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Crisis ‘will lead to mergers, buyouts’
The global crisis would boost mergers and acquisitions in Viet Nam, Deputy Minister of Planning and Investment Nguyen Bich Dat said at a seminar in Ha Noi yesterday.
Many enterprises were downsizing, Dat said, and the need for restructuring of investment and business administration activities in order for firms to survive and thrive was increasing, resulting in more varied and active merger and acquisition activities.
Dat estimated about 30-50 per cent of Vietnamese enterprises were likely to merge with other firms within the next 5-10 years.
"This will present both opportunities and challenge for mergers and acquisitions," he said.
Economic difficulties, particularly declines in exports and foreign direct investment, were affecting about 300,000 domestic firms, Vietnam M&A Network director Nguyen Tri Thanh said.
If there was merely 1 per cent of that number which wanted to sell themselves every year, there would be a substantial supply for the merger and acquisition market.
"However, this is only a theory and even if such a supply is practical, the situation will depend on demand and other marco-level factors."
Dat said there had been about 90 mergers and acquisitions in 2007 with a total value of more than US$1.7 billion, while in 2008 there had been 40 worth $350 million.
Thanh said the figures were insubstantial, adding that many domestic firms were still fledging in terms of corporate management, technology and market which made the merger and acquisition market unattractive.
Dat said the legal basis and policies on mergers and acquisitions in Viet Nam needed to be further improved to suit the practice. Speeding up equitisation and giving reasonable foreigners’ holding ratios in domestic firms were participants’ major interests, he said.
The managing director of law firm Vilaf-Hong Duc, Tran Anh Duc, said many foreign investors found current limits in Vietnamese banks unattractive. (The limits are 30 per cent for all foreigners, 15 per cent for a strategic shareholder, and 5 per cent for a non-bank shareholder).
Thanh said the development of the stock market was an important motivation that would boost merger and acquisitions as it created liquidity for such transactions. He said about 360 companies listed on the domestic stock markets were also a potential source of goods for the merger and acquisition market.
Vietinbank official Nguyen Anh Tuan said another major factor to spur mergers and acquisitions was "genuine need" from domestic businesses.
"Preparing for the upcoming competition on domestic markets, Vietnamese enterprises have been striving for capital increase and performance consolidation," Tuan said.
Dang Xuan Minh from Avalue Vietnam said: "Enterprises should note that the most important factor is not whether a merger or acquisition is successful but if they have the capacity to restructure and manage their firms to generate bigger values."
The last three years witnessed "vigorous growth" in merger and acquisition activities in the domestic banking and finance sectors and this was predicted to continue over the next few years. Major cases included: Techcombank sold 20 per cent stake to HSBC; SeaBank sold 15 per cent to France’s Societe General and 10 per cent to PetroVietnam; and VPBank sold 15 per cent to Singapore’s OCBC.
The sectors also saw ANZ buy into Saconbank; Dragon Capital and IFC invest in Asia Commercial Bank; and Maybank buy into An Binh Bank.
"There will be a stronger trend in banking and finance mergers and acquistions," Tuan said. "Foreign financial institutions were interested in investing in Viet Nam on a core basis given that the current level of banking technology is still low."
Foreign investment mainly served the purpose of market acquaintance before the final step-in, he said, adding that three foreign banks had set up domestic banks: HSBC, ANZ and Standard & Chartered.
Large domestic corporations also wished to expand their activities into the financial and banking business, which "are deemed to be highly profitable recently".
Obvious examples, Tuan said, were that Bao Viet Group set up Bao Viet Bank; VNPT and Vinalines invested in Maritime Bank; and PetroVietnam invested in Seabank.
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