Mergers and Acquisitions in Thailand

Mergers and acquisitions in Thailand combine familiar cross-border deal mechanics with distinctive local regulatory, ownership and procedural issues. Success depends on matching commercial structure to Thai corporate rules (including the Foreign Business Act), regulatory approvals, tax and employment realities, and prescient drafting that protects buyers from title and corporate-governance surprises. This guide explains the practical law and steps you will actually use on the ground: deal structures, mandatory filings and approvals, due diligence priorities, common contractual protections, tax and labour traps, timeline expectations and a short post-deal integration checklist.

1. Strategy & structuring — share purchase vs asset purchase

Two basic approaches:

Share acquisition (buying the company):

• Pros: continuity of contracts, licenses, employees, banking relationships and asset ownership; minimal transfer paperwork in many cases.

• Cons: you may inherit hidden liabilities (tax, labour, litigation, regulatory non-compliance). Due diligence and robust indemnities are essential. For foreign buyers, share purchases can leave foreign-ownership limits intact (but you may still need a Foreign Business License or BOI relief).

Asset acquisition (buying selected assets/operations):

• Pros: cleaner cut — buyer acquires only chosen assets and can leave liabilities behind; easier to exclude problematic contracts.

• Cons: requires transfer of titles/leases/permits (Land Department transfers for land, assignment of licenses). Some commercial relationships or governmental concessions may not be assignable without consent. Transfer taxes and stamp duties can be material.

Choice depends on target liabilities, third-party consents and threshold for assumed risk. In Thailand, assets like land and certain licenses often push buyers toward either share deals or carefully negotiated asset transfers with seller indemnities and escrow protections.

2. Regulatory landscape — FBA, BOI, SEC, and competition

Foreign Business Act (FBA): Many service and trading activities fall under FBA Lists; foreign majority ownership in a List-3 activity normally requires a Foreign Business License (FBL) unless exempted (BOI, treaty relief). Classify the target’s business early — an FBA classification memo from local counsel is essential because it materially affects whether post-transaction control is lawful.

Board of Investment (BOI): BOI promotion often trumps FBA restrictions (promoted projects can have majority foreign ownership and incentives). If the target is BOI-promoted, confirm conditions (employment, capital) remain met post-deal.

Securities & Exchange Commission (SEC): takeovers of Thai listed companies are governed by the SEC and SET rules (mandatory tender offers at prescribed thresholds, disclosure obligations, and insider / connected-party rules). Compliance with takeover rules drives timing and public disclosure steps.

Competition law & sectoral regulators: large deals may trigger the Trade Competition Commission or sector regulators (telecoms, banking, insurance). Early regulatory engagement and screening of thresholds avoids surprises.

3. Due diligence — practical priorities

Thai deals are exceptionally document-driven. Key due diligence pillars:

• Corporate & title: certified DBD extracts, MOA/objectives, shareholder registers, board minutes, powers of attorney, Land Office title extracts (originals) for property. Confirm chanote vs lesser title types.

• Regulatory & licenses: check permits, concession documents, BOI certificates, FBLs and any outstanding compliance notices.

• Tax & customs: audited financials, tax filings (PND, corporate tax returns), transfer-pricing documentation and pending audits or assessments.

• Labour & social security: employment contracts, collective agreements, social-security registrations, pending disputes and severance liabilities. Thai labour claims can be costly and quick — identify pay-in arrears and statutory entitlements.

• Commercial contracts: major customer, supplier and distribution contracts (assignment/consent clauses).

• Litigation & enforcement: pending suits, criminal exposure (fraud allegations) and police reports — criminal issues particularly affect immigration and licensing.

• Foreign funds & FET: for purchases involving foreign funds for Thai land, traceable Fund Transfer (FET) evidence will be needed for Land Office acceptance.

Always obtain original Land Office extracts and physical surveys for property. Photocopies are weak.

4. Key transactional protections — practical drafting

• Warranties & disclosure schedules: exhaustive warranties on title, tax, licenses and corporate authority, capped (or uncapped) indemnities for hidden liabilities. Use a negotiated disclosure schedule to limit warranty friction while placing the onus on seller to disclose material issues.

