Pursuing Growth During a Pandemic – M&A in Cambodia


It is now over a year after the World Health Organisation declared the COVID-19 outbreak a pandemic. Since then, the world has been under various forms of lockdowns and restrictions. Some countries appear to have tamed the virus while others experience a resurgence. COVID-19 has also ravaged the global economy with almost every country experiencing a slowdown in economic growth while businesses have been forced to close and retrench employees. Despite the rollout of vaccination programmes, the resumption of international travel is expected to be slow with various restrictions still in place.

Exploring Secondary Markets for Growth

If your business is suffering, what else can you do beyond taking advantage of government support programmes? Businesses urgently need to think outside the box during a crisis. One option is to look at secondary markets nearby that could become an additional engine of growth for your business.

Under favourable conditions, these secondary markets could provide an additional source of revenue and profit that just might be able to sustain your overall business and help you through this difficult period. Given COVID-19’s uneven impact across the world, now might also prove to be an ideal time and unique opportunity to expand into new overseas markets, especially when new capital and investors are highly sought after.

Some of these markets are right at our doorstep within the ASEAN region. According to the Asian Development Bank’s forecasts, Cambodia is expected to record 4.0% growth in 2021, Vietnam is projecting 6.7% and Indonesia at 4.5%, all well above Southeast Asia’s average of 3.14%.

GDP Growth  Rate, 2020, 2021F
  2020 2021F
Vietnam 2.9% 6.7%
Singapore -5.4% 6.0%
Malaysia -5.6% 6.0%
Indonesia -2.1% 4.5%
Philippines -9.6% 4.5%
Cambodia -3.1% 4.0%
Lao PDR -0.5% 4.0%
Thailand -6.1% 3.0%
Brunei Darussalam 1.2% 2.5%
Myanmar 3.3% -9.8%
Average of ASEAN-10 2.5% 3.14%

Source: Asian Development Bank – Asian Development Outlook (ADO) 2021, April 2021. F=Forecast.

Fortune Favours the Bold

Given the challenging business environment, it may seem crazy to consider pursuing an acquisition or M&A deal at this time. International travel remains very difficult as countries continue to have various restrictions in place with some even going back under lockdown. Face-to-face meetings with the counterparty and site visits remain unlikely. However, challenging it may seem, secondary markets within the region present some very good deals and value for those willing to overcome these challenges.

Local businesses across the region have inevitably come under pressure amidst the global COVID-19 crisis. It is now a good time to look for value deals in distressed assets or businesses. Businesses which have been severely impacted by COVID-19, particularly those in tourism-related industries, will be in dire need of new investment and partners for support. New investors or partners may have the upper hand with a stronger bargaining position under the current climate.

In addition, certain countries have pro-business laws which lower the barrier to entry for foreign investors. One such country is Cambodia where the law still allows 100 per cent foreign ownership of companies in a wide range of industries and sectors, without any requirement for a local partner.

Moreover, the country has relatively relaxed foreign land ownership laws. Foreign investors can also enjoy a range of tax holidays, customs waivers, and other benefits by registering their investment project as a Qualified Investment Project under local regulations. In the area of taxation, the Cambodian government has shelved its plans to implement a capital gains tax until conditions improve.

New processes and Technology for a New Normal

The impact of COVID-19 presents unique challenges for businesses pursuing an acquisition, merger or asset purchase. Travel restrictions are one of the biggest hurdles for cross border transactions. To overcome the challenges, here are some of the solutions which have been adapted for the new normal:

1. Due Diligence

A good due diligence process is about obtaining the right documents relevant to the key areas of the target and being able to review them in a systematic manner. The key to this is to have a very robust, secure, and reliable document storage and tracking system.

This has led to the use of electronic data rooms like Intralinks or Datasite, where soft copies of due diligence documents are stored on a secure, password-protected platform, which only the buyer and their lawyers can access. Documents are typically organised based on their relevant due diligence category, but a word search can yield the specific document being searched for within seconds. This in fact results in a better due diligence process for buyers, and in fact is ideally suited to an online process such as forced upon by the pandemic.

2. Having Local Boots on the Ground

Nonetheless, having a systematic due diligence process will be of limited use if the counterparty still fails to provide the right documents, or provides insufficient or incomplete documents. This issue may be particularly challenging in developing economies like Cambodia due to language and cultural barriers, or local counterparties’ lack of familiarity with M&A in general.

In this situation, having an experienced and competent agent on the ground is crucial. It is best to engage lawyers that have a local office in the country, with staff who are effectively conversant both in English and the local language, and who are experienced in M&A, so that they can understand the needs of the due diligence exercise and articulate those needs to the local seller, in some cases guiding the seller through the due diligence process.

