M&A deals on the rise

Activities relating to selling, buying or merging enterprises have flourished since early this year, with many business transactions worth hundreds of millions of US dollars. Business difficulties and lack of capital at these businesses are considered to be the main reasons causing the situation.

Research in the 2011 Grant Thornton International Business Report showed that 20 per cent of Viet Nam’s private enterprises would be converted within three years.

Pricewaterhouse Coopers (PWC) also said that in 2010, 345 cases related to the transfer of ownership of private businesses were implemented in Viet Nam with the total value of nearly $ 1.75 billion, and 295 cases at $1.1 billion in 2009.

The buying and selling of private enterprises would flourish more this year, the company said.

The owner of a small enterprise involved in the food processing industry said he was going to sell at least 45 per cent of the company’s total capital in order to be competitive.

“The money that I earn will be used to renovate the production line to improve production capacity and product quality,” he said.

In mid-March, Thien Minh, a tourism private company, spent $45 million to buy a chain of Hong Kong’s five Victoria hotels in Viet Nam and Cambodia.

Recently, the Sai Gon Paper Plan also sold 38 per cent of its shares to a group that also was involved in the paper industry and Japan’s funds management company.

Enterprises involved in infrastructure development, including electricity, roads, wharves, and consumer goods production, are among the best sellers during this time.

According to the Funds Management Company Mekong Capital, emerging private enterprises and those that have shifted to private status have become more favourable because the value of Vietnamese private enterprises was cheaper than before.

Don Lam, general director of VinaCapital, said the market lacked companies whose value was more than VND1 billion, so this was a good time for the Government to strengthen the equitisation of major state-run enterprises or economic groups.

The Government is in great need of both foreign and domestic capital to operate the country. So it is necessary to cut capital in the state-run enterprises to ease the state’s capital burden.

VinaCapital is seeking opportunities to invest in companies with potential, such as Vinaphone, MobiFone and petrol enterprises.

Tags: Vietnam M&A