While the Thai economy slowed and stagnated, Thai companies looked abroad to expand their trade operations and playdown their exposure to local political and economic pressures. The biggest example of this was Thai Union Frozen Products PLC (TUF) with their acquisition of the US fish company, Bumble Bee Seafoods for $ 1.5 billion. This happened after TUF bought a series of European fish products companies for another 1.2 billion dollars. The acquisitions of TUF have allowed them to expand rapidly in the American and European markets. This is considered a horizontal acquisition since it is a merger between two competing companies.
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Warehouse developer WHA Corporation Plc purchased a 22.53% stake in the industrial real estate holding company, Hemaraj Land and Development, to merge its services and vertically integrate its commercial activities. Now large producers can buy land from Hemaraj and WHA Corporation can build factories for producers on the ground. The union enables WHA Corporation to stabilize and increase its revenue stream. This is a vertical integration because a customer integrates with one of his suppliers.
Mergers and acquisitions also allow foreign companies to enter the Thai market. China Mobile International (CMI) purchased an 18% stake in True Corporation so that it could enter the Thai mobile phone market. Many foreign companies buy minority shares of Thai companies so that they can settle in Thailand without being bound by the Foreign trade Act. The Foreign trade Act limits foreign-owned companies to participate in certain commercial activities and limits foreign ownership in other forms of trade.
Mergers and acquisitions in Thailand are controlled by the Trade Competition Act (TCA). The Thai Commercial Competition Commission will not allow mergers that will result in a monopoly or unfair competition for Thai businesses or consumers. Companies that individually hold a market share of at least 50% or one of the first three companies that collectively hold at least 75% of the market share are listed in a dominant position. Dominant activities are limited in their commercial operations, including mergers and acquisitions.
Mergers and acquisitions is a complicated process. The merger of two companies involves the elimination of duplicate positions and departments, the resolution of debt issues and the management of interested parties and third parties. Furthermore, while it is hoped that there will be synergies in the merger of the entities, there will be financial, commercial and regulatory issues that need to be examined for potential conflicts.
Depending on the size of the company, lawyers and auditors will need to be hired to ensure that all potential risks are discovered and all relevant information is disclosed to both parties. This is essential to ensure that the parties are aware of the risks associated with the transactions before proceeding. Minimizing unexpected surprises is in the interest of both parties and reduces the potential for future disputes and regulatory problems. Before embarking on complicated company mergers or acquisitions, companies should seek the assistance of auditors and lawyers who have experience in the process.
By Dennis Ramm
Mergers and Acquisitions
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