Family business growth With mergers and acquisitions: new options

In the previous article, I wrote about Dhamma principles for inheriting a Thai family business: 4 brahmavihāhāra and 4 saṅgahavatthu, which are part of My "Thai Family Business Formula Book" is being published soon. In this article, I would like to introduce M&A and M&P mergers and acquisitions that are tools of family business growth, which are also a part. A new book is here for readers to learn about.

Most family businesses in the world and in Thailand expand through mergers and acquisitions or M&A, such as LVMH Group, Central Group, CP Group, and ThaiBev Group.

The M&A (Mergers & Acquisitions) form is a merger of businesses in the form of a majority shareholding or purchase of assets.

As for the M&P (Mergers & Partnerships) format, it is an interesting new trend. It is a form of merger and acquisition that involves entering into partnerships with other family business companies. There may be a purchase of shares in other families, where the buyer may not necessarily hold a majority share. Or they may sell part of the business to a partner and share management duties or professionals to manage it.

In fact, M&P mergers have only recently occurred where family business owners may be willing to share some of their shares with partners or find other family business partners to manage them together. Differences in the culture of each family are therefore a matter for families to consider the pros and cons carefully before making a decision in any way.

Nowadays, readers will see that merger and acquisition transactions occur in both domestic and international businesses all the time. If a family business is not prepared for a merger, the M&A or M&P system may not be able to maintain ownership of the business. own business or are unable to enable their own business to grow steadily and inherit the business sustainably for more than 3 generations

The reader will see that Changes in business in today's world Most will find that Mergers and acquisitions (M&A) transactions occur every day both domestically and internationally. From the data in the 2017 annual report of Oxford Economics, it was found that the overall merger and acquisition statistics (Both domestic and international) in the Asia-Pacific region in 2560 reached 560,000 billion US dollars. and there are more than 7,500 cases

Reasons for the merger

In order for family business owners to prepare to study the causes or benefits of mergers, M&A systems, or M&P systems to family businesses, they may be considered separately as follows.

1. It is beneficial in terms of expanding the base of the family business to become larger and have a variety of businesses.
2. For the benefit of restructuring the business of the family company, which may be the purchase, sale, merger or acquisition of the company's assets. to create more value or to adjust the internal structure for strength or be listed on the stock exchange
3. Use the method of mergers and acquisitions (M&A) to buy businesses with a future or cheap assets. In the case that the business has problems To expand the business or sell it to make a profit for the family business by turning the crisis into an opportunity both domestically and abroad.
4. To find a partner or partner Also known as M&P, in order for the business to have support (Synergy) and be sustainable in the development of the family business, you may find professionals or partners to help support the management of the family business. which means Business owners may have to decide that their family may not own a majority stake and operate as a single family owner. But there are partners from other families who come to invest and manage the business. There must be clear rules for managing and supervising the business.
5. Businesses with special licenses such as securities, insurance, and banking businesses If the family business intends to enter into such business This can be done by acquiring existing businesses.
6. Using tax benefits to restructure multi-business family businesses as well as using the losses to benefit as well
7. For the benefit of structuring the shareholding of family business members in an appropriate form, such as setting up a holding company to invest in various businesses together, both reducing legal and business and financial risks. To use the opportunity to expand the business and sustainability of the family business.

Why should family businesses be interested in mergers and acquisitions?

Readers have probably heard the saying: “What family business is if it is not ready to adapt? The family business may not be able to endure or develop beyond three generations, which is like a curse.”

From this statement, the reader may have seen many examples of Thai business families that have grown and survived for more than 3 generations, very few of them. which is neither willing to adapt to change nor expand new businesses to grow up

Which family businesses are taking advantage of M&A opportunities? It will allow the business to operate more stably than a business that has not been restructured through acquisitions and mergers. Mergers and acquisitions are M&A or M&P, which are joint investments with other partners. Having knowledge and expertise in each area or partnering in a cooperative way to do business will develop into a strong business. Including being listed on the stock exchange. further in the future as well

An example of a Thai family business that has made adjustments for the development of the business by merging the entire business is the case of the Sirivadhanabhakdi Jiaraworanon Chirathivat family group.

For other small and medium-sized family businesses (SME) in the past I still haven't found that. How many merger and acquisition strategies are chosen for business expansion? Because most do not want to expand or find other people to join in their own business. Therefore, it is an important reason why family businesses cannot expand and grow.

But at present there is a trend of investment by fund groups or Private Equity Funds or businesses that have synergy or are merging businesses or creating alliances in family businesses. In the M&P style, it should be a way to expand the family business more than before. It also lays the foundation for management and the foundation for financial stability. for future registration on the stock exchange as well.

How should I prepare? : Before doing M&A, M&P

I think that family businesses should start by studying the current trends in the business in which they operate.

