Mergers and acquisitions in Thailand are key drivers of corporate growth, market consolidation, and foreign direct investment. They offer opportunities for companies to expand, diversify, or restructure. However, M&A transactions in Thailand are governed by a complex legal and regulatory framework that requires careful structuring, due diligence, and compliance to succeed.
This article provides an in-depth analysis of the legal structures, regulatory requirements, procedural steps, and practical considerations for M&A in Thailand.
Legal Framework
M&A activities in Thailand are primarily governed by:
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Civil and Commercial Code (CCC) — general rules on contracts, partnerships, and company law.
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Public Limited Companies Act B.E. 2535 (1992) — for M&A involving public companies.
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Securities and Exchange Act B.E. 2535 (1992) — for transactions involving listed companies; includes tender offer rules.
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Trade Competition Act B.E. 2560 (2017) — merger control and antitrust considerations.
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Foreign Business Act B.E. 2542 (1999) — restrictions on foreign ownership in certain sectors.
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Sector-specific laws (e.g., Financial Institutions Business Act, Insurance Act).
Common M&A Structures
1️⃣ Share Acquisition
The acquirer purchases shares in the target company, obtaining ownership and control indirectly through the shareholding structure.
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Advantages:
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Simpler transfer of control.
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Contracts, licenses, and assets generally stay with the target.
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Disadvantages:
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Buyer assumes existing liabilities (known and unknown).
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Due diligence is critical to identify hidden risks.
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2️⃣ Asset or Business Transfer
The acquirer purchases specific assets or business undertakings of the target entity.
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Advantages:
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Selective acquisition of desired assets and liabilities.
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Avoidance of hidden liabilities.
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Disadvantages:
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Need to assign/novate contracts.
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Individual transfer of licenses, permits, and registrations.
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Potential tax inefficiency.
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3️⃣ Amalgamation (Merger)
Two or more companies combine to form a new entity, or one company absorbs another under CCC Sections 1237–1243.
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Requires:
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Shareholder approval (usually 75% of votes at a general meeting).
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Registration with the Ministry of Commerce (MOC).
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All rights, liabilities, and obligations transfer by operation of law.
Regulatory Approvals and Restrictions
Trade Competition Act (Merger Control)
Merger transactions that may substantially lessen competition are subject to:
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Pre-merger approval: Required where the merger may create or enhance market dominance (combined market share ≥50% and turnover ≥1 billion THB).
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Post-merger notification: Required for other significant mergers (combined turnover ≥1 billion THB).
Foreign Business Act
Foreign parties (≥50% foreign shareholding or control) may not engage in certain restricted activities (e.g., services, agriculture) without:
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Foreign Business License or
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BOI promotion (Board of Investment)
A share acquisition by a foreign buyer may trigger foreign status under the FBA.
Sector-Specific Approvals
Certain industries require regulator consent (examples):
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Bank of Thailand — for financial institutions.
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Office of Insurance Commission — for insurance companies.
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NBTC — for telecom operators.
Due Diligence
Robust due diligence is essential, covering:
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Corporate: Shareholder structure, articles, minutes, compliance.
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Financial: Liabilities, tax compliance, accounting.
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Operational: Material contracts, licenses, assets, employment.
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Litigation: Existing and potential claims.
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Environmental/Zoning: Real property use compliance.
Findings guide the transaction structure, pricing, and warranty protections.
Procedural Steps
1️⃣ Preliminary agreement — Letter of intent (LOI) or memorandum of understanding (MoU), often including exclusivity and confidentiality provisions.
2️⃣ Due diligence — Legal, financial, operational reviews.
3️⃣ Negotiation and drafting — Sale and purchase agreements, merger plan, disclosure schedules.
4️⃣ Regulatory filings and approvals — Trade Competition Commission, sector regulators.
5️⃣ Shareholder meetings — Required for amalgamations or major asset sales.
6️⃣ Closing — Transfer of shares/assets, payment, registration with the MOC or other authorities.
7️⃣ Post-closing integration — Corporate housekeeping, license updates, employee transfers.
Tax Implications
Share Deals
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Capital gains on share sales are taxable in Thailand.
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Stamp duty of 0.1% on the higher of sale price or paid-up value of shares.
Asset Deals
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Subject to VAT (7%) unless exempt (e.g., entire business transfer with conditions).
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Land and building transfers: subject to transfer fee (2%), specific business tax (3.3%), and income tax withholding.
Amalgamation
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Often tax neutral, but tax benefits depend on compliance with Revenue Department conditions.
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All tax liabilities of merged entities transfer to the surviving entity.
Employment Considerations
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Share deal: Employment contracts continue automatically.
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Asset/business transfer or amalgamation: Employee consent may be required; severance obligations may arise if employment terminates.
Employers must honor accrued benefits and service continuity if employees are retained.
Common Challenges
⚠ Foreign ownership limitations
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M&A structures need careful planning to comply with FBA restrictions.
⚠ Merger control
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Trade Competition Commission clearance may take several months.
⚠ Tax efficiency
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Transaction design impacts tax liabilities significantly.
⚠ Assignment of contracts
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In asset deals, third-party consent may be needed for contract novation.
⚠ Cultural and operational integration
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Especially important in cross-border M&A.
Enforcement of M&A Agreements
Thai law generally enforces well-drafted M&A agreements. Disputes may be resolved through:
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Thai courts (Civil Court, IP&IT Court if cross-border elements).
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Arbitration (often preferred in cross-border deals; Thailand is a New York Convention member).
Timeline
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Simple share acquisition (private companies): 2–3 months.
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Public company takeover: 6–12 months (includes tender offer process).
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Merger/amalgamation: 4–8 months (due to shareholder and regulatory approvals).
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Asset deals: Varies depending on contract novation and license transfers.
Example Case
👉 A Singaporean company acquires 60% of a Thai services company. The acquisition triggers FBA restrictions. The parties apply for a Foreign Business License, which takes six months. During this time, the deal is structured as an asset purchase for unregulated activities, with a deferred share acquisition pending license approval.
Conclusion
Mergers and acquisitions in Thailand are governed by a complex interplay of corporate, competition, foreign investment, and sector-specific laws. Success in Thai M&A requires careful structuring, thorough due diligence, attention to regulatory compliance, and practical integration planning. Early legal and tax advice is critical to navigate these challenges and achieve a smooth transaction.