M&A Report 2022: Thailand | International Financial Law Review

Throughout the first half of 2021, M&A exercise in Thailand was sluggish, with a number of transactions being pulled, delayed or placed on maintain as a result of Covid-19 pandemic. Nevertheless, there have been indicators of restoration through the second half of 2021, because the Thai authorities’s lockdown and journey restrictions had been eased and enterprise operators tailored to the brand new enterprise setting.

A number of sectors gained traction as Thailand recovered from the pandemic within the second half of 2021, together with monetary companies, e-commerce, retail, telecommunications, media and know-how (TMT), and renewable power.

The Thai markets are pushed by each non-public and public M&A transactions. Whereas there was a rise in public M&A deal quantity, non-public M&A is extra prevalent on condition that the goal firms are largely non-public firms and that the dimensions of personal M&A transactions are usually smaller than these of public M&A transactions, and are due to this fact extra accessible to consumers. As well as, international consumers could also be much less inclined to spend money on listed firms for the reason that requirement for a compulsory tender provide might be triggered.

Public M&A transactions are sometimes seen in relation to the monetary companies, TMT, logistics, renewable power, infrastructure, and oil and gasoline sectors, as large-scale sellers and consumers are sometimes concerned. Personal M&A is extra lively within the retail, meals and beverage, and actual property sectors, given the type of authorized car and the dimensions of enterprise acquired.

Regardless of the Covid-19 pandemic, there have been a lot of vital M&A transactions in Thailand in 2021, one in all which was the proposed acquisition of 51% curiosity in Bitkub On-line, a number one digital asset trade and the most recent unicorn in Thailand, by SCB Securities, a subsidiary of one in all Thailand’s largest business banks, with a transaction worth of roughly THB17.85 billion (roughly $540 million). This transaction is seen as a significant improvement within the digital belongings area, representing a milestone in Thailand’s digital economic system infrastructure. It’s anticipated that the digital belongings area will proceed to draw curiosity from each home and abroad buyers, together with present gamers and monetary establishments.

The opposite M&A transactions value mentioning are the acquisition by Gulf Vitality Improvement, one in all Thailand’s largest energy producers, of a holding of shares (lower than 50% however sufficient to make it the most important shareholder) in Intouch Holdings, which controls Thailand’s high cell phone operator AIS, by means of a conditional voluntary tender provide, and the proposed merger between two telecom giants, particularly True Company and Complete Entry Telecommunication. The latter has induced considerations relating to the affect on competitors and shoppers: on the time of writing, competitors approval from the telecom regulator has not but been obtained.

Financial restoration plans

M&A deal movement considerably picked up in 2021 in comparison with 2020 as many companies have adjusted to the affect of the Covid-19 pandemic. Additional, with a rise in vaccination charges and the easing of lockdown and journey restrictions, firms are extra assured getting into into M&A transactions. As well as, Thai listed firms have turn into extra lively abroad as a result of have to seek for strategic belongings and/or companions and create synergies, notably within the monetary companies, know-how, and renewable power sectors. Regardless of the easing of lockdown and journey restrictions within the second half of 2021, sure industries proceed to be closely affected, together with hospitality, aviation, manufacturing, and actual property.

Regardless of the foregoing, the emergence of digital disruption has stimulated M&A deal movement in Thailand, notably within the e-commerce, fintech, digital belongings and know-how sectors. Accordingly, firms are extra keen to diversify their enterprise portfolios to adapt to present enterprise traits and supply larger synergies. Such investments are generally entered into by means of joint ventures, enterprise capital investments or strategic collaborations, as these provide faster and extra environment friendly methods of penetrating different sectors.

When it comes to deal constructions in Thailand, there are numerous vital traits and elements influencing deal constructions in Thailand, together with buy consideration, merger management clearance, synergies, and exit choices.

Mounted value stays the commonest buy value mechanism, because the events want to conclude the deal rapidly and to keep away from any changes pre- or post-completion amid the Covid-19 pandemic.

