MERGERS & ACQUISITIONS BUSINESS IN THAILAND
There is merger when two companies combine into a single business organization. On the other hand, an acquisition refers to the process of purchasing another firm. Acquisitions are also known as takeovers and could be both friendly and hostile.
During acquisitions, the process could be very complicated and time consuming. Investors are highly recommended to consult with a professional Thai lawyer who could help you for accomplished result.
TYPICAL 4 STAGES IN MERGERS & ACQUISITIONS
- Parties enter into a Memorandum of Understanding (MOU) or Letter of Intent (LOI). In this stage, the confidentiality terms along with the binding terms should be stipulated under MOU.
- The buyer checks various issues within the target company via due diligence concerns with the business, property, legality and finance, etc.
- After due diligence process, parties enter the buy-sell negotiation. Any concerns from the due diligence will be negotiated and settled.
- Parties prepare the Sales and Purchase Agreements and any other related documents ready to be signed and affixed the company seal. The signed agreements are validated under Civil and Commercial Code of Thailand.
Investors are highly recommended to consult with K FiSCHER & CO lawyer who could help you to accomplish your goal
PROCESS OF MERGERS
- Each company invites their shareholders to a meeting and conducts a special Resolution of merger with the vote of not less than ¾ of the total shares of those present in the meeting. Fourteen (14) days before the meeting, a notice must be mailed to the shareholders detailing the meeting announcing it in the local newspaper.
- Each company registers a Special Resolution of merger within 14 days after obtaining such resolution.
- Each company advertises the intention to merge in a local newspaper at least once.
- Each company has to send a registered mail to their company to have an opposition within 60 days.
- After 60 days of sending such announcement or notification, a shareholders meeting for both companies must be considered for any details of the newly merged companies.
- The new merged company could be registered within 14 days since the merged resolution is approved.
TYPES OF MERGERS
There are many types of mergers. A horizontal merger is when two competing companies with similar products and markets decide to merge. A vertical merger is when a customer acquires with one of its suppliers. A market extension merger is when two companies selling similar products in different markets decide to merge. A product extension merger is a merger between two companies that sell different products in the same market. A conglomeration is when two companies do not have anything in common but decide to merge. Each of these different types of mergers will have effects on their local markets and product competition.
WHAT ARE THE LAWS IN THAILAND
Foreign investment in Thailand is governed by the Foreign Business Act of 1999. The Foreign Business Act restricts foreigners participating in certain businesses and limits foreign ownership in other forms of businesses. The foreign business act will generally limit the possibility of a foreign company absorbing a Thai company in Thailand. Most foreign owned companies in Thailand are restricted from becoming majority owners of a Thai company without government approval.
The Board of Investments and some international treaties allow certain foreign owned businesses to operate in Thailand without the restrictions of the Foreign Business Act. The Board of Investments provides incentives and privileges to foreign companies that start operations in targeted industries. A bilateral treaty between Thailand and a foreign nation sometimes provides special privileges to citizens of the foreign nation like Americans. With certain exemptions, Americans are exempt from the restrictions of the Foreign Business Act.
The Trade Competition Act of 1999 restricts mergers of businesses that may result in a monopoly or unfair competition without special permission by the Trade Competition Commission. The TCA prevents businesses from abusing a dominant position in market share. Companies that individually hold market share of at least 50% or is one of top three companies that collectively hold at least 75% market share are stated to have a dominant position. Dominant businesses are restricted in their business operations including mergers and acquisitions.