By SUCHEERA PINIJPARAKARN
RENEWABLE ENERGY is one of the main sectors expected to engage in more merger and acquisition (M&A) activity offshore in the next three to five years, according to Kasikornbank.
This is because companies have the financial capacity to do so, while domestic consumption of renewable energy is not supportive of their long-term growth ambitions, said the bank.
KBank, one of the major banks involved with corporate fund-raising, yesterday shared its views on the upward M&A trend by Thai corporates domestically and in the CLMV markets – Cambodia, Laos, Myanmar and Vietnam.
First senior vice president Suradech Kietthanakorn said that in the long term, more inbound M&A activity was expected because foreign investors – led by China and Japan – wanted a footprint in Thailand in order to use the country as a springboard to Asean, and the upcoming Asean Economic Community.
However, the interesting trend is that listed Thai companies that raised funds via initial public offerings in previous years still have enough capital to consider M&A ventures themselves, as such a move could enable them to achieve higher growth over the long term, he said.
On average, about 50 per cent of the capital raised from IPOs has not been invested in business expansion, and companies – especially those in the renewable-energy sector – are looking at paths for driving business growth, he explained.
In the next three to five years, renewable-energy players will undertake M&As overseas, as limited demand for such energy in Thailand is forcing them to look outside the country for sustainable growth, said the executive.
Thai hotel-chain operators are another sector looking at M&A activity overseas, as their goal is to achieve healthy income from services, which can be achieved by foreign acquisitions. Meanwhile, Thai food and beverage companies are expected to increase their outbound M&A, even though the sector has ranked the highest in terms of value for offshore M&A since the beginning of 2012, said Chongrak Rattanapian, executive vice president of KBank.
He said the overall value of Thailand’s outbound M&A in Asean from 2012 to 2014 had expanded to 1.3 per cent of gross domestic product, from 0.15 per cent in the 2009-11 period.
The figure is expected to rise further, driven by consumer products and the services sector, he said. Chongrak said M&A was a solution for companies seeking to strengthen their value chain and brands, and the bank hoped the upward trend would help support its fee income.
However, overall fee income from assisting clients with their M&As is small when compared with what KBank earns from customers raising funds via IPOs and debentures, said the executive vice president.