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Vietnamese enterprises benefit from M&A trend
Vietnam ’s leading sanitary napkin maker, Diana Vietnam Joint Stock Company, said its operation has improved greatly four months after selling a 30 percent stake to the US leading financial group Goldman Sachs.
Diana Personnel Manager Do Vu Phuong Anh also said she thinks the mergers and acquisitions (M&A) approach is attracting Vietnamese enterprises as an efficient business solution in the present period of fierce competition.
Besides Diana, Vietnam also witnessed other large M&A cases recently, such as the Indochina Capital Vietnam Holdings Ltd.’s acquisition of a 20 percent stake in the Viet Fashion Company - Ninomaxx, and a purchase by four foreign investors of 25 percent of the Export-Import Bank (Eximbank)’s charter capital.
Though mentioned in the Enterprise Law in 1999, M&A became more popular in Vietnam only two years ago. M&A activities occurred in almost all fields, particularly in the financial-banking sector.
According to the Foreign Investment Department under the Ministry of Planning and Investment, the number of M&A among domestic enterprises and between domestic with foreign businesses has rapidly increased. The first half of 2007 saw 46 cases with a total value of 626 million USD, doubling the figure of the whole 2006.
The transfer of projects, another M&A aspect, is also booming with 1,092 projects worth 16.8 billion USD changing hands.
Director of the Foreign Investment Department Phan Huu Thang forecast the M&A trend would further expand as enterprises are inclined to making alliance for co-existence and development amidst the fierce competition as a result of international integration.
According to Thang, in next 6-10 years, between 35 and 50 percent of Vietnamese enterprises will move in this direction.
M&A activities will increase even more once the foreign investment influx into the country continues surging and many foreign investors seek local partners for their plans to penetrate into the market.
Accordingly, M&A consultancy services are expected to blossom. Many securities companies are planning to expand into this service, including An Viet, An Binh and Vietnam securities companies.
However, M&A activities still face many barriers, including an incomplete legal system regarding the field, particularly regulations on the cap of foreign investors’ ownership in M&A contracts; inadequate information of business operation of both sellers and buyers, and a lack of experts, advisors and brokers.
In efforts to improve foreign investment in both quantity and quality terms, the Ministry of Planning and Investment is drafting a decree on foreign-related M&A in order to make it easier for domestic and foreign enterprises to buy shares from each other.
VNA
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