M&A takes off thanks to Vietnamese businesses

M&A activities will take place strongly in several areas, particularly production, finance, banking and infrastructure.

Merger and acquisition (M&A) in Vietnam is no longer “an exclusive game” for foreign businesses and multinational companies but is drawing the enthusiastic participation of domestic enterprises in the role of purchasers.

Dang Xuan Minh, Director of the AVM Vietnam Company, said that many series of large private groups in Vietnam, after gathering financial resources, have sought to purchase or merge with other businesses operating in the same field to increase their strength in the market.

Statistics show that the number of Vietnamese enterprises which buy Vietnamese ones accounts for up to 40 percent of the total M&A transactions.

A 30 million USD deal transaction between the Lilama Hanoi Joint Stock Company and the Vietnam Steel Corporation (VNSteel) was one of the most well-known recent transactions.

VNSteel acquired an 85 percent stake in Lilama Hanoi’s zinc-plating factory at the Hanoi-based Quang Minh Industrial Zone through the legal entity, the VNSteel Thang Long Corrugated Iron Plated Joint Stock Company.

Not to stop at domestic M&A transactions, Vietnam’s large businesses have also targeted M&A in foreign markets. The military-run telecom group Viettel offered 300 million USD for a 60 percent stake in Teletalk Bangladesh Ltd., Co. and 59 million USD for 70 percent of equity of Haiti’s Teleco Company.

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

Lawyer Le Dinh Vinh, Deputy General Director of the SMIC law firm, said that there are many favourable factors for boosting M&A activities in Vietnam, especially more open and transparent legal and investment environments four years after Vietnam’s World Trade Organisation (WTO) accession, the government’s efforts in foreign investment attraction with M&A being a key activity, and foreign investors’ close attention to M&A, which is seen as attractive.

From this fact, the Competition Management Department under the Ministry of Industry and Trade forecast that M&A in Vietnam will continue flourishing in 2011 and the following years, with a growth rate of 30-40 percent.

According to EuroCham Managing Director Matthias Duehn, in 2011, M&A activities will take place strongly in several areas, particularly production, finance, banking and infrastructure.

However, a lack of a legal framework for M&A activities has stringent liquidity conditions and businesses’ limited human resources and understanding on M&A, makes the expansion of this activity slower than expected.

The year 2010 saw 345 M&A transactions with a total value of 1.7 billion USD, up 65 percent over the previous year. This was the highest growth of the M&A activity in Vietnam so far.

Tags: M & A