Keys to Successful M&A in Southeast Asia

Last April 5, 2022, YCP Solidiance and DFDL, a leading international law firm, presented “Keys to Successful M&A in Southeast Asia” a live webinar which addressed challenges international investors may face when striking M&A deals in the dynamic Southeast Asian market.

The event, which was attended by over 100 participants across the region, was designed to take a deep dive into the intricacies of Southeast Asian M&A deals through insights from YCP Solidiance Partner Gary Murakami and DFDL Partners Jerome Buzenet and Vinay Ahuja. Participants learned about the most important factors to consider in an M&A transaction, and emerging M&A trends in three emerging ASEAN markets. 

Successfully Pursuing M&A Deals in SEA

When it comes to M&A in Southeast Asia, YCP Solidiance’s Gary Murakami (Thailand Partner and Head of M&A Advisory in SEA) always tells his clients that textbook theory does not apply to the multicultural region. Unexpected events always occur in cross-border M&A deals, and international investors must be prepared to adapt to sometimes country- or industry-specific details and needs. He advises clients to have very sound investment criteria in mind, and a specialized target to help the process run smoothly.

International investors must also take note of the discrepancies between a majority and minority investment, from the deal process itself to risk vs. return. Minority investments, for example, are easier to process and require little merger integration, while majority investments—though complex and time-consuming—can pose high financial returns. 

Ultimately, international companies who want to pursue M&A deals in Southeast Asia must first do their research and select not only a feasible target, but invest in financial advisors who can help them navigate cultural, regional, and industry details. 

M&A in Emerging ASEAN Markets

The global M&A boom has been mirrored in Southeast Asia, with over three times more transaction value than in previous years. With the diverse Southeast Asian region currently a prime hotspot for investment opportunities, how can international companies choose the right countries and industries that can benefit them in the long-term? 

According to Jerome Buzenet (Partner, Co-Head of Regional Mergers & Acquisitions Practice, DFDL) and Vinay Ahuja (Partner, DFDL), the key is to select emerging markets that make M&A more attractive for international investors through local regulations and incentives. They shared their insights on three investment destinations that are poised to lead the region:

Indonesia

  • Hot sectors for M&A this 2022 are Telecommunications, Logistics, E-Commerce, Fintech, and Consumer/Retail.
  • An online licensing process, Online Single Submission (“OSS”), makes it easy for investors to navigate the complex M&A system.

Thailand

  • Trending M&A sectors in the country are Energy & Infrastructure, Telecommunications, Real Estate & Hospitality, Financial Services, Logistics, and Retail/F&B.
  • Foreign companies are encouraged to invest in the country through an attractive investment policy under the Board of Investment (“BOI”).

Vietnam

  • Emerging M&A industries in Vietnam are Renewable Energy, Financial Services, Consumer/Retail, Logistics, Healthcare, Tech, and Real Estate.
  • Foreign investors who want to pursue minority acquisitions in Vietnam do not need an Investment Registration Certificate (“IRC”).

Structuring and Closing M&A Transactions in ASEAN Emerging Markets

The DFDL Partners also discussed deal execution and the main challenges faced by foreign investors in the Southeast Asian region. These issues can have a major impact on M&A transactions and should be considered in the early stages of the process. 

Some important things to note for deal execution in Indonesia are to manage the sell-side’s expectations and understand any changes of regulations that can happen during the process. New legal measures, such as the Omnibus Law, which amended several important regulations in a short period of time, could have a major impact on a deal. Adapting to a country’s culture and regulatory regime is also an important component of successful deal execution. In Thailand, it can become complicated because of complex foreign ownership requirements. In Vietnam, frequent non-compliance issues can delay a transaction, but several options are available to solve these issues. 

Ultimately, one of the most important things international companies must do when it comes to M&A in Southeast Asia is to acquire the services of a partner with extensive knowledge and experience of the region to help with the complex process. 

The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.

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