Thailand's merger and acquisition (M&A) volume and value should improve in the second half of 2023, according to PwC Thailand, after many businesses paused M&A activities because of economic conditions, inflation and geopolitical risks.
Although many deals were delayed from the fourth quarter of 2022, there are positive signs in line with global trends.
According to surveyed chief executives, 60% want to be proactive about continuing their M&A activities this year despite environmental factors adding pressure to business operations.
Chantanuch Chotikapanich, deals leader at PwC Thailand, said Thailand's M&A market is showing signs of recovery for the second half of 2023 after experiencing a slowdown in volume and value since last year.
Compared with 2021, multiple macroeconomic factors such as inflation, high interest rates and geopolitical crises have made a significant impact on businesses, halting deal activities.
However, M&A activity this year will not reach the impressive levels seen in 2021 during the pandemic, she said.
"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," Ms Chantanuch said.
She said the volume and value of Thai M&A activities declined from the fourth quarter of 2022 into 2023 as investors postponed their merger plans and adopted a wait-and-see approach, hoping for the return of stable market conditions.
The signs of recovery are now much clearer, with buyers and sellers starting their preparations for deals.
"When a business reaches a certain level of growth, it can no longer rely solely on its existing strategy," said Ms Chantanuch.
"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."
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.
More than half of chief executives (60%) surveyed said they were not planning to delay deals this year despite some negative economic factors affecting businesses, according to PwC's 26th Annual Global CEO Survey.
As for global M&A activity in 2022, the industry trends report found volume and value declined by 17% and 37%, respectively, from 2021, which set records with 65,000 deals valued at US$5.26 trillion.
This was a result of macroeconomic fluctuations as well as concern for a potential recession, high interest rates, significant drops in stock valuation, geopolitical tensions like the war in Ukraine, and supply chain disruption, according to the report.
The M&A volume and value in Asia-Pacific declined by 23% and 33%, respectively, between 2021 and 2022. China led the decline, where deal volumes and values decreased by 46% and 35%, respectively, following Covid-19 and weakening exports.
As a result, companies looking to expand into Asia are searching for investment opportunities in other markets such as India, Japan and Southeast Asian countries.
The report stated there were 16,238 deals in Asia-Pacific last year compared with 21,166 deals in 2021, while the value of mergers was $826 billion, compared with $1.23 billion in 2021.
The PwC report identifies six industry sectors likely to see consolidation activity this year.
Digitalisation in technology, media and telecom remains the focus for many businesses. Software deals will continue to dominate the sector, much like in 2022, having accounted for 71% of tech deal activity and 74% of deal values.
The report predicts other likely hotspots of M&A activity this year as telecom, the metaverse and video games.
Portfolio optimisation in industrial manufacturing and automotive will drive divestitures and acquisitions, particularly those focused on sustainability and accelerating digital transformation, according to PwC.
Disruption in financial services from platforms and fintech is driving rapid technological changes across financial services, and should boost M&A as players seek to acquire digital capabilities.
The transition of energy, utilities and resources will remain a priority for investors and management teams, directing large volumes of capital to M&A and other capital project development, said the firm.
As for consumer markets, while challenges remain in 2023, portfolio reviews and a focus on transformational transactions will create M&A opportunities.
The need to innovate and transform health industry businesses to achieve growth goals will drive M&A activity in 2023.
Biotech, medtech, consumer-facing healthcare and digital health solutions are expected to attract strong investor interest.
Ms Chantanuch said this will be a great year for businesses interested in buying or selling through M&A.
Many organisations made changes in their operations during the pandemic by restructuring, reducing costs and enhancing productivity.
True business capabilities are reflected in financial statements, enabling businesses to assess their own performance compared with the pre-pandemic era.
