M&A activity likely to increase in 2011

Major companies are planning merger and acquisation deals in 2011, rather than setting up new business operations.

In November, software giant FPT announced it would buy a 50-per-cent stake in EVN Telecom, a wholly-owned unit of State-owned Electricity of Viet Nam. This was expected to set off a wave of M&A activity among the nation’s mobile phone service providers.

FPT chairman Nguyen Thanh Nam said the corporation considered the option of setting up its own mobile phone operations but opted to buy a stake in EVN Telecom as a more efficient way to expand into the telecommunications market.

Meanwhile, with the withdrawal a of South Korea’s SK Telecom from the S-Fone network, Sai Gon Postel Co was also searching for a new partner to help it keep S-Fone alive.

In the real estate market, decreasing demand and difficulties in raising capital had forced many developers to transfer projects to other companies, said Kinh Bac Urban Development Co (KBC) chairman Dang Thanh Tam.

KBC had acquired a number of real estate projects in Ha Noi through such acquisitions, and M&A had become the preferred method to establishing a new project from scratch under current conditions.

Prudential Viet Nam Fund Management, for instance, had acquired the interest of South Korea’s Vina Development Inc in the Blooming Park apartment project in HCM City. Following the acquisation, Prudential held a 60-per-cent stake in the project, which it renamed Imperia An Phu – while the original primary investor, Kien A Services and Investment Co Ltd, retained just a 30-per-cent interest.

“While it can take a company 3-5 years to turn a profit from a real estate development project, an acquisition of a project already in development can allow investors to turn over capital more quickly with less risk,” said Dang Hoang Huy, chairman of Vinaconex Xuan Mai Co.

Tran Nhu Trung, director of consultancy and market research for Savills Viet Nam, said the property market had grown significantly and required greater professionalism and companies with a higher financial capacity.

“M&A deals are something inevitable in this market,” Trung said. — VNS

Tags: M & A