In 2021, Merger & Acquisitions (M&A) activities soared above 2020 levels in line with the record-breaking year globally for M&A. Corporations in Thailand have been taking advantage of greater access to capital to invest in high growth opportunities in a low growth environment. The pandemic has been a catalyst to invest in enhancing digital capabilities, in line with a post-pandemic world as consumers noticeably grew their reliance on technology.
Despite a stall in economic recovery due to measures to contain the spread of Omicron variant at the end of last year, we still expect to see continued robust M&A activities continue throughout this year, with major themes being digital transformation, divestments and diversification, synergy capture, economies of scale and the continued rise of private equity & venture capital.
"With the rise in M&A activities in Thailand, we would like to emphasize on the importance of conducting a comprehensive and integrated Due Diligence," says Boonyaporn Donnapee, Legal Partner, KPMG Law in Thailand. "While Financial Due Diligence is a well-known step towards a successful M&A deal, Legal Due Diligence is sometimes overlooked. Legal Due Diligence is a way to evaluate the level of risk involved in the investment, identify a suitable purchase price given the risk factors, determine the structure of the M&A transaction, and identify the conditions for the deal that needs to be included in the transaction agreements."
Considerations in conducting Legal Due Diligence
In the case that the target company, the seller or the buyer is a listed company, there are more factors to consider when conducting Legal Due Diligence. For example, if the target company is a listed company, when the prospective buyer is conducting due diligence on the target, the target company needs to put in place measures to prevent the leaking of information and be careful of insider trading activities. Moreover, there are other legal considerations such as whether the M&A transaction will be considered an acquisition or disposition of assets or connected transactions under Thai securities law, and whether a tender offer is needed, and whether and when to disclose information to the stock exchange, etc. All this would need to be considered if the target company, the seller or the buyer is a listed company.
While acquiring, making an investment in or merging with a business presents new challenges and opportunities, today's constantly changing business environment makes it even more important for businesses to carefully consider their rationale for doing a deal and how it fits into their wider business strategy. Just financial and tax Due Diligence is not enough. This is why due diligence must be approached in a new and integrated way, to include legal due diligence, among others.