Prospects in IPO and M&A between Vietnam and Japan

Many Vietnamese businesses attended the seminar entitled “Attracting IPO listing and M&As between Japan and Vietnam” held recently in Hanoi by the Vietnam Chamber of Commerce and Industry (VCCI) in collaboration with the Tokyo Stock Exchange and RECOF Corporation. In the midst of domestic and international economic difficulties, these activities catch the interest of domestic and foreign investors and businesses.

 

Addressing the meeting, Dr Vu Tien Loc, VCCI President, said: 2011 was a very tough year for Vietnamese and global economies. 2012 will continue to be a challenging year for Vietnamese economy and businesses. Therefore, how to approach external capital sources through the stock market or corporate restructuring in line with business models is always the big question for Vietnamese enterprises in the current context.

 

Mr Loc said merger and acquisition (M&A) is an important corporate restructuring activity. M&A, which appeared very long ago, is very popular in market economies where there is fierce competition among multinational corporations. In Vietnam, the M&A market started in 2000 and kept growing in number and value. A majority of M&A deals are involved in industry, financial services, telecommunications and mining.

 

However, M&A activities are in general still confronting a number of obstacles that put the brake on the expansion of this market. Mr Loc cited three primary reasons for this problem. Firstly, Vietnam lacks a legal framework exclusive for M&As. This raises difficulties for management agencies, businesses and financial consultants. Secondly, M&A activities are still new and complex, and the involvement and support of organisations for M&A process are limited. Finally, relatively strict liquidity conditions inhibit M&A breakthroughs. And, there are some other factors relating to business environment and legal system like administrative procedures, asset valuation, accounting standards and corporate governance.

 

In the past five years, Vietnam achieved annual GDP growth of less than 6 percent. In 2012, the country expects to bring the number of businesses to 700,000. It also puts the target of attracting more domestic and foreign investment capital and developing all kinds of markets. This is the important basis and condition for the rapid development of M&A activities and the formation of the M&A market in Vietnam in the coming years.

 

Japan has a strong development of M&A activities and a very exciting securities market. Although it was hard hit by the terrible earthquake, tsunami and nuclear crisis in 2011, it has basically recovered and is enjoying higher growth. Global economic revitalisation is helping quicken this progress. By and large, Japanese manufacturing and service sectors will recover and grow and domestic demand will increase as a result of reconstruction needs. These are positive factors that foster economic, commercial, industrial and investment relations between the two countries.

 

Mr Yasuyuki Konuma, Managing Director of Tokyo Stock Exchange Group Inc, said Japanese individual assets are the highest in the world at US$19.48 billion. As for stock market growth prospects, the Tokyo Stock Exchange is one of largest stock exchanges in the world, only after exchanges in the United States. Besides, the Tokyo Stock Exchange is one of five biggest stock exchanges in the world in terms of market capitalisation and trading value.

 

Mr Toshifumi Iwaguchi, Managing Director of Record Company, an M&A consultant in Japan, said: Japanese businesses consider Vietnam the third destination (after China and India) by the means of M&As. This is the result of a survey into 307 Japanese listed companies and leading companies representing different industries.

Mr Vu Tien Loc said, through this conference, Vietnamese businesses can consider and select capital approaching methods appropriate to their business operations, through stock market or M&A, to solve their current capital difficulties.

 

Before current favourable factors, according to Deputy Minister of Planning and Investment Dang Huy Dong, prospects for IPO and M&A partnerships between Vietnam and Japan are very positive.