Correct antitrust evaluation continued to play an vital position in deal structuring in 2021 for the reason that merger management regime has been totally enforced up to now few years. Merger management clearance is commonly included as a part of the circumstances precedent to completion. Nevertheless, a ‘hell or excessive water’ clause stays very uncommon in Thai M&A transactions.

To assist cut back funding dangers and improve their skill to compete in a quickly altering economic system, many Thai conglomerates have began to spend money on associated companies or new strains of enterprise

(the so-called new s-curve), akin to know-how, e-commerce, e-payment, renewable power, healthcare, and life sciences. As well as, the flexibility to exit both by a commerce sale or an preliminary public providing (IPO) is turning into more and more vital for consumers investing in new strains of enterprise or companies which might be rising exponentially akin to start-up firms.

Because the affect of Covid-19 has delayed the timelines for M&A transactions, firms at the moment are greater than ever targeted on getting the deal accomplished as swiftly as doable by specifying clearer milestones with stricter completion dates. For instance, the vendor of a distressed goal will try to shut the deal at a quicker tempo by stipulating a transparent timeline within the bidding necessities. Additional, we’ve witnessed a pointy improve within the deal quantity in sure industries which were severely impacted by the Covid-19 pandemic akin to insurance coverage, meals and beverage, leisure, and hospitality.

Monetary buyers play an lively position in shaping how M&A transactions are carried out in Thailand. The phrases of M&A documentation are geared in direction of worldwide practices, e.g., buy value mechanisms, {qualifications} to warranties, limitation of liabilities and use of guarantee and indemnity insurance coverage. As well as, there’s extra give attention to regulatory due diligence involving Thai goal firms, notably, anti-bribery and corruption, anti-money laundering, and knowledge privateness points.

That stated, non-public fairness (PE) buyers and enterprise capitalists are more and more keen to tackle minority pursuits alongside present house owners, particularly in start-up firms within the monetary, know-how and healthcare sectors.

Laws and coverage adjustments

The important thing laws governing non-public M&A transactions is the Civil and Business Code (CCC), with the Division of Enterprise Improvement, Ministry of Commerce being the principle regulatory physique.

For public M&A transactions, the important thing laws consists of the Public Restricted Firms Act B.E. 2535 (1992) and the Securities and Alternate Act B.E. 2535 (1992) (SEC Act), together with the principles and laws issued thereunder, with the Workplace of the Securities and Alternate Fee of Thailand (SEC) and the Inventory Alternate of Thailand being the principle regulatory our bodies.

As well as, the Workplace of the Commerce Competitors Fee of Thailand (OTCC) performs a major position in monitoring merger management in Thailand, aside from these sectors that are regulated by particular laws akin to telecommunications, broadcasting and tv and power. The Commerce Competitors Act BE 2560 (2017) (TCA) is the principle laws governing merger management in Thailand.

Particularly, the TCA goals to control mergers or acquisitions of companies that will end in a monopoly, market dominance or substantial discount of competitors in a related market.

In December 2018, the merger management regime pursuant to the TCA got here into impact. This has elevated the complexity of M&A transactions in Thailand, particularly in relation to deal structuring, timelines, certainty and documentation. A merger topic to the TCA could require a pre-merger approval or a post-merger notification.

A pre-merger approval is required the place the merger would end in:

• The creation of a monopoly, i.e. the place there is just one enterprise operator with absolute energy to find out the worth and provide of its services or products, and the enterprise operator has a gross sales turnover of no less than THB1 billion a yr; or
• A enterprise operator being in a dominant market place, i.e. the place (i) one enterprise operator has a market share of fifty% or extra and a gross sales turnover of no less than THB1 billion a yr; or (ii) any high three enterprise operators collectively have an combination market share of 75% (excluding any enterprise operator which had a gross sales turnover of lower than THB1 billion within the earlier yr or had a market share within the earlier yr of lower than 10%).

