Introduction
As evident from its ranking as the fourth-largest destination for Japanese corporate expansion, following the United States, China, and India, Thailand boasts a deep connection with Japanese industries.
In this article, we explore the landscape of cross-border M&A by Japanese companies targeting Thailand, highlighting five recent cases to elucidate industry trends and practical developments.
Case 1: Suntory Beverage International Acquires PepsiCo's Thai Beverage Business Company (Announced in November 2017)
[Overview]
Suntory Beverage International acquired 51% of the shares of International Refreshment (Thailand) Co., Ltd., a Thai beverage business company affiliated with PepsiCo. The acquisition aims to leverage PepsiCo's robust business foundation and Suntory Beverage International Group's expertise in developing health-oriented products, primarily green tea, to expand the beverage business in Thailand. The acquisition price is reported to be 33 billion yen.
[Perspective]
For products with high functionality and added value, costs are inevitably higher. From a marketing perspective, whether the increased costs can be passed on to the price becomes a critical consideration in market evaluation. It is likely that Japanese manufacturers are attentive to this point when analyzing overseas markets, especially emerging markets.
From this M&A, it can be understood that with Thailand's economic growth, mature consumers are increasingly seeking higher-functionality products. Thus, there is an expectation for synergy through the acquisition, leveraging Suntory's expertise in developing health-oriented products.
Case 2: Unicharm Acquires Thai Diaper Manufacturer DSGT for 60 Billion Yen (Announced in September 2018)
[Overview]
Unicharm announced the acquisition of DSG International (Thailand) Public Company Limited, a leading hygiene product manufacturer in Thailand. Unicharm acquired all the shares of DSGT's holding company for 530 million dollars (approximately 60 billion yen), making it the largest overseas M&A deal in the company's history.
DSGT is engaged in the manufacturing and sales of baby and adult diapers, with operations in Thailand, Malaysia, Indonesia, and Singapore. It owns prominent brands such as "BabyLove," "Fitti," "PetPet" for baby diapers, and "Certainty" for adult diapers, enjoying high market share and brand recognition in Southeast Asia.
[Perspective]
By adding DSGT, which distributes products throughout Southeast Asia, to its group, Unicharm was able to strengthen its lineup in the mid-to-low price range. Unicharm has previously acquired Diana in Vietnam in 2011 and Myanmar Care Products in Myanmar in 2013, enhancing its penetration into local markets through the acquisition of local diaper manufacturers.
This M&A deal is also expected to yield benefits in terms of brand acquisition. Brand preferences in hygiene-related areas such as consumer goods, especially diapers, tend to be fixed, and it takes a long time to establish a brand. Therefore, it can be understood that Japanese companies aiming to enter new markets cannot rapidly expand their market share overnight and may adopt an M&A strategy to "buy time" for growth.
Case 3: Medical Net Acquires Pacific Dental Care, a Thai Dental Clinic Operator (Announced in October 2020)
[Overview]
Medical Net acquired all the shares of Pacific Dental Care Co., Ltd., a dental clinic operator in Thailand, through its Thai subsidiary. Medical Net Thailand has been operating dental clinics in Thailand since 2017, and the acquisition of Pacific Dental Care aimed to promote new dental business. The acquisition price was 53.71 million yen.
[Perspective]
For service industries with physical storefronts such as food and beverage or hospitals, typical bottlenecks in overseas expansion and growth include "searching for real estate properties" and "securing (and education) talented personnel." The expansion of dental clinics is no exception, as securing prime real estate and hiring qualified personnel are crucial. It is quite challenging for Japanese companies to undertake these tasks alone overseas, and it is rational for them to focus on their core competencies while leveraging the strengths of local companies for other aspects of the business.
Medical Net already had operations in Thailand. However, through this M&A, the company secured a local network, enabling it to take significant steps forward for further business expansion in the future.
Case 4: TIS Acquires MFEC, a Thai IT Company, through TOB (Announced in October 2020)
[Overview]
On the 6th of October, TIS conducted a tender offer (TOB) to acquire the Thai IT services company, MFEC Public Company Limited. Through this TOB, TIS increased its ownership stake in MFEC from the previous 24.9% to 49%. The acquisition price was approximately 1.83 billion yen.
MFEC is a leading provider of IT services for companies listed on the Stock Exchange of Thailand. TIS had established a capital and business alliance with MFEC in 2014, and through collaboration and additional investments, it had strengthened the relationship. By bringing MFEC under its umbrella, TIS aimed to accelerate the transformation of MFEC's business structure and expand overseas operations as a group.
[Perspective]
In the B2B (business-to-business) sector, acquiring new customers is not easy. In fields where strict security is required, such as IT services, customers tend to be reluctant to switch unless they are significantly dissatisfied with existing services. This challenge is even greater when dealing with overseas markets and customers.
Through this M&A, TIS gains access to high-quality customers, primarily listed companies in Thailand. In the future, TIS is expected to pursue business expansion by cross-selling its own services in addition to the existing services offered by MFEC.
Case 5: Discharge Precision Processing Institute Acquires Subsidiary of Thai Aluminum Extrusion Mold Joint Venture (Announced in December 2019)
[Overview]
Discharge Precision Processing Institute acquired additional shares of KYODO DIE-WORKS (KDT), a Thai joint venture company manufacturing aluminum extrusion molds, and turned it into a subsidiary. KDT was established in 1987 through joint investment with local clients, and by increasing its stake from the previous 50% to 51%, it gained management control. In addition to mold manufacturing, KDT has been focusing on expanding sales of its self-developed servo press machines and functional coatings in recent years, and it was deemed essential to accelerate management by turning it into a subsidiary. The acquisition price was approximately 13 million yen.
[Perspective]
When expanding overseas, it is common to invest in joint ventures to leverage the connections and expertise of local companies. Compared to outright acquisition or majority ownership from the outset, engaging local partners as shareholders and establishing capital interests can lead to a higher level of commitment.
The acquisition of management control in this transaction is aimed at accelerating management speed. By increasing the ownership ratio to a majority, the company aims to execute its management objectives more swiftly. However, by maintaining a 51% stake, they also prioritize maintaining a collaborative relationship with their partners in the future.
Have you been able to gain a deeper understanding of the M&A market and investment environment in Thailand? Please note that this document primarily aims to provide an overview for your understanding. For specific inquiries, our representatives will be happy to assist you directly. Please feel free to contact us.
Thank you for reading until the end.
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