1. Today's business families must consider whether there is a need to enter into an M&A or M&P transaction. This may be divided into business needs, such as finding partners at home and abroad. Necessities within the family where the heir may not be interested in the main business Want to change the old business model or for tax benefits or want to expand the business or have a larger variety of businesses Including buying and merging businesses both domestically and abroad to turn the crisis into an opportunity if there are assets that are cheap and beneficial in the long term.
2. Can the merger create added value to assets or strengthen the financial status of the family business, family members or families? In what form? And can it be listed on the Stock Exchange?
3. If you agree to proceed What will the management or shareholder structure be like before and after the merger? Will family members be able to manage the family business? or must be jointly managed with investors or other partners and if jointly managed How will they be managed? How can family members learn from partners or professionals at home and abroad? Having a contract between shareholders that is careful and tight to prevent problems is something that must be prepared and studied well.
4. Restructuring of the family company for the benefit of bringing the company to be listed on the stock exchange. and has a mechanism for good supervision and a solution to eliminate conflicts among future family members as well
5. In the case where a family business wants to become a major shareholder of a company listed on the stock exchange There must be many laws and rules that must be followed. Family business owners cannot act on their own terms. Therefore, it is necessary to consider how necessary the business is to be listed on the Stock Exchange. or buy a business listed on the stock exchange If you don't want to register, you may do so by delisting the securities later.
6. If you want to list your family business on the stock exchange They may go and buy shares of companies listed on the stock exchange, which is an option known as “Indirect listing on the Stock Exchange” is also known as “Back Door Listing”. However, buying shares of a company on the Stock Exchange like that has regulations of the Stock Exchange and the SEC that must follow many steps as well. Which at present may be more difficult to do.
7. To what extent should the tax burden of organizations and owners be adjusted for the benefit of future tax planning and management?

What must families do when making decisions? M&A or M&P

However, when deciding whether to restructure the family business through mergers, M&A or M&P, the family must take the following steps.

1. Appoint a consultant This includes financial advisors who will help in valuing various assets. or to help find business ventures that the family business wants to buy or merge. These financial advisors will have many target companies or businesses that want to be merged. By considering many reasons Choosing such a consultant must be chosen based on their experience and reputation and personnel working. and must have time to work fully

Including having to choose legal and tax advisors. Accounting consultant To do everything in accordance with the law, including checking that the business that we are going to merge has legal processes. There is an accounting process. There are any debts that appear, which we call "accounting processes." Legal Due Diligence Accounting and Finance (Due Diligence) where the advisor will recommend that Which format should I choose? Which merger structure is most beneficial? And what are the laws and taxes? And most importantly, you should agree on the fee, which may be based on a fixed amount/hourly or on the completion of the work first.

2. Appoint family personnel who will be involved in the merger. Family members who have business expertise will be hired to help coordinate with the consultants according to item 1 in order to give opinions to family members in making decisions.
3. Once the verification process has been completed. There must be a price set. Whether it's about buying shares Buying property or a merger, source of funds, family members and advisors must jointly study this matter thoroughly before making a decision.

Here are some questions family business owners may want to ask of their advisors and those involved in M&A transactions.

1. What form will the merger be? That is, it will be the form of buying shares. Buying assets or merging with M&A or M&P

A holding company may be established to hold shares. Organizational structure and shareholding Because the format is different What are the legal and tax implications of operating? You should have a financial advisor. legal advisor And an accounting consultant will be able to help provide information to you. But you should have to study and gain knowledge by yourself.

2. What should the payment value be? will be paid in cash or pay in shares by exchanging shares And how will the price be assessed? Where does the funding source come from? Must borrow or use the family business's cash flow

3. When completing the process of acquiring assets or shares in a merger, either M&A or M&P, it is necessary to see that the management or the board of directors of the company in which we are merging. How to proceed? Who in the family will be involved in managing the new business that has been acquired? Including if it is an M&P merger by clearly dividing the roles and responsibilities of the partners.

4. Structuring for tax benefits: What are the problems with purchasing and merging with taxes? Do I have to pay withholding tax? Can purchase tax be used? When paying taxes The seller or buyer will recognize this as income in the future or if the business is sold or additional partners are found, what will the tax be like? and mergers and acquisitions How will it be beneficial in tax management to the family business in the future?

5.The most important thing is Take the opportunity to restructure the family business. The family holding company or conglomerate simultaneously prepares legal documents related to the various family businesses.

Finally, I recommend that you read the book series. “Mergers and Mergers” Volumes 1 and 2 (revised edition 3rd edition, 2557) that I and my group wrote. Published by the Stock Exchange of Thailand A place to study about mergers and acquisitions in detail with examples as a guide to gaining knowledge.