Strategy needed for mergers, say experts

A strategy that is simple and easy to understand and implement is a prerequisite for the success of mergers and acquisitions, an expert said at a forum yesterday.

Prof. Christopher Kummer, president of the Zurich-based Institute of Mergers, Acquisitions and Alliances, also said: “You should have people or a team to cover the complete process from the beginning to the end, or else seek external consultancy.”

He told the Viet Nam M&A 2010 Forum that the combination between internal resources and external advisors should be a “smart” one for it to be successful.

A company should only carry out deals that fits their growth strategies, he said.

M&A is the buying, selling and combining of different companies that can aid, finance, or help a company in a given industry grow rapidly without having to create another business entity.

The importance of a sound strategy was also stressed by Andy Ho, managing director of fund management firm VinaCapital.

“Companies should thoroughly understand their strategies. If the company is the acquirer it should know why the acquisition is being made and what it will bring to the company,” said Andy. The lack of clarity and suitability was why half the acquirers in the world failed in their M&A projects, he said.

“The acquirers should also know well the concerned laws and regulations as M&A activities will differ in different legal environments,” he added.

Completing the deal was only half the work, with the other half comprising the nitty gritty of integration, including accounting and staff management, Ho said.

Luong Quang Hien, deputy general director of confectioner Kinh Do Corp, highlighted the role of evaluation of both firms prior to the M&A, as well as the added value that would accrue after the merger.

To Hai, executive director for Ban Viet Securities Company said M&A transactions in Viet Nam were still evoking “hard feelings among companies being acquired or merged as there are not many precedents.

“There are a lot of differences between human factors, organisational culture and structure, corporate governance and others, of involved parties,” he noted.

Hai also complained that laws and regulations governing M&A transactions were not systematically consistent, thereby reducing the chance of success and lengthening the process.

According to PricewaterhouseCooper, last year saw around 300 deals worth US$1.138 billion. Notable ones included HSBC Insurance (Asia Pacific) Holdings’s agreement to increase its shareholding in Bao Viet Holdings to 18 per cent from the previous 10 per cent for a consideration of VND1.88 trillion (approximately $105 million).

The Ha Tien 2 (“HT2″) Cement Joint Stock Company merged with Ha Tien 1 (“HT1″) Cement Joint Stock Company last year in a deal estimated at $ 133 million. The deal involved HT2 transferring all of its assets, rights, obligations and legal benefits to the merged entity.

Yesterday’s forum was jointly organised by the Ministry of Planning and Investment, the Viet Nam Investment Review and valuation and consultancy services company Avalue. — VNS

Tags: Vietnam M&A