Where physical due diligence of the seller’s assets is required, they would also be the individuals carrying out the inspection on the ground, especially dealing with local authorities, regulators or other third parties is required. The tides of the pandemic may also ebb and flow and countries may go into lockdown from time to time, resulting in the slowing of government operations. In this case, being able to rely on a local lawyer who can advance your case with the local authorities on the ground, will be invaluable to your M&A.

3. Written Law v Business Practice

In our experience of doing M&A in these emerging jurisdictions, a key challenge posed – and now exacerbated by the travel restrictions and inability to personally visit the country in which the target is located – is the uncertainty over what is permitted practice for various business practices in the country. Due to legal regimes of developing countries not being at an advanced stage, there is often deviation between the written law and actual business practice, and business parties often devise their own ways of conducting business, whether legally compliant or not. This represents a risk as you do not want to do an entire transaction on the basis of what the seller claims is legal, and then find out that the structure does not actually work when the authorities refuse to give you the rubberstamping you need.

Here, as part of the due diligence process, you need your local adviser to provide objective feedback of what is permissible or not in the country, based on their understanding of the law, local business practice and norms and cultures in the country. Lead counsel should then do an assessment of the findings and provide you strategies on how to structure your transaction in order to achieve your business objectives and minimise your risks.

4. The Toughest Part: Negotiations

The toughest hurdle to overcome really is how to conduct effective negotiations without meeting face-to-face. Of course, negotiations have always been able to be conducted by video-conference, on platforms such as Zoom and Teams. On-boarding is minimal and using these platforms are straightforward. The advantage of virtual negotiation meetings is the streamlining and simplification of the negotiation process. Firstly, the fuss and formality of organising and attending physical meetings is removed, allowing parties to really focus on the substantive issues at stake. Secondly, parties can now meet at a moment’s notice, with the circulation of a virtual invite. This is especially helpful in the midst of an urgent closing, when unexpected issues arise and need to be discussed on-the-go.

Nevertheless, even with all the bells and whistles above, not being able to engage another person face-to-face to present your points both intellectually but also emotionally and personally can be a significant challenge to any negotiations.  In this case, having an effective local counsel on the ground and representing you at the meeting would be extremely beneficial, if not critical to the success of the negotiation.  Such a person would not only be able to communicate your thoughts and wishes in a personal manner, he or she would also understand the local customs and behaviour of the sellers and be able to bridge any cultural or language gap between the parties.

5. Signing and Closing of the Transaction

Traditionally, closing a transaction has always involved parties meeting in a room to physically sign and exchange the transaction documents. The pandemic has now rendered such meetings all but impracticable. Nonetheless, signing and completion can still be organised virtually.

For signing, there are now various virtual e-signature platforms like DocuSign and HelloSign which can virtually organise the signing process, through circulating the transaction documents to the signing parties, who sign strictly at their designated spaces and cannot tamper with any other part of the document. Once signing is complete, the executed copy will be sent to all parties automatically. This greatly simplifies the signing process, and saves parties the logistical burden of having to courier and collate wet-ink signed copies.  Electronically or digitally signed documents are already recognised as valid and legally enforceable in most countries in the region.

Should parties still wish to meet in person for the completion, there is the quarantine bubble facility at Changi Airport, which is the world’s first COVID-19 secure facility set up for international business meetings. Here, parties can meet in a secure environment, where the meeting rooms are separated into two sections by airtight glass panels, and there is a small window for the exchange of documents, which will be disinfected prior to any exchange. In this new normal, this will be the closest thing to a physical closing meeting that we can replicate.

Forging ahead

The challenge involved in cross-border transactions in the new normal are not insurmountable. Others have forged ahead and shown us the way forward with exciting deals for growth in secondary markets like Cambodia.

Even in times of uncertainty amid COVID-19, Cambodia remains open to foreign investors and deals continue to move forward. Singapore’s YCH Group and Cambodia’s Ministry of Public Works and Transport have recently signed a framework agreement to develop the Phnom Penh Logistics Complex.

Surbana Jurong has also recently obtained approval and support from local government and other foreign investors for its sustainable development masterplan to develop an 834-hectare (ha) “Ream City” in Sihanoukville, Cambodia. Both projects reflect the immense potential that Cambodia has for foreign investors and how Singapore companies can still do regional business deals in this post COVID era.


There is no doubt that there are compelling economic and strategic advantages to look to start a new business or for value acquisitions or partnerships in the region. Exploring opportunities in secondary markets like Cambodia is a proactive step in the right direction towards addressing the challenges businesses face in their home markets in the post COVID era.


About the Authors

Liow Yee Kai
Partner (Foreign Lawyer)
+65 6381 6834

Liow Yee Kai is a foreign legal advisor based in Phnom Penh, Cambodia and has advised numerous Cambodian projects over the last 8 years. He is a Partner at RHTLaw Asia LLP.

Natalie is an associate of RHTLaw Asia’s Corporate and Capital Markets Practice. And frequently assists on cross-border M&A projects.

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