Local firms get in on mergers, acquisitions

Merger and Acquisitions (M&A) in Viet Nam are no longer “an exclusive game” for foreign businesses and multinational companies but are now drawing the enthusiastic participation of domestic enterprises.

Dang Xuan Minh, director of the AVM Viet Nam Company, said many large private groups in Viet Nam, after gathering their financial resources, had sought to purchase or merge with other firms operating in the same field to increase their strength in the market.

The number of Vietnamese enterprises buying domestic firms now accounts for 40 per cent of all M&As.

A US$30 million deal between Lilama Ha Noi Joint Stock Company and the Viet Nam Steel Corporation (VNSteel) was one of the biggest recent transactions.

VNSteel acquired an 85 per cent stake in Lilama Ha Noi’s zinc-plating factory at the Ha Noi-based Quang Minh Industrial Zone through the VNSteel Thang Long Corrugated Iron Plated Joint Stock Company.

Furthermore, large Vietnamese firms have also targeted M&As in foreign markets. Military-run telecoms group Viettel offered $300 million for a 60 per cent stake in Teletalk Bangladesh Ltd and $59 million for a 70 per cent stake in Haiti’s Teleco Company.

According to a recent survey by international consultants Grant Thornton, 17 per cent of Vietnamese businesses said they planned to boost growth through M&As compared to 19 per cent in 2010 and 15 per cent in 2009. Up to 20 per cent of Vietnamese businesses said they expected changes in their ownership relations, doubling the global average rate.

Le Dinh Vinh, deputy general director of the SMIC Law Firm, said there were many favourable factors for boosting M&A activities in Viet Nam, especially the more open and transparent legal and investment environment over the last four years after Viet Nam joined the World Trade Organisation (WTO), Government efforts to attract foreign investment chiefly through M&As, and foreign investors’ close attention to M&As.

The Competition Management Department, under the Ministry of Industry and Trade, forecasts that M&As in Viet Nam would continue to flourish in 2011 and over the next few years, growing at a rate of 30-40 per cent.

Matthias Duehn, EuroCham managing director, said that in 2011, M&A activities would develop strongly in several fields, particularly production, finance, banking and infrastructure.

However, the lack of a legal framework for M&A activities, stringent liquidity conditions and businesses’ limited human resources and understanding of M&As would dampen this expansion.

In 2010, there were 345 M&As, worth a total of $1.7 billion, up 65 per cent over the previous year. This was the highest growth in M&A activity in Viet Nam so far. — VNS

Tags: acquisitions, mergers