5 Factors Sparkling New Wave of M&As

10:21:43 AM | 8/14/2014

In the period of 2008 and 2013, the investors witnessed a wave of mergers and acquisitions (M&A) in Vietnam. This is recognised as the first wave. The overall judgement of the leading experts in M&A in Vietnam, in the next 5 years there will be another wave of M&A.
The first wave of M&A took place in the context of which the economy of Vietnam was difficult; the growth rate was low; the macro-economy was unstable; the stock market declined; the real estate market was quiet; and many businesses started restructuring to survive and overcome the crisis.
Even so, the value of the M&A transactions in Vietnam in this period grew 5 times, from US$1 billion in 2008 to US$5 billion in 2013. Many investors and businesses that took advantage of the opportunities to come up with an appropriate M&A strategy have become powerful corporations.
According to the calculations of experts, within the next 5 years, the Vietnamese market will continue to soar, leading the second wave of the M&A. The main characteristics of the second M&A wave on the Vietnamese market are forecast in the coming 5 years as below:
First, the M&A activities in Vietnam will take place in the context where the economy recovers and Vietnam promote the institutional reform and legal framework. The M&A be more professional when a series of important laws such as Investment Law, Enterprise Law, Housing Law, Business Law Real Estate, Securities Law related to the business investment activities will be modified and supplemented.
Second, this will be the stage where the equitisation will occur strongly. Under the project that was approved by the Prime Minister, in the next 2 years, the equitisation will be worked out in 432 large-scale state-owned corporations, and the government will continue to review and add the business that needs equitisation to decrease the enterprises of which the government owns 100 percent shares or dominant number of shares.
Currently, investors are seeing many IPOs of large-scale state-owned enterprises such as Vietnam Airlines, MobiFone, and large corporations in textiles, cement, steel, and transport sectors. This would be important source of the M&A to select major strategic partners.
Third, along with the equitisation of the state enterprises, the process of restructuring of the banking system and divestment of other enterprises, given the guidelines of the government, will also promote the second wave of M&A.
Fourth, in the coming years, the M&A activities in Vietnam will not be a temporary trend, but the investment strategy of the businesses. Many enterprises in both public sector and private sector will choose the M&As a sustainable growth strategy and breakthrough.
Fifth, the rise of the private company, along with the foreign capital flows for investment opportunities and M&A in Vietnam, will contribute to a new wave of M&A.
Attending the M&A forum in 2014 that was held in mid-July in Ho Chi Minh City, Minister of Planning and Investment Bui Quang Vinh stressed that the equitisation of the state-owned enterprises has just been approved by the Government, leading the expected equitisation of 432 corporations and large enterprises within 2 years from 2014 to 2015. This is opening up new opportunities for the M&A market. On the other hand, the new wave of M&A activity will be an important driving force to promote the successful implementation of the programme of restructuring of the economy and the equitisation of the state-owned enterprises. The investors are about to witness the wave of the IPOs of large state-owned enterprises and M&A transactions, particularly in the most active fields such as banking and finance, food and