The “Vietnam M&A Forum 2018: New thrust, new era” conference on August 8 (Photo: VNA)HCM City (VNS/VNA) - Mergers andacquisitions (M&A) have become a popular investment channel and a crucialfactor in restructuring companies to improve their efficiency andcompetitiveness and that of the economy, a conference heard in Ho Chi Minh Cityon August 8.
Speaking at the “Vietnam M&A Forum2018: New thrust, new era” conference, Deputy Prime Minister Vuong Dinh Hue saidthe Government was diligently working towards an increasingly healthy,transparent, and conducive investment environment, stimulating the developmentof the M&A market both in quantity and quality in line with economicdevelopment orientations.
“As the Vietnamese economy moves forwardconsistently on the renovation path, with deeper integration with the worldeconomy, and is empowered by economic restructuring, the Vietnamese M&Amarket has been vibrant over the past decade and I hope this would continue inthe future,” Hue said.
According to a KPMG survey of theVietnamese M&A market in the last 10 years, last year the estimated valueof M&A transactions was 8.6 billion USD, and it forecast over 300 deals in2018 and 2019.
In 2007 –17, Thailand accounted for 47 percentof the value of transactions, followed by Japan and the US with 11 percent, andSingapore with 9 percent.
Also making the list were France, theNetherlands, the United Kingdom, Malaysia, Taiwan, and Hong Kong.
“Inthe next three years investors are expecting investments in M&A deals in Vietnammainly from Japan, the Republic of Korea, China and Thailand,” said WarrickCleine, chairman & CEO of KPMG Vietnam.
He pointed out that the fast growingeconomy, large market with nearly 100 million consumers, multilateral andbilateral FTAs, increasing bonds with traditional trading partners, and SOEequitisation would be the key drivers of M&A.
“Food and beverage, pharmaceuticals andlife sciences, real estate, fast moving consumer goods, technology, media andtelecom, retail, education, and renewable energy are the most promisingindustries for M&A.”
The key criteria for investors inidentifying M&A deals are strong growth potential, management capability,operating sectors, financial capacity, and sector expertise, he said.
“The key challenges during the duediligence process in Vietnam are quality of historical information,responsiveness/preparedness/willingness to share information, legal issues, taxissues or exposures, and flow of information.”
The key deal breakers are valuationexpectation, due diligence findings, regulatory/licensing, aligning businessplans, and approach to timeline, he said.
Cleine said M&As are being doneefficiently in Vietnam and said the Government should foster the process andcreate more favourable conditions for investors.
“The Government should reduceadministrative procedures involved in M&A deals.”
Minister of Planning and Investment NguyenChi Dung said as Vietnam was celebrating the 30th anniversary of its foreigninvestment, the ministry were reviewing and would issue development policiesfor foreign investment.
“Authorities are trying to reduceadministrative procedure to attract more investors, and we would like toconfirm that there is no difference in the treatment between domestic andforeign companies," he said.
“All are equal, except for certain specialbusinesses like banks, in which foreign ownership is restricted to 30 percent,and some other under WTO commitments.”
Seck Yee Chung, managing partner, Baker& McKenzie said: “In the last 10 years there have been many changes.Customers used to ask about logistics and the legal framework in Vietnam, butnow they ask about regional expansion [in future].
“More investors are coming to the country,but this is the right time to identify whether the Vietnamese legal frameworkhas adapted to changes on the international business scene where there are alot of new business models.”
Tran Van Dung, Chairman of the StateSecurities Commission, said since the stock market came into operation, M&Adeals had become lively.
"The Vietnamese Government is tryingto stabilise the macro-economy in the context of the trade war and US raisinginterest rates,” Dung said.
Phan Duc Hieu, Deputy General Director ofthe Central Institute of Economic Management, said M&A would helpenterprises expand their markets.
“However, M&A has a bad impact oncompetition as enterprises buy their competitors.”
To avoid this, the Government is amendingthe Enterprise Law and Stock Law to protect small shareholders and preventmonopolies, he said.
“[We are] ranked 80th out of 189 nations inprotecting small holders.”
Dominic Scriven, chairman of Dragon CapitalGroup, suggested that the Government should choose M&A deals more carefullyby paying attention to both the selling and buying by Vietnamese companies.
“Vietnam is facing a challenge in that manycompanies were set up in the 1990s and 2000s. Now their owners would like toretire or do not have the ability to compete in the new era but don’t want todo M&A because they still want to be the ‘boss’.
“The legal framework should be updated todeal with disputes related to M&A.”
Since 2009 more than 4,000 M&A dealshave been done with a total value of 48.8 billion USD.
In the first half of this year they rose by55 percent year on year to 3.55 billion USD.
But the M&A boom could come up againstsome challenges soon like the rising protectionism, trade war (especiallybetween the US and China), geopolitical tensions, and slowing growth in majoreconomies.
Last year the sectors in Vietnam that sawthe most M&A deals in value terms were consumer goods (57 percent), realestate (27 percent), finance-banking (4 percent) and chemicals (3 percent).
But this year real estate (66.8 percent),finance-banking (19.1 percent) and industrial production (9 percent) have takenover.
The 10th Vietnam M&A Forum, organised by theVietnam Investment Review, the Ministry of Planning and Investment and AVMVietnam company, reviewed the last 10 years of M&A deals to predict thetrends in the next few years.-VNS/VNA
VNA
