M&A transactions involving Thai corporations have grown by leaps and
bounds from an average of US$3.7 billion per year, hitting a record $18.7
billion last year, according to UBS Research.
Driving the deals were strong
financial foundations and cheap financing costs. Despite export woes, listed
companies showed combined net profits of 560 billion baht in the first nine
months of last year, slightly up from 556.9 billion baht in the same period a
year earlier.
Interest rates are kept low
almost globally and Thai corporations are positioning themselves for Asean
integration in 2015. It was a welcome trend, especially for Thai banks, the
research house added.
Panop Ansusinha, head of
investment banking at Kasikornbank, said the strong baht was also helping to
spur mergers and acquisitions by Thai firms, which see a need to go abroad as
the home market is becoming mature.
Te M&A outlook should remain
bright this year. Thai Beverage's recent takeover of Fraser & Neave alone
is valued at over 300 billion baht, so M&A deals this year must definitely
be higher than 2012, he said.
Large conglomerates like PTT,
Siam Cement Group and Banpu will continue to be the leaders in acquiring
businesses in Asean and beyond while medium-sized companies mostly in consumer
products, services and retailing can focus only on Asean.
Local banks will see growing loan
demand for M&A activities mainly from medium-sized companies, while foreign
banks would play a bigger role in helping large companies in financing bigger
deals beyond Asean, he said.
Kittiya Todhanakasem, first
senior executive vice president of Krungthai Bank, said local banks were
assisting local companies by spotting targets for them, as some do not know
what opportunities were out there. It would then depend on the Thai companies
if they were interested in pursuing a deal.
"M&A opportunities are
vast out there, but the scale may not be as big as the deals involving ThaiBev
or Charoen Pokphand Group," she said.
For medium-sized companies the
motive was organic growth, which meant strengthening production capacity,
rather than "inorganic growth" or diversification.
fee income
Limiting Thai banks' capability
is their limited experience in overseas M&A. They can get involved only
when the deals are not complicated. While they can help advise on financing
structure and risk management, it is foreign banks that have the expertise to
offer comprehensive services because of their global network.
At Krungthai Bank, M&A deals
in the pipeline involve only local companies. Besides M&A, its investment
banking unit has to rely on the initial public offering (IPO) business, which
is expanding fast thanks to the recent spike in the stock market. Many
companies are now planning to seek a listing on the Stock Exchange of Thailand
to benefit from inflows to the market.
Kasikornbank's investment banking
unit, set up last June to help amplify non-interest income, also focuses on the
equity market, particularly IPOs and property fund launches. Fee income from
investment banking should grow by 30-35 per cent within three years.
Last year, companies raised 20
billion baht through IPOs but the positive market environment may boost
business this year. The bank plans to assist five to six companies in raising
about 20 billion baht through IPOs this year. This convinced it that total IPOs
this year would surge to 100 billion baht.
"Yet, importantly, the
political situation will determine the size of both M&As and IPOs,"
Panop said.
*US$1=29.9 baht
Sucheera Pinijparakarn
The Nation
Business & Investment Opportunities
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