HCM CITY — Mergers and acquisitions (M&A) have become a popular investment channel and a crucial factor in restructuring companies to improve their efficiency and competitiveness and that of the economy, a conference heard in HCM City yesterday.

Speaking at the “Việt Nam M&A Forum 2018: New thrust, new era” conference, Deputy Prime Minister Vương Đình Huệ said the Government was diligently working towards an increasingly healthy, transparent, and conducive investment environment, stimulating the development of the M&A market both in quantity and quality in line with economic development orientations.

“As the Vietnamese economy moves forward consistently on the renovation path, with deeper integration with the world economy, and is empowered by economic restructuring, the Vietnamese M&A market has been vibrant over the past decade and I hope this would continue in the future,” Huệ said.

According to a KPMG survey of the Vietnamese M&A market in the last 10 years, last year the estimated value of M&A transactions was US$8.6 billion, and it forecast over 300 deals in 2018 and 2019.

In 2007 –17,Thailand accounted for 47 per cent of the value of transactions, followed by Japan and the US with 11 per cent, and Singapore with 9 per cent.

Also making the list were France, the Netherlands, the United Kingdom, Malaysia, Taiwan, and Hong Kong.

 “In the next three years investors are expecting investments in M&A deals in Việt Nam mainly from Japan, South Korea, China and Thailand,” said Warrick Cleine, chairman & CEO of KPMG Việt Nam.

Deputy Prime Minister Vương Đình Huệ at the conference. — VNS Photo

He pointed out that the fast growing economy, large market with nearly 100 million consumers, multilateral and bilateral FTAs, increasing bonds with traditional trading partners, and SOE equitisation would be the key drivers of M&A.

“Food and beverage, pharmaceuticals and life sciences, real estate, fast moving consumer goods, technology, media and telecom, retail, education, and renewable energy are the most promising industries for M&A.”

The key criteria for investors in identifying M&A deals are strong growth potential, management capability, operating sectors, financial capacity, and sector expertise, he said.

“The key challenges during the due diligence process in Việt Nam are quality of historical information, responsiveness/preparedness/willingness to share information, legal issues, tax issues or exposures, and flow of information.”

The key deal breakers are valuation expectation, due diligence findings, regulatory/licensing, aligning business plans, and approach to timeline, he said.

Cleine said M&As are being done efficiently in Việt Nam and said the Government should foster the process and create more favourable conditions for investors.

“The Government should reduce administrative procedures involved in M&A deals.”

Minister of Planning and Investment Nguyễn Chí Dũng said as Việt Nam was celebrating the 30^th anniversary of its foreign investment, the ministry were reviewing and would issue development policies for foreign investment.

“Authorities are trying to reduce administrative procedure to attract more investors, and we would like to confirm that there is no difference in the treatment between domestic and foreign companies," he said.

“All are equal, except for certain special businesses like banks, in which foreign ownership is restricted to 30 per cent, and some other under WTO commitments.”

Seck Yee Chung, managing partner, Baker & McKenzie said: “In the last 10 years there have been many changes. Customers used to ask about logistics and the legal framework in Việt Nam, but now they ask about regional expansion [in future].

“More investors are coming to the country, but this is the right time to identify whether the Vietnamese legal framework has adapted to changes on the international business scene where there are a lot of new business models.”

Trần Văn Dũng, chairman of the State Securities Commission, said since the stock market came into operation, M&A deals had become lively.

"The Vietnamese Government is trying to stabilise the macro-economy in the context of the trade war and US raising interest rates,” Dũng said.

Phan Đức Hiếu, deputy general director of the Central Institute of Economic Management, said M&A would help enterprises expand their markets.

“However, M&A has a bad impact on competition as enterprises buy their competitors.”

To avoid this, the Government is amending the Enterprise Law and Stock Law to protect small shareholders and prevent monopolies, he said.

“[We are] ranked 80th out of 189 nations in protecting small holders.”

Dominic Scriven, chairman of Dragon Capital Group, suggested that the Government should choose M&A deals more carefully by paying attention to both the selling and buying by Vietnamese companies.

“Việt Nam is facing a challenge in that many companies were set up in the 1990s and 2000s. Now their owners would like to retire or do not have the ability to compete in the new era but don’t want to do M&A because they still want to be the ‘boss’.

“The legal framework should be updated to deal with disputes related to M&A.”

Since 2009 more than 4,000 M&A deals have been done with a total value of $48.8 billion.

In the first half of this year they rose by 55 per cent year-on-year to $3.55 billion.

But the M&A boom could come up against some challenges soon like the rising protectionism, trade war (especially between the US and China), geopolitical tensions, and slowing growth in major economies.

Last year the sectors in Việt Nam that saw the most M&A deals in value terms were consumer goods (57 per cent), real estate (27 per cent), finance-banking (4 per cent) and chemicals (3 per cent).

But this year real estate (66.8 per cent), finance-banking (19.1 per cent) and industrial production (9 per cent) have taken over.

The 10^th Việt Nam M&A Forum, organised by the Vietnam Investment Review, the Ministry of Planning and Investment and AVM Vietnam company, reviewed the last 10 years of M&A deals to predict the trends in the next few years.— VNS