A post-merger notification is required the place the merger could end in a considerable discount of competitors in a related market, i.e. the place the gross sales turnover of a enterprise operator, or of all of the enterprise operators collectively conducting the merger, is THB1 billion or extra, however doesn’t result in a monopoly or end in a enterprise operator having dominant market energy.

Full enforcement of the Private Information Safety Act B.E. 2562 (2019) (which is deferred till June 1, 2022, as a result of extended Covid-19 pandemic) is anticipated to have an effect on how companies are carried out (particularly within the monetary companies, insurance coverage, retail and telecommunications sectors), disclosure of knowledge for the needs of M&A transactions, and areas of due diligence to be lined by the customer.

Moreover, the affect of the Covid-19 pandemic has emphasised the significance of a fabric adversarial change (MAC) clause in share buy agreements. Events have been paying larger consideration to set off occasions, carve-outs and the consequences of the MAC clause. That stated, in some instances (e.g., the place the goal enterprise has been instantly affected by the extended Covid-19 pandemic, akin to manufacturing companies), it’s open to debate whether or not any occasion ensuing from the Covid-19 pandemic ought to represent a carve-out.

Environmental, social and governance (ESG) elements nonetheless have little affect on M&A transactions in Thailand as a result of lack of knowledge and significance given to them by the Thai authorities and varied stakeholders. Extra discussions relating to ESG in M&A transactions within the power sector – particularly the place worldwide funds, worldwide monetary establishments and PE buyers are concerned – are anticipated quickly.

As for an additional anticipated regulatory change, on June 26 2021, the Thai Cupboard authorised an modification to the amalgamation provision within the CCC to incorporate the idea of ‘merger’ below Thai legislation (i.e. one of many merging entities will stay in existence following the merger). At current, the CCC solely recognises enterprise consolidation by means of amalgamation (i.e., two entities are mixed, thereby creating a brand new separate authorized entity). It’s anticipated that this modification to the CCC will turn into efficient quickly. This modification will permit larger flexibility for enterprise acquisitions and extra tax-efficient M&A transactions in Thailand.

Market norms

Whereas the idea of a nominee shareholder could also be acceptable in sure jurisdictions, it’s unlawful for Thais to behave as nominee shareholders to allow a foreigner to function a enterprise in circumvention or in violation of the international possession restrictions below the Overseas Enterprise Act B.E. 2542 (1999) or the Land Code. On condition that nominee constructions are sometimes seen in Thai firms with totally different lessons of shares, it’s a widespread false impression that nominee constructions are legally permissible and enforceable below Thai legislation.

The 2 areas about which questions are regularly requested when structuring an M&A transaction are international possession restrictions, which apply to engagement in most companies, and restrictions on land possession by foreigners in Thailand. That stated, not a lot consideration has been given to the authorized implications of the usage of nominee constructions as they will nonetheless be seen in sure industries akin to actual property, tourism, agriculture and retail. Furthermore, one space that’s typically neglected is merger management clearance, because the TCA grew to become totally efficient comparatively just lately and events should not but fully accustomed to the method.

Given the current journey restrictions and social distancing necessities, most M&A offers have due to this fact been carried out remotely. The usage of digital knowledge room platforms for due diligence processes and the conducting of board conferences and shareholders’ conferences by way of digital means can be turning into extra widespread in Thailand. As well as, the federal government authorities coping with the registration of M&A offers, such because the Division of Enterprise Improvement, Ministry of Commerce, are additionally shifting in direction of e-application processes and e-appointment techniques, quite than hard-copy documentation and bodily conferences.

Regardless of these current developments, it’s value noting that while digital signatures are usually recognised below Thai legislation, they aren’t extensively utilized in business transactions in Thailand. It’s because the Thai authorities nonetheless choose (and most often require) the usage of wet-ink signatures for official paperwork akin to types and functions, and there are inadequate courtroom rulings on the usage of digital signatures or different acceptable strategies for creating legally efficient digital signatures below Thai legislation.

In observe, events to business transactions nonetheless go for wet-ink signatures when executing transaction paperwork or any vital paperwork or devices with a view to keep away from any future issues, ought to any social gathering later try and problem the authenticity of an digital signature.

