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More developers turn to M&A for survival, growth

By on Jul 02, 2014 in Property News

Joint ventures also an option as smaller players grapple with fiercely competitive market dominated by big names

Mergers and acquisitions are one means for small and medium-sized developers, both listed and non-listed, to survive and even grow at a time of intense competition from the major players in the sector.

News-thenation_27jun

There has been much M&A activity of late, with deals totalling nearly Bt13 billion having been agreed since the beginning of December for the acquisition of fellow residential developers.

“We [bought a listed developer as we] wanted to survive the market competition after the country’s two beverage tycoons, Charoen Sirivadhanabhakdi and Santi Bhirombhakdi, expanded their investment in the industry,” said Chainid Adhyanasakul, CEO of Property Perfect Plc.

During the past seven months, Santi took over a major stake in Rasa Property Development Plc for Bt8 billion, Property Perfect announced a takeover deal with Thai Property Plc worth up to Bt3.9 billion, and Chewathai Co Ltd took over Rojtaj Development Co Ltd for Bt1 billion.

Moreover, Charon took over both Univentures Plc and Golden Land Property Development Plc two years ago.

While mergers and acquisitions can be a fast track to growth, success in M&A is far from a sure thing, according to Grant Thornton research.

The company said M&A helps high-growth, dynamic companies navigate complex transactions – whether buying or selling – with speed and agility.

From deal strategy, through due diligence and to the integration of a new business, the company helps clients solve problems, manage risk and seize opportunities to unlock their potential for growth.

Chainid, meanwhile, said that if his company’s takeover of Thai Property were completed by the end of this year, its assets would increase 47 per cent, from Bt30.66 billion to Bt45.22 billion, and its equity would nearly double – from Bt8.64 billion to Bt16.39 billion.

Property Perfect’s purchase would make it a top-four player in terms of assets among listed developers in the Stock Exchange of Thailand (SET).

DBS Vickers (Thailand) Securities said M&A activity would be the market trend not only in the property sector, but for all listed companies. It offers a way to drive business growth and also provide a back-door listing in the SET for some companies.

A number of small and medium-sized listed property developers also have the potential to merge with either listed or non-listed real-estate companies, as this would boost their market share and enable them to compete with residential developers that are in a healthier financial situation, said the securities house.

Joint ventures, meanwhile, are another means of surviving intense competition. JVs with large overseas property companies with a view to expanding investment have been undertaken by two listed Thai developers – AP (Thailand) and Ananda Development – in recent times.

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Source |  The Nation 27 June 2014

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