Neither the pandemic nor the combined impact of rising interest rates, inflation and regulations have been able to derail the growth trajectory of Thailand’s M&A scene, with a strong 2021 set to be followed by an even better 2022. Lawyers say despite some further regulatory changes on the horizon, this growth is set to continue.

The volume and value of Thailand’s mergers and acquisitions in 2022 are poised to experience continued growth from the previous year, despite rising interest rate impact on financial costs as businesses and people began to adapt alongside the COVID-19 pandemic, according to a recent report from PwC.

The report noted that new technologies, emerging trends, environmental awareness, and more are set to shape the robust M&A scene in the coming year. “There’s an upward trend in M&A deals this year for Thailand and the rest of the world, even with the outbreak of the Omicron variant, rising interest rate, inflation and regulations that may hinder reaching deals agreement,” wrote Chantanuch Chotikapanich, deals lead partner at PwC Thailand. “This contentious situation, however, is actually accelerating M&A activity.”

“As global trends become clearer, business leaders will continue to review their business strategies and portfolio,” she added. “Meanwhile, others will adjust their cost structure or acquire businesses they lack to maintain steady growth.”

One key factor behind the boom has been proactive policymaking. The Thai government has been pulling out all the stops to revive the tourism-pillared economy. It is currently spearheading the Thailand 4.0 Economic Plan, a value-based, innovation-centric economic blueprint, that has positioned the country as a serious player in regional economic integration and global initiatives.

Already buoyed by this policy trend, law firms see the easing of COVID-related restrictions as playing a critical role in creating favourable conditions that empower M&A growth. Not only are some deals getting reactivated after being put on hold, but new opportunities are also mushrooming in corporate reorganisations and asset disposals.

This is particularly notable in the technology field, as companies, eager to take advantage of the post-pandemic normality, overhaul and recraft their operational strategies. “M&A activities in the technology sector has remained strong given the digital transformation across many industries,” says Arkrapol Pichedvanichok, a senior partner at Chandler MHM. Arkrapol emphasises the development of e-commerce in terms of platforms as well as electronic payments.

Fintech and e-commerce companies in Southeast Asia are raking in hefty amounts of capital as global investors scout for new opportunities, reported Reuters. For instance, Southeast Asia’s internet economy is forecast to triple to $300 billion by 2025 from the end of 2020, according to a report cited by Reuters. Some analysts are bullish about Thailand’s growth potential as with its large domestic population comes sizable digitalisa-tion opportunities.

Meanwhile, in the telecommunication scene, Arkrapol highlights the amalgamation of state-owned telecommunication giants TOT and CAT last year, which his firm advises on, as a demonstration of the vigour of a deal-making sphere further pivoting to digitalisation. The merger of True Corporation and Total Access Communication (DTAC), although still pending clearance for pre-merger control approval, serves as another high point.

Arkrapol notes that venture capital investment is one of the main engines fuelling M&A transactions in Thailand, in technology and other sectors. “We have seen an increase in joint ventures between Japanese and Thai developers in relation to condominium developments. The industrial estate, automotive part manufacturers including EV-related business, healthcare and energy sectors remain strong,” he says.

Dominating Chandler MHM’s M&A practice this year is major internal corporate restructurings spanning a wide range of industries.

“For example, we advised Thai Oil Public Company Limited on the restructuring of its shareholding in its power business. We also advised on several cross-border disposals often as part of global multi-jurisdictional transactions,” Arkrapol says, adding that service for private equity acquisitions and disposals is also highly sought after in medical and healthcare sectors.

CLOSER SCRUTINY

However, the booming M&A deals are inviting closer regulatory scrutiny, with authorities placing a larger focus on the country’s merger control regime. Thailand’s Trade Competition Commission, Arkrapol points out, has issued a number of clarifications over the past year with respect to the Trade Competition Act of 2017 in a bid to stifle unfair competition.

“The full enforcement of the Personal Data Protection Act in June this year has also impacted all businesses in how they conduct their operations,” Arkrapol adds.

“Our expectation is that the market will see a mix of corporate restructurings, divestments and acquisitions, particularly private M&A. In particular, we expect more medium-sized local M&A deals as part of business diversification.”

— Arkrapol Pichedvanichok, Chandler MHM

But looking ahead, Arkrapol believes any major shift in the M&A market is unlikely despite backdrop of a global tightening circle of monetary policies to rein in surging inflation, which is projected to peak in Thailand in the third quarter. The Bank of Thailand is expected to keep raising its key interest rate at its next meeting on September 28 after hiking it last month for the first time in nearly four years.

The bright side is that Thailand’s economy is expected to grow 3 percent to 3.5 percent this year at a time when the risks of recession loom over the United States and Europe.

“Our expectation is that the market will see a mix of corporate restructurings, divestments and acquisitions, particularly private M&A,” Arkrapol says. “In particular, we expect more medium-sized local M&A deals as part of business diversification. The technology and consumer sectors are likely to remain active, particularly e-commerce and e-payments. Industrial manufacturing, medical and healthcare sectors would also stay active.”