Public M&A

The important thing elements are the takeover guidelines issued below the SEC Act, which set out the necessities of a compulsory tender provide and a voluntary tender provide for the shares of a goal firm that could be a listed firm.

Firstly, the acquirer is required to make a compulsory tender provide the place it has obtained shares in a amount which reaches or exceeds the thresholds of 25%, 50% or 75% of the overall voting rights of the goal firm. A compulsory tender provide additionally extends to cowl an intermediate or the last word holding firm which controls the goal; this is named the ‘chain precept’ rule.

In a compulsory tender provide, the acquirer should provide to purchase all of the shares and equity-linked securities of the goal firm, and such provide should not be conditional on a sure proportion of shareholders accepting the provide. Then again, a voluntary tender provide permits the offeror to announce the tender provide for all or a portion of the shares of the goal firm. The offeror can also set out a minimal share of shares the offeror needs to purchase in a voluntary tender provide.

Restrictions on international shareholdings are one other vital issue for each private and non-private M&A transactions in Thailand. It’s because the Overseas Enterprise Act B.E. 2542 (1999) prohibits a foreigner (e.g., a international entity or a Thai entity with 50% or extra of its registered capital owned by foreigners) from conducting many varieties of enterprise in Thailand. As such, a international investor could resolve to make a partial tender provide for lower than 50% of the goal’s shares. On this regard, an approval of the shareholders’ assembly of the goal firm and the approval of the SEC should be obtained for the partial tender provide.

An unsolicited bid might be structured in an analogous method to a non-hostile bid, both by a compulsory or a voluntary tender provide. That stated, because of a minority squeeze-out not being recognised below Thai legislation, hostile bids should not extensively deployed in observe.

Whereas the events could set out circumstances for a voluntary tender provide to happen, a compulsory tender provide is unconditional. The circumstances for launching a voluntary tender provide normally embody an approval from the related regulatory authority, an approval from the board of administrators or shareholders of the offeror, and the related third-party consents earlier than the tender provide can happen.

Much like non-public M&A transactions, following the total enforcement of the merger management regime and the rising variety of high-profile public M&A transactions in Thailand in the previous few years, extra consideration has been paid to merger clearance in voluntary tender affords. Moreover, a provision in relation to the MAC clause, specifically the outbreak of Covid-19, can also be included as a situation to the acquisition of the shares.

As well as, below Thai public takeover guidelines, the tender provide could usually be withdrawn when: (i) there’s extreme harm to the standing or belongings of the goal firm through the tender provide interval which isn’t the results of an act of the offeror or an act for which it’s accountable; or (ii) there’s a materials discount within the securities worth through the tender provide interval which is brought on by any irritating motion dedicated by the goal firm through the tender provide interval, offered that these are acknowledged within the tender paperwork and there’s no objection raised by the SEC.

Break charges should not generally employed in public M&A transactions in Thailand. Reasonably, public M&A offers are normally protected by non-refundable deposits or exclusivity undertakings with a view to guarantee safety for offerors. Nonetheless, when a break payment is adopted, Thai courts will award damages on an precise foundation. Because of this the quantum of the break payment might be adjusted on the courtroom’s discretion.

Personal M&A

Essentially the most regularly used consideration mechanisms in Thailand are mounted value and completion accounts. Though there was a rise in the usage of locked field mechanisms lately, they’re nonetheless unusual, particularly following the outbreak of Covid-19, because the events’ focus is now on concluding the deal and cashing in rapidly, or the customer normally needs to have the ability to conduct a true-up train post-completion. The mechanisms of earn-outs and escrow preparations are very not often used.

Whereas the usage of guarantee and indemnity insurance coverage has elevated in cross-border M&A transactions (particularly the place the vendor is a PE investor), that is nonetheless unusual for M&A transactions in Thailand, for the reason that Thai events are much less accustomed to the method, the related prices are excessive, and these merchandise have sure limitations, e.g. protection exclusions and limitation of liabilities.

