M&A activity to recover in second half of 2023, PwC Thailand says
BANGKOK, 28 April 2023 – Thailand’s merger and acquisition (M&A) volume and value will improve in the second half of 2023, says PwC Thailand’s partner, after many businesses had paused M&A activities due to economic conditions, inflation and geopolitical risks.
Although many deals were delayed since the fourth quarter of 2022, there are positive signs in line with global trends. According to the surveyed CEOs, 60% are proactive in continuing their M&A activities this year, despite environmental factors adding pressure on business operations.
Chantanuch Chotikapanich, Deals Leader, PwC Thailand said Thailand’s M&A market shows signs of recovery in the second half of 2023 after experiencing a slowdown in volume and value since last year. Compared to 2021, multiple macroeconomic factors such as inflation, high interest rates and geopolitical crisis made a significant impact on businesses, halting deals activities. However, M&A activity this year won’t reach the impressive levels seen in 2021 during the COVID-19 pandemic.
“Thailand’s M&A deals are likely to recover in almost every sector. Whether it’s businesses looking to expand their operations, acquire new portfolios or venture into new s-curve industries, they’re all reviving their M&A activities again,” Chantanuch said.
Chantanuch explained the volume and value of Thailand M&A activities declined from the fourth quarter of 2022 into 2023 as investors postponed their M&A plans and adopted a wait-and-see approach, hoping for stable market conditions again. The signs of recovery are now much clearer with buyers and sellers beginning their preparations to conduct deals.
“When a business reaches a certain level of growth, it can no longer rely solely on its existing strategy. To achieve accelerated growth, strategic M&A and portfolio optimisation are vital. It’s a catalyst for driving accelerated growth that businesses in any sector can apply,” she said.
Although many deals have been delayed, there are positive market signs in line with global trends. PwC’s Global M&A Industry Trends: 2023 Outlook forecasts a rise in global M&A activity in the second half of 2023, after which investors and executive management will balance their short-term risks with their long-term business transformation strategy.
Meanwhile, more than half of CEOs (60%) surveyed said they’re not planning to delay deals this year despite some negative economic factors impacting businesses, according to PwC’s 26th Annual Global CEO Survey.
As for global M&A activity in 2022, the Global M&A Industry Trends report found that volume and value declined by 17% and 37% from 2021, with record-breaking highs of 65,000 deals, valued at USD5,268bn. This was a result of macroeconomic fluctuations as well as concerns for potential recessions, high interest rates, significant drops in stock valuation, geopolitical tensions, such as the war in Ukraine, and supply chain disruption.
At the same time, the M&A volume and value in Asia Pacific declined by 23% and 33%, between 2021 and 2022. China led the decline where deals volume and value decreased by 46% and 35%, respectively, following COVID-19 and weakening exports. So, companies looking to expand into Asia are looking for investment opportunities in other markets such as India, Japan and Southeast Asian countries.
The report also states there were 16,238 deals in 2022 in the Asia Pacific region, compared with 21,166 deals in 2021, while the value of mergers was USD826bn, compared with USD1,233bn in 2021. The PwC report identifies six industry sectors likely to see consolidation activity this year.
- Technology, media and telecommunications (TMT): Digitalisation remains the focus for many businesses. Software deals will continue to dominate the sector – as much as they did in 2022 – having accounted for two-thirds (71%) of tech deal activity and three-quarters (74%) of deals value. Other areas which will likely be hot spots of M&A activity in 2023 include telecoms, the metaverse and video games.
- Industrial manufacturing and automotive (IM&A): Portfolio optimisation will drive divestitures and acquisitions, particularly those focused on sustainability and accelerating digital transformation.
- Financial services (FS): Disruption from platforms and FinTech is driving rapid technological changes across FS and will boost M&A as players seek to acquire digital capabilities.
- Energy, utilities and resources (EU&R): Energy transition will remain a priority for investors and management teams, directing large volumes of capital to M&A and other capital project development.
- Consumer markets: While challenges remain on the consumer front in 2023, portfolio reviews and a focus on transformational transactions will create M&A opportunities.
- Health industries: The need to innovate and transform businesses to achieve growth goals will drive M&A activity in 2023. Biotech, CRO/CDMO, MedTech, consumer-facing healthcare and digital health solutions are expected to attract strong investor interest.
Chantanuch added that this is a great year for businesses who are interested in buying or selling through M&A. Many organisations made changes in their operations during the COVID-19 pandemic by restructuring, reducing costs and enhancing productivity. True business capabilities are reflected in the financial statements, enabling businesses to assess their own performance compared to the pre-pandemic era.
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