PwC predicts Thailand business deals to soar post-crisis

PwC Thailand expects significant growth in the volume and value of deals in Thailand over the next 12 months compared to the first half of 2021 as the economy opens up. 

The forecast follows a positive start to this year that saw mergers and acquisitions (M&A) in Thailand in the first six months exceed those in 2020, it said.

Chantanuch Chotikapanich, Deals Lead Partner, PwC Thailand, said that despite the uncertainty created by COVID-19, Thai businesses have been reviewing their portfolios and seeking to acquire new capabilities with high growth potential through M&A deals. 

With relatively low financial costs and optimism that business activity in Thailand will soon pick up, more companies are turning to M&A. This includes divesting in certain areas or diversifying to enhance existing capabilities and reinforce their competitive advantage, she said.

“It’s been quite a surprise to see a lot of activity in business deals in Thailand, both by the buy-side and sell-side. People may think the market is quiet because of the pandemic, but many deals have been made quietly behind closed doors.

“COVID-19 has proven to be a catalyst for change, together with changing consumer behaviour and increased dependence on technology. These factors have prompted businesses to strengthen their portfolios or venture into new directions that are more in line with the trends they envision for a post-pandemic world.  

“M&A is a shortcut to transform their businesses. Many companies are choosing to sell off some existing assets even in areas where they have expertise because they aren’t deemed future proof. They prefer to hold cash or wait for a good time to invest,” Chantanuch said. 

This uptick in deals activity reflects the global picture, as reported in PwC’s Global M&A Industry Trends: 2021 mid-year outlook. 

The report examines current global deals activity and presents insights from PwC’s deals industry specialists. They have identified the key trends driving M&A activity, as well as investment hotspots for the rest of 2021 and into 2022. 

The global figures show record levels of deals in the first six months of 2021 both in terms of volume and value, notably rising in excess of USD1 trillion (approximately THB33 trillion) per quarter over the past 12 months.

Fresh capital inflows led by special-purpose acquisition companies (SPACs) have been a major catalyst, plus an increase in private equity (PE) investment and corporate acquisitions—particularly focused on technology assets, it said.

Thai retail and financial services industry’s M&A boom 

The financial services and retail consumer sectors led with the most combined deals and acquisitions in Thailand over the past six months, Chantanuch said.

These businesses were looking to gain a competitive advantage, perform cost restructuring and increase efficiency and profitability, she added. They were followed by future-ready businesses in a variety of sectors, including electronic components, data centres, upstream food, raw materials and production.

In contrast, data from the PwC report show that technology, media and telecommunications companies accounted for a third of all megadeals globally in the first half of 2021.

The transformation to net zero also continued to influence M&A activity in the energy, utilities and resources industry, which saw deal volumes and values recover to pre-pandemic levels. 

Despite the rise in deal activity in Thailand, the appetite for M&A deals in industries such as hospitality and airlines has been more muted, Chantanuch said.

Even though these businesses’ valuations have become more attractive, some prospective buyers believe the sectors still have some way to go before recovering, she said. 

Future government financial recovery packages could stimulate the broader economy, which would produce follow-on benefits for infrastructure, construction and supply chain-related businesses.

“Even though businesses should be holding onto cash where they can, those with enough funds should be bold and seek investment opportunities that could prepare their businesses for the future. 

“For anyone monitoring the situation day-by-day, I’d suggest reviewing the relevance of their original business model and studying market trends,” Chantanuch said. 

“They should see what’s missing or needs to be invested or divested to maximise their business capabilities. Maintaining a competitive edge alone isn’t enough for the COVID-19 world – businesses need to be ready to adapt quickly in an ever-changing world,” she said.