Other than the MAC clause acknowledged above, consumers normally request regulatory approvals required for the transaction and full licences and permits which might be materials for the operation of the goal enterprise as circumstances precedent to completion. As well as, merger management clearance is turning into extra essential on the structuring stage of offers, because the OTCC has been extra lively lately following the total enforcement of the merger management regime in Thailand.

It’s common observe to undertake a international governing legislation in cross-border M&A transactions. The Thai courts usually recognise and uphold a contractual alternative of international legislation, particularly when one of many events is international, topic to the same old reservations that it isn’t opposite to public order or the nice morals of the individuals of Thailand, and such international legislation is confirmed to the satisfaction of the Thai courts to be appropriate. Recognition of the international governing legislation can be much less of a problem if a share buy settlement ruled by international legislation is enforced exterior of Thailand, e.g. by a international arbitration or a international courtroom.

The commonest exits in Thailand are by commerce gross sales and IPOs, which we normally discover in non-public fairness offers. Exit choices (e.g., the precise to set off a commerce sale or an IPO after the goal enterprise reaches the specified valuation) might be (and sometimes are) included in a shareholders’ settlement.

Wanting forward

Given the expansive development within the know-how business and the emergence of digital disruption lately, we anticipate that sure sectors – akin to e-commerce, monetary companies, digital belongings and TMT – will probably be extra lively than others. As well as, many companies will seek for alternatives to spend money on associated companies or new strains of enterprise and to construct on their present abilities and experience.

As for the authorized business, we’ve seen adaptation in authorized practices, as many legislation companies are adopting synthetic intelligence to assist with their duties, notably in conducting due diligence and getting ready authorized documentation. Additionally, legal professionals will embrace alternatives that come up from the transformation of their purchasers’ companies and industries because of adjustments in know-how and digitalisation.

Click on right here to learn all of the chapters from the IFLR M&A Report 2022

Vipavee Kaosala
Accomplice
Weerawong Chinnavat & Companions
T: + 666 5985 5779
E: vipavee.okay@weerawongcp.com

Vipavee Kaosala is a accomplice within the agency’s M&A observe group. She has intensive expertise in M&A and company finance, and advises monetary establishments, multinational firms and PE homes on cross-border M&A, public takeovers, joint ventures, enterprise reorganisations, international direct investments, securities-related transactions and regulatory points regarding monetary companies.

Vipavee’s transactional expertise covers a variety of sectors, together with finance, client items and retail, manufacturing, insurance coverage, healthcare and actual property. Her deal expertise spans a lot of south-east Asian jurisdictions, however with specific give attention to Thailand.

Vipavee obtained a bachelor’s diploma from Thammasat College, and an LLM diploma in Company and Securities Legal guidelines from the London Faculty of Economics. She is admitted to observe legislation in Thailand and England & Wales.

Siregran Sakuliampaiboon
Counsel
Weerawong Chinnavat & Companions
T: + 669 0982 2602
E: siregran.s@weerawongcp.com

Siregran Sakuliampaiboon is a counsel within the M&A observe group. She specialises in M&A, , company structuring and company administration and management, specializing in cross-border transactions.

Siregran obtained a bachelor’s diploma from Chulalongkorn College, an LLM diploma in Business Legislation from the College of Cambridge, and an LLM diploma in taxation legislation from the London Faculty of Economics.

Akeviboon Rungreungthanya
Senior affiliate
Weerawong Chinnavat & Companions
T: +668 9049 3399
E: akeviboon.r@weerawongcp.com

Akeviboon Rungreungthanya is a senior affiliate within the M&A observe group. He has intensive expertise working with non-public and public firms, from SMEs to multinationals, and offers solutions-based recommendation.

Akeviboon advises on home and cross-border transactions, international direct funding, and corporate-commercial issues in all kinds of sectors.

Akeviboon obtained a bachelor’s diploma from Chulalongkorn College, and an LLM diploma in Worldwide Enterprise Legislation from College of London (Faculty of Oriental and African Research).

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