30 ASIAN LEGAL BUSINESS – SEPTEMBER 2023 WWW.LEGALBUSINESSONLINE.COM THAILAND REPORT High interest rates, geopolitical uncertainty, and heightened regulations have severely stymied the wave of dealmaking that reached its peak in 2021 during the COVID-19 pandemic. Thailand, the second largest ASEAN economy, was not unscathed either, with both deal volume and value experiencing a slowdown in the first half of 2023 as a result of delayed transactions. But things are starting to look up. Chantanuch Chotikapanich, deals leader at PwC Thailand, has predicted that Thailand’s mergers and acquisitions activities are likely to pick up for the remainder of the year. “Thailand’s M&A deals are likely to recover in almost every sector. Whether it’s businesses looking to expand their operations, acquire new portfolios or venture into new s-curve industries, they’re all reviving their M&A activities again,” says Chantanuch in a PwC report, calling 2023 “a great year for businesses who are interested in buying or selling through M&A”. Meanwhile, 60 percent of CEOs surveyed said they are not planning to delay deals this year despite some negative economic factors impacting businesses, according to PwC’s 26th Annual Global CEO Survey. Economists are predicting a pause in the Thai central bank’s monetary tightening cycle after Thailand’s GDP rose 1.8 per cent year on year in the second quarter, missing market estimates. High rates have led to expensive acquisitions, tamed asset valuations, and complicated financing options both pre- and post-acquisition, sapping the appetite of dealmakers and investors. The pause in the rate cycle could be a lifeline. Sooksun Popun-Ngarm, a senior associate at Chandler MHM, thinks it’s unlikely a potential rate pause might immediately shift the outlook for dealmaking throughout the remainder of the year. “The persistence of high-interest rates continues to influence M&A dynamics, and the recent increase in the policy rate to 2.25 percent by the Monetary Policy Committee of the Bank of Thailand on Aug. 2, marking its highest level in nine years, underscores the current challenges in the financial landscape,” explains Sooksun. “The heightened cost of borrowing inevitably leads to a more thorough assessment of the deal’s value within the context of the current business landscape. But Sooksun believes there have been valuable dealmaking opportunities in the market. “This is especially evident in targets with small or medium enterprise values, as such deals typically require less financing, allowing valuations to remain relatively stable despite prevailing interest rates. This encourages sellers to consider transactions,” says Sooksun. POSITIVE SENTIMENT The positive sentiment is echoed by Nuanporn Wechsuwanarux, a corporate partner at Chandler MHM. “Since the start of the year, we have advised on a range of M&A transactions, both inbound and outbound, and a cross-border acquisition encompassing different sectors. Active sectors include renewable energy, F&B, automobile-related, manufacturing, and TMT. We are now seeing a sharp pickup in M&A activity in the final quarter of the year,” notes Nuanporn. In an interview with ALB earlier this year, Chandler MHM was bullish about deal flows in the clean energy and infrastructure, technology, e-commerce, insurance and healthcare sectors. Nuanporn says deal flows remain strong in these industries while ESG-propelled diversification continues to dominate a proportion of transactions. Furthermore, the strong momentum in Thailand’s manufacturing sector is likely to translate into a robust dealBETTER DAYS AHEAD After a slow start to Thailand’s dealmaking scene in 2023, mergers and acquisitions (M&A) activities are expected to tick up in the second half of the year, with businesses finally taking their feet off the brakes. But lawyers say that companies need to navigate not just tight monetary conditions and heightened geopolitical risks, but also a murky political situation in Thailand. BY SARAH WONG “To effectively address the complexities of this evolving landscape, law firms must invest to cultivate a deep-seated understanding of the local legal intricacies, prevailing business environment, and geopolitical risks.” — Nuanporn Wechsuwanarux, Chandler MHM