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Firms choose mergers over restructuring risking takeover
A recent trend has surfaced where many Vietnamese firms have begun to merge with larger ones or buy out others in order to enlarge their business to solve financial problems instead of restructuring their company, something experts warn could cause foreign takeovers.
Vu Dinh Phuong, the founder of the Vietnam Fan JSC, which specializes in electronic fans, recently sold 65 percent of his company to the French SEB Group for a reasonable price, instead of selling 80 percent to a Chinese firm, which said it would agree to any cost he demanded.
“When we told them [the Chinese firm] that we wanted to sell 40 percent of our stake, they refused, saying that they wanted to purchase 80 percent,” he said. “That’s when I knew they wanted to take over our company, and did not want to cooperate with us to expand our Asia Vina brand name to the world. So we rejected their offer.”
Phuong said some foreign firms are willing to buy a company, but what they really want is to sell it for profit once it has been developed, not to cooperate with the owners to develop it.
Vietnam Fan decided to cooperate with SEB Group because the two parties shared the same ambitions.
“We want Asia Vina fans to spread into worldwide markets, while SEB wants to choose a qualified firm to help them develop the Asian market,” Phuong said. “Our product quality is good enough to compete with those from Thailand and China, and we need their international network and valuable trade promotion experience.”
Mai Hanh Co Ltd, an average size cooking gas distributor in Ho Chi Minh City, recently purchased the whole stake of Tan Hai Viet, another distributor that is twice its size.
Earlier, Mai Hanh had taken over the Nguyen Hiep distributor. With these two transactions, Mai Hanh has become one of the biggest cooking gas distributors in Ho Chi Minh City.
Tran Thanh Thuc, CEO of Mai Hanh, said his company could not profit in the cooking gas industry if it was still operating as a small business.
“Once my company is bigger, it will be able to attract good personnel to help its development,” he said.
Although mergers and acquisitions have become a common trend in domestic firms in order to boost their business development, most of the small domestic businesses are not very knowledgeable about the process, which may lead to their company being taken over by foreign firms that want to enter the Vietnamese market.
“The domestic firms must make up their mind whether they want a short-term solution, which is to call for capital to solve financial problem, or a long-term one, which is to prepare for the restructuring of the firm before they come to the [mergers and acquisitions] solution,” Nguyen Trung Kien, CEO of TNK Capital Partners, said.
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