M&A activity among Thai firms seen increasing this year

"The trend of M&A transactions from now on will be focused on hospital, hotel and supply chain [in the automotive industry] businesses," said company chairman Kitipong Urapeepatanapong, who is engaged in many M&A deals.

Speaking at an M&A seminar organised by the Stock Exchange of Thailand, he said Thai firms, especially those in the super-small to medium size, were possible targets for acquisition rather than being acquirers themselves.

The government should promote and support this type of company to invest abroad so that their businesses can survive and grow, he suggested.

"They need to amalgamate within their business sectors in order to become bigger; for example, by setting up a joint venture so as to avoid difficulties in terms of tax, and different management and mentalities," he said.

The implementation of the Asean Economic Community in 2015 will lead to the freer flow of trade, investment and labour, which will result in more acquisition deals, Kitipong said.

However, this might not turn out to be a major driver of M&A transactions, as there is currently no agreement in place on whether non-Asean investors will be able to establish companies in the region to exploit the benefits of the single market in the same way as Asean investors.

As things stand, there is no decision on whether a company set up by a non-Asean investor will be regarded as a substantial business operator or as just a paper company, he added.

Nonetheless, he said the number of M&A deals in the Kingdom should continue to increase, as some of the key legal issues related to such transactions had been resolved.

In particular, he cited amalgamation deals, namely a merger between companies A and B to create company C, which can now benefit from exemption of corporate income tax for the acquiring party.

However, there are still some legal issues that need to be tackled in order to facilitate yet more Thai M&A activity. For example, if a shareholder objects to an acquisition deal, the acquirer is currently required to arrange a buyer for the stock belonging to that shareholder at the market price a day ahead of seeking approval for the deal from a shareholders’ meeting.

He said this requirement could allow some shareholders to take advantage of share speculation, making a deal more costly.

Another area of M&A law that needs to be fixed concerns the transfer of assets. The rules currently specify that the companies involved must have the signed approval of all clients, but Kitipong said this was not easy for large companies with thousands of customers.

Approval should be limited to clients gaining benefits from the companies, such as leasing and insurance clients, he suggested.

Thailand witnessed a lower number and value of M&A transactions last year than many other countries. According to Bloomberg statistics, the Kingdom was involved in 156 deals worth US$20 billion (Bt622 billion).

Singapore recorded 596 deals worth $30 billion in the period, Malaysia had 338 deals worth $49 billion, Japan had 2,217 worth $104 billion, South Korea had 972 worth $58 billion and Hong Kong had 840 worth $65 billion.

M&A deals globally last year numbered 28,184, with a combined value of $2.5 trillion.

About 40 per cent of the acquisition deals in Thailand during 2008-2011 were mergers with foreign businesses. Thai companies were acquirers in 73 per cent of the transactions, according to Bloomberg.