M&As ready to alter business landscaspe

Mergers and acquisitions (M&A) will become more prominent in 2011, SMiC law firm deputy general director Le Dinh Vinh tells VIR.

What are your predictions for M&A trends in Vietnam this year?

Generally, 2011 has four key factors that will encourage M&As in Vietnam.

The first is the impact of the global economic crisis on local enterprises, weighed on by the internal problems existing in Vietnam.

Secondly, the legal and investment environments have become increasingly clear and transparent over the last four years since Vietnam joined the World Trade Organization (WTO).

Thirdly, the government has put much effort into luring foreign investment.

Lastly, the fact that M&As have been growing in recent years is a sign of foreigners’ interest in Vietnam.

However, there will not be an explosion in M&As this year. Vietnam still lacks a coherent and safe legal framework for M&As. Meanwhile, the global M&A trend is being weighed on by the global economic crisis, so cash cannot strongly flow into M&As in the near future.

Can you outline further favourable factors?

The scale of our economy is still small with small- and medium-sized enterprises in the majority, which means our economy’s sustainability is quite low. Besides, the government’s policies to tighten credit and cut preferential treatments are putting heavy pressure on enterprises.

Therefore, restructuring across the economy is almost unavoidable. Meanwhile Vietnam’s laws, especially the Law on Credit Institutions and Law on Securities, are being adjusted according to WTO commitments, in which foreigners are increasingly facilitated to tap Vietnam’s business potential.

Regarding foreign direct investment (FDI), experiences in other countries show that the M&A trends will follow that of newly establishing companies. That happened in Japan and Korea during the 1980s and is happening in China now. Vietnam will follow this trend.

M&As are growing in Vietnam, while they have slowed on the global scene in recent years. The M&As between HSBC and Bao Viet, Ha Tien 1 and Ha Tien 2, Common Wealth Australia Bank and VIB are typical cases.

Which sector will see the most M&As?

Banking and finance will continue to see an excited M&A trend, as companies in this sector are facing great challenges that are forcing them to restructure for survival. Besides, foreigners are increasingly encouraged to join this sector as their ownership ratios in financial institutions are being lifted.

The real estate sector promises to see exciting M&As as well. After the boom in real estate projects, many investors now cannot afford to develop their projects further and are trying to transfer these projects. Meanwhile, the real estate market remains very attractive in the medium and long term, thus M&As will increase in the future.

Vietnam’s retail market is seeing global retail groups arrive, while other fields such as communications and healthcare are opening in accordance with Vietnam’s WTO commitments. All these sectors will see foreigners tapping the market via M&As. – VIR

Tags: Vietnam M&A