Mergers and Acquisitions in Thailand

Mergers and Acquisitions in Thailand. Thailand remains a highly active market for strategic and financial M&A — attractive for its manufacturing base, regional hub status and growing tech and services sectors. But deals must be structured around a complex regulatory landscape: foreign-ownership limits, takeover rules for listed targets, merger control, sectoral regulators and tax/labour traps. This guide explains the legal framework, typical deal structures, regulatory clearances, due diligence priorities and practical structuring choices you’ll face on an M&A in Thailand.

1. Legal and regulatory framework (what governs deals)

Key laws and regulators to keep in mind:

Civil & Commercial Code / Companies Act — company law and shareholder mechanics.
Foreign Business Act (FBA) — principal source of foreign-ownership restrictions with “lists” of reserved or restricted activities. Foreigners must check whether proposed control is permitted or requires a Foreign Business License or other exemption.
Securities & Exchange Commission (SEC) / Stock Exchange of Thailand (SET) — takeover regime and mandatory tender-offer obligations for listed targets.
Trade Competition Commission of Thailand (TCCT) — merger control under the Trade Competition Act (pre-merger approval where a merger may create a monopoly; post-merger notification where competition may be substantially lessened).
Sector regulators (Bank of Thailand, OIE, OIEA, Energy Regulator, etc.) — industry licenses and approvals for regulated sectors.

These overlapping regimes determine not just the permissibility of a deal but also its timing, conditions and required filings.

2. Typical deal structures — pros and cons

Two principal economic structures are used in Thailand:

A. Share acquisition (buying the company’s shares)

Pros: preserves contracts, licenses and permits that are tied to the legal entity; simpler transfer of employees and existing commercial relationships.
Cons: buyer inherits all liabilities (litigation, tax, undisclosed debts); may trigger SEC mandatory tender-offer rules if thresholds are crossed (see below).

B. Asset acquisition (buying assets/business lines)

Pros: buyer cherry-picks assets and limits legacy liabilities; easier to carve out non-core elements.
Cons: requires novation/consent for customer contracts, re-licensing, employee transfers (with consent) and repeated registrations (land transfers attract transfer taxes).

Choice depends on licenses, the target’s license transferability, tax profile and commercial continuity needs.

3. Takeover rules for listed companies

Thailand operates a tender-offer regime. A mandatory tender offer is triggered when a person/entity acquires or passes statutory thresholds of voting rights (notably 25%, 50% or 75% thresholds used as regulatory triggers), and the acquirer must file the prescribed SEC forms and make the offer in the prescribed manner. The SEC’s takeover rules require careful procedural compliance (disclosure, timetable, minimum offer price rules and filing of tender documents).

In practice this means active bidders must plan disclosure timing, financing and possible compulsory buy-outs well in advance — failing to observe SEC thresholds can expose the bidder to fines and forced remedies.

4. Competition (merger control)

Under Thailand’s Trade Competition Act, transactions that may substantially lessen competition must be notified — in some cases prior approval is required where a merger creates a monopoly or dominant position; otherwise a post-merger notification must be filed promptly (often within seven days). The TCCT reviews substantive competition effects and can require remedies. The TCCT and its staff typically take several weeks to months to assess complex cases; for a pre-clearance application, statutory decision windows apply (and extensions are possible).

5. Foreign ownership, exemptions and BOI

The FBA remains the main constraint on foreign control in many service and trading activities. Workarounds or lawful exemptions include: Board of Investment (BOI) promotion (which can permit 100% foreign ownership for promoted activities), qualifying for certain treaties or obtaining a Foreign Business License in limited circumstances. For projects that rely on full foreign ownership, applying for BOI promotion is a routine structuring option since BOI status may also provide tax incentives and simpler work-permit/visa processing.

6. Due diligence — what buyers should focus on

A Thailand M&A due diligence must be thorough and locally grounded. Core workstreams:

Corporate and shareholder due diligence: confirm share chain, shareholder agreements, power of attorney, beneficial ownership and any nominee issues.
Regulatory & license checks: identify licenses that will be lost on a change of control (and whether they are transferable).
Tax & customs: historical tax exposures, transfer pricing, VAT liabilities, and stamp duty implications for share vs asset deals.
Land and property: verify title deed type (chanote vs lesser documents), encumbrances and any land-use restrictions.
Employment & labour: identify collective agreements, severance exposure and statutory entitlements that attach on termination or transfer.
Contracts & change-of-control clauses: customers, suppliers, IP licenses and loan covenants that permit termination on change of control.
Litigation & contingent liabilities: pending suits, regulatory investigations, environmental liabilities.

Each diligence track typically generates closing conditions, indemnities, escrow mechanics and warranty caps in the SPA.

7. Tax, timing and implementation issues

Tax treatment materially affects structure: share sales generally incur stamp duty (and capital gains may be taxable at corporate or personal level depending on seller status), while asset transfers can expose a seller to specific business tax, VAT and land transfer fees. Buyers should model cash flow and post-closing taxes early, and consider using escrow or holdback to address tax uncertainty.

Typical transaction timeline: due diligence (2–6 weeks), negotiation & signing (2–4 weeks), regulatory approvals (varies — weeks to many months). Sectoral and competition approvals are usually the critical path.

8. Common pitfalls & practical advice

Underestimating the FBA: confirm whether the target’s business is in a restricted list and plan BOI/FBL or alternative structures early.
Surprise SEC obligations: crossing tender-offer thresholds without pre-planning can derail deals.
Assuming licenses transfer: many Thai licenses are entity-specific; where continuity matters, a share deal or pre-approval may be required.
Competition clearance timing: don’t close before clearance where pre-merger approval is required; post-notification remedies can be burdensome.

9. Dispute resolution and remedies

Parties commonly opt for arbitration (SIAC, ICC or Thai Arbitration Institute) for commercial certainty and enforceability across borders; however, some remedies (urgent injunctive relief or registrar filings) require access to Thai courts. Draft warranty and indemnity clauses carefully; escrow, retention and insurance (representation & warranty insurance) are frequently deployed to allocate risk.

10. Practical checklist (closing essentials)

Confirm whether deal triggers mandatory tender offer and prepare SEC filings.
Assess competition notification/pre-clearance needs and timetable.
Verify foreign ownership limits and whether BOI or FBL is needed; if BOI is intended, start early.
Complete tax modelling for share vs asset purchase and build escrow/holdback accordingly.
Prepare employee and transfer-of-license plans; secure consents needed for contract novation.
Agree dispute resolution forum and secure interim relief routes (Thai courts/arbitral seat).

Conclusion

M&A in Thailand delivers strategic access to ASEAN supply chains and local markets, but success depends on early regulatory mapping (FBA/BOI, SEC tender rules, TCCT merger control), focused local due diligence and tax/labour planning. For cross-border buyers, combining experienced local counsel with financial and competition advisers is essential to de-risk timing, approval risk and post-closing liabilities.