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M&As to offer firms a path to salvation
More firms are considering taking the mergers and acquisitions route to fresh investment opportunities amid the sagging markets.
Le Minh Thanh, head of An Binh Securities Joint Stock Company’s private equity division, said there were many opportunities for investors to undertake mergers and acquisitions (M&As) in Vietnam.
“When the economy slows down, many enterprises struggle with financial difficulties and a narrowed market. They need financial support to survive,” he said.
According to the Vietnam Chamber of Commerce and Industry, there are more than 300,000 enterprises operating in Vietnam, of which about 95 per cent are small- or medium-sized.
In 2008, those enterprises experienced high inflation and struggled with financial difficulties as the government tightened its monetary policy to help rein in inflation. The global recession has also negatively impacted on local exports, resulting in a downgrade in Vietnam’s economic growth in the first quarter of this year to 3.1 per cent, compared with the 6.5 per cent recorded in the same period last year.
Nguyen Bich Dat, Vice Minister of Planning and Investment, estimated that around 30 to 50 per cent of Vietnamese enterprises would be driven to merge with other partners in the next five to 10 years due to the economic slowdown. The trend seems to have already begun as M&As have become more prevalent in Vietnam recently.
Thanh said foreign investors were choosing to enter the Vietnamese economy through M&As because they provided one of the fastest points of entry.
The sector seeing the greatest amount of M&As is the banking sector. Over the past few years, Australian ANZ Banking Group, HSBC, MayBank and Morgan Stanley have bought stakes in domestic banks.
Early this year, Vietnam Banks Association urged the government to issue regulations on M&As in the banking sector, permitting domestic banks to merge with other sectors in the case of bankruptcy due to the economic slowdown.
Luong Dinh Quang, chairman of Saigon Thuong Tin Investment Company, said Vietnamese companies were more familiar with M&As and had begun to see them as a fast way to enhance their market competitiveness. Another factor pushing M&A activities in Vietnam is the equitisation process of state-owned enterprises (SOEs), permitting private investors to buy stakes in those enterprises.
Nguyen Xuan Phong, business development director of Samsung C&T Corporation Hanoi Office, said his company was seeking M&A opportunities in the country, especially in SOEs. “Many large SOEs were on the roadmap for equitisation and would be good choices for investors looking to enter or solidify their market footing.”
VietNamNet, VIR
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