The seminar titled “Mergers & Acquisitions – M&A in the economic integration and depression” was held by Ministry of Industry and Trade’s Department for Competition Management, Ministry of Planning and Investment’s Foreign Investment Department, Ministry of Foreign Trade’s World and Vietnam newspaper in HCM City yesterday.
Most delegates were of the opinion that the legislation system, consultancy activities and financial mechanism of Vietnam have not yet caught up with M&As.
Vice head of the competition management department Vu Ba Phu said that the number of M&A deals in Vietnam continuously increased rapidly in recent years, from 38 in 2006 to 108 in 2007 and 146 last year.
Regarding the transaction size, 2008 witnessed an economic crisis, however, Vietnam’s M&A value also reached over $1 billion, mainly in finance and banking, industry and consumer goods. In 2009, Viettel telecom firm bought 18.91 percent worth 700 billion dong into Vinaconex in February and ICP Joint Stock Co invested 51 percent stake in Thuan Phat Food JSC in May 2009. Earlier, PetroVietnam spent $24 million purchased 20 percent in OceanBank, MayBank increased its size in ABBank by investing more 15 percent worth $94.7 million and Qantas took 30 percent stake ($50 million) in Pacific Airlines.
M&A deals in Vietnam are mainly small and medium sized but according to Pricewaterhouse Coopers (PWC) Co-UK firm provides audit, assurance, advisory, and tax services, although total value of M&As in Vietnam during the first half of 2009 declined, total deal numbers surged highly compared with the global average growth.
Addressing the seminar, Ian Lydal general director of Pricewaterhouse Coopers said that till the end of June, Vietnam had total 122 deals worth $232 million, a year-on-year rise jump of 107 percent while the world’s figure declined 15 percent, US down 29 percent, China slumping 21 percent and south-eastern Asia decreasing 3 percent.
Despite the impressive growth in number of M&A deals, M&A activities in Vietnam are less professional. Quoting an M&A specialist, “tacit” business negotiations between seller and buyer without consulting agencies still exist in the country, mainly the securities exchange between two sides to take advantages of the stock market’s growth to take short term profit.
A representative from Bank for Investment and Development of Vietnam (Bidv) admitted that Bidv Insurance arm (Bidv) bought back the contributed capital of Australian partner QBE Group without any consultancy (from professional firms) to set up Bidv 100 percent invested insurer. If being consulted by professional companies instead of self-negotiation, the deal should likely have been more successful for the buyer.
Many enterprises complained the less professional M&A consultancy that now is only the combination of a law firm, an auditing company and a financial unit, providing separated services at high costs. In addition, the law system and financial mechanism have not yet caught up with the reality of M&A activities.
Since the end of 2008, many small sized companies had to face difficulties. Thus M&A is the opportunity for the ailing companies to restructure and overcome current challenges through taking advantages of investment capital of other firms, Dr Cao Sy Kiem chair of SME Association spoke at the seminar.
PWC forecasts that M&A activities in Vietnam from 2009 to 2011 are at high potential. A lot of foreign businesses pay much attention to Vietnam’s telecom, pharmaceutical, entertainment and communication sectors. The largest transaction value will be recorded when local firms make equitisation, for example MobiFone’s corporate value was recently fixed at $2 billion.
The obstacles of M&A development in Vietnam are legislative problems and risks because of the non-professional of traders.
Particularly, foreign companies cannot set up holding firm in Vietnam while the tardiness in making procedures made M&A transactions lag. Also, less qualified leading groups in many private enterprises in Vietnam along with overspreading investment, non-transparent information are barriers for the M&A development roadmap in the next time.
Tran Anh Duc from Hong Duc law firm said that Vietcombank could not find out foreign partners when its average winning price was 107,000 per share. Under the current regulation on buying price of strategic investors, the buying price also cannot surpass 107,000 dong/share. Meanwhile, on the Ho Chi Minh Stock Exchange (STC) yesterday, VCB coded share was traded at 46,800 dong/share. It is assessed that Vietnam’s laws did not offer much preferences for strategic shareholders. The deadline for share transfer of strategic shareholders is five years according to the current regulations, which caused a lot of difficulties for foreign investors wanting to restructure their investment portfolio. Due to this, foreign investors are still hesitant in investment selection in Vietnam.
As for Vietnam, though Law on Competition does not rule on effectiveness of the consultancy support, before implementing M&A deals, enterprises should ask analysis and consultancy on competitor, service user and providers from the Department of Competition Management.