Thailand’s M&A activity is on a growth track in 2022: PwC
Thailand’s M&A deal volume and value in 2022 are poised to experience continued growth from the previous year, despite rising interest rate impact on financial costs as businesses and people began to adapt alongside the COVID-19 pandemic.
The financial service and technology industries will continue to dominate the landscape as the two most traded sectors this 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 rate, inflation and regulations that may hinder reaching deals agreement. This contentious situation, however, is actually accelerating M&A activity,” Chantanuch said.
“As global trends become clearer, business leaders will continue to review their business strategies and portfolio. Meanwhile, others will adjust their cost structure or acquire businesses they lack to maintain steady growth. Sectors with the most M&A activity in Thailand last year were financial services and technology.
“Under these conditions, businesses must adapt and digitalise themselves into the new market to enhance sustainable business value,” she said.
This trend aligns with a recent report – ‘Global M&A Industry Trends: 2022 Outlook’ – by PwC that surveyed experts and analysed deals activities worldwide to identify key trends in volume and value.
The report revealed that in the past year, M&A volume and value had increased by 62,000 globally in 2021, up 24% from 2020. Meanwhile, a publicly disclosed deal reached a recording value of USD5.1bn, which included megadeals valued at USD5bn or more, accounting for a 57% higher volume than 2020. The high value broke the previous record of USD4.2tn in 2007.
Chantanuch added that globally there’s strong competition between investors who are conducting M&A, whether they’re financial investors, such as private equities (PE), or strategic investors.
In the past year, investors raised huge capital through the capital market and special purpose acquisition companies (SPACs) in the US, resulting in higher transaction prices. This will impact the financial cost since investors are investing in M&A at an increasing price. Hence, this creates pressure for investors to ensure their investment in the business generates higher profit than before, she said.
Global M&A industries trend in 2022
Moreover, the outlook report also highlights M&A trends expected to occur in major industries.
1. Consumer markets: Consumer behaviour will continue to accelerate M&A activity in 2022 as businesses and PE 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) is forcibly driving strategy across the industry. M&A will be used to rebalance portfolios and pursue value creation opportunities in ESG growth areas, including renewables, 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 seek to adjust their portfolios for growth through deals that provide access to new technologies such as mRNA, cell and gene therapy, speciality 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 quickly adopted by the mainstream market faster than anticipated, the technology industry will continue to experience unparalleled deals activity. At the same time, companies from all sectors will seek to gain key technology and digital capabilities.
Digital transformation will continue to increase pressure on all industries to revisit their portfolios. Even though M&A deals can drive accelerated growth, it’s equally critical to review existing business and its profitability. This will give a clear overview of our current business, whether it has the potential to grow amid this global trend.
Many businesses are divesting assets that are unprofitable or non-core businesses. 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 also impact the supply chain, material management, workforce 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 delay in closing business deals may occur in the first half of 2022,” Chantanuch said.
