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Thailand: M&A on growth track
The volume and value of mergers and acquisitions are poised to experience continued growth this year in Thailand, despite the impact of rising interest rates on financial costs as businesses and people began to adapt alongside the Covid-19 pandemic.
The financial services and technology industries will remain the two most traded sectors this year, as they were last year, according to Chantanuch Chotikapanich, deals lead partner at PwC Thailand.
“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 rates, inflation and regulations that may hinder reaching deal agreements. This contentious situation, however, is actually accelerating M&A activity,” Ms Chantanuch said.
“As global trends become clearer, business leaders will continue to review their business strategies and portfolios. Meanwhile, others will adjust their cost structure or acquire businesses they lack to maintain steady growth.
“Under these conditions, businesses must adapt and digitise themselves in the new market to enhance sustainable business value.”
The local trend trend aligns with the findings of a recent PwC report — “Global M&A Industry Trends: 2022 Outlook” — that surveyed experts and analysed deals activity worldwide.
It revealed that M&A volume increased by 62,000 deals globally in 2021, up 24% from 2020. The value of publicly disclosed deals reached US$5.1 trillion, with megadeals valued at $5 billion each or more accounting for 57% higher volume than in 2020. The overall value broke the previous record of $4.2 trillion in 2007.
Ms Chantanuch said competition for M&A opportunities was increasing among investors, whether they are financial investors, such as private equity (PE) funds, or strategic investors.
Investors last year raised huge sums through the capital market and, notably, special purpose acquisition companies (SPACs) in the US, resulting in higher transaction prices. This will affect financial costs since deals are being undertaken at increasing prices.
This creates pressure in investors to ensure their investment in the business generates higher profit than before, she said.
The report also highlights M&A trends expected to occur in major industries.
1. Consumer markets: Consumer behaviour will continue to influence M&A activity in 2022 as businesses and private equity investors review their portfolios to capitalise on trends such as “conscious consumerism”, which creates demand for new products and services. This will lead to a burgeoning business model that addresses environmental impacts.
2. Energy, utilities and resources: Environmental, social and governance (ESG) considerations are driving strategy more emphatically across the industry. M&A will be used to rebalance portfolios and pursue value creation opportunities in ESG growth areas, including renewable energy, carbon capture, battery storage, hydrogen, transmission infrastructure and other clean technologies.
3. Financial services: Competition for strategic market advantage continues to fuel M&A activity for technology and innovation as companies seek to utilise it to enhance productivity. Distressed assets in the banking and insurance sectors will become a prime target for M&A as well.
4. Health industries: Pharmaceutical companies are seeking to adjust their portfolios for growth through deals that provide access to new technologies such as mRNA, cell and gene therapy, specialised care platforms, telehealth and healthtech.
5. Industrial manufacturing and automotive: Strategic portfolio reviews and ESG are driving M&A activity, especially deals that drive digital transformation, such as electric and autonomous vehicles, batteries and charging technologies, additive manufacturing, next-generation materials and production with renewable energy sources.
6. Technology, media and telecommunications: As traditional industries face high levels of disruption and innovative technologies are being adopted by the mainstream market faster than anticipated, the tech industry will continue to experience unparalleled deal activity. At the same time, companies from all sectors will seek to gain key technological and digital capabilities.
“Digital transformation will continue to increase pressure on all industries to revisit their portfolios,” said Ms Chantanuch.
“Even though M&A deals can drive accelerated growth, it’s equally critical to review existing business, its profitability and whether it has the potential to grow amid the prevailing global trend.
“Many businesses are divesting assets that are unprofitable or non-core. Moreover, other businesses are trying to maintain a competitive advantage through M&A, which is another option to create value for important assets other than revenue growth and cost reduction.
“Besides this disruptive trend, global conflicts are also affecting the supply chain, materials management, workforces and logistics. These factors will influence investors’ risk diversification strategies by limiting access to material resources in the local market, neighbouring countries or nearshore.
“However, disruption and delays in closing business deals may occur in the first half of 2022.”
Source: https://www.bangkokpost.com/business/2304006/ma-on-growth-track