
Every old company that is merged will be dissolved without going through a liquidation process.
New companies which are merged with several companies must have a new legal entity status.
The draft consolidation and the concept of the consolidated deed must be approved by the GMS in each company.
All assets and liabilities of the combined companies will automatically be transferred to the new company.
The concept of a consolidated deed which has been approved by the GMS will be set forth in a consolidated deed made before a notary in Indonesian.
The new company resulting from the consolidation will have legal status as of the issuance of the Menkumham’s decision regarding the company merging without liquidation.

Examples of Consolidated Companies

From the explanation above, we can conclude that the meaning of consolidation is that two or more companies merge to dissolve by law, and instead a company with a new name is formed even though the new company is financially taking over the assets of rights and obligations of the liquidated company.

Some examples of companies which are the result of consolidation are as follows:

Bank Mandiri, the consolidated results of Bank Bumi Daya (BBD), the State Trading Bank (BDN), the Indonesian Export Import Bank (Exim Bank), the Indonesian Development Bank (Bapindo).
SmartFren, the consolidated results of PT. Mobile-8 Telecom Tbk (Mobile-8), PT. Smart Telecom (Smart).
Indonesian Professional Reinsurer (IPR), the consolidated results of PT. Reinsurance Internasional Indonesia (Reindo), PT. National Reinsurance Indonesia (Nas Re), PT. Tugu Reasuransi Indonesia (Tugu Re), and PT. Indonesian Reinsurance Airlines (Marein).