• Escrow / retention: holdbacks for tax contingencies, litigation and title defects; phased release based on clearance periods. Escrow handling is a standard compromise when retrospective claims may arise.

• Completion mechanics: clear conditions precedent (board approvals, third-party consents, regulatory approvals), intercreditor arrangements, simultaneous closing for multi-jurisdictional steps.

• Purchase price adjustment: working capital and net debt true-up mechanics, with defined calculation date and dispute resolution (independent accountant).

• Non-compete & transition services: Thai courts respect reasonable non-competes; include transition services agreements (TSAs) clearly setting scope, fees and termination events.

Negotiate specific indemnities for taxes, historical labour claims and environmental liabilities; these are frequent sources of post-close disputes.

5. Tax & stamp issues — real costs

• Stamp duty & specific business tax (SBT): transfers of shares are generally subject to stamp duty at a nominal rate (and sometimes SBT depending on nature of the transaction). Asset transfers (land) attract transfer fees and specific taxes.

• Stamp duty on purchase agreements and real estate transfer fees can materially change economics; model these early.

• Withholding tax & VAT: cross-border service fees and certain disposals may trigger WHT or VAT. Consult tax counsel for treaty relief and restructuring.

• Tax clearance & mapping: seller tax indemnities and representations are standard; get tax covenants and post-close cooperation for audits.

6. Employment & labour integration

Thai labour law favours employee protections (severance, redundancy pay). If headcount reductions are anticipated, build severance funding and formal consultation timelines into closing documents. Ensure social-security registrations and tax withholding practices are cleaned up pre-close.

7. Timing, approvals & realistic schedule

• Small private deals: 6–10 weeks from LOI to close if limited consents required.

• Deals needing FBL/BOI/sector approvals: expect several months (3–6+ months). BOI and FBL processes are document-heavy; submit complete dossiers to avoid iterative delays.

• Listed company takeovers: statutory timetables and disclosure windows can extend timing; plan for regulatory waiting periods and public tender obligations.

Anticipate parallel workstreams: legal, tax, compliance and anti-money-laundering (AML) checks.

8. Post-close integration & enforcement

Integration planning must start at LOI: licences, management contracts, employment harmonisation, IT and data migration. Also plan a dispute resolution ladder: escalation, expert determination for post-close accounting disputes, arbitration for major disputes (Thailand-seated arbitration is common), and local enforcement considerations for awards.

9. Common deal killers & how to avoid them

• Unclear land titles: insist on chanote or fix via re-survey before closing, or price for risk.

• FBA mismatch: do FBA classification early; remedy by structure (BOI, FBL or local JV) rather than belated re-negotiation.

• Undisclosed labour claims: audit payroll and employment records closely; use escrow to cover contingencies.

• Regulatory surprises: consult sector regulators pre-LOI where risk is high (banking, telecoms, healthcare). Early engagement reduces rejection risk.

Practical M&A checklist (ready to use)

1. Get a Thai-law FBA classification memo.

2. Obtain original Land Office extracts and a licensed survey for property.

3. Obtain certified DBD extracts and check shareholder registers.

4. Run tax and social-security compliance desktop checks; request audited accounts and tax receipts.

5. Draft warranties, tax indemnities and escrow terms tied to materiality and probability of loss.

6. Pre-clear BOI/sector approvals where possible; plan timeline contingencies.

7. Prepare a post-close integration plan and a dispute-resolution framework.

Conclusion

M&A in Thailand is commercially familiar but legally distinctive. Local regulatory classifications (FBA/BOI), property-title practice, employment protections and tax rules drive the structuring and risk allocation. Winning deals marry careful pre-deal classification and thorough, document-driven due diligence with pragmatic contractual protection (escrows, warranties and specific indemnities) and realistic regulatory timelines. Engage Thai counsel early, insist on originals for title and corporate documents, and bake post-close integration into the LOI to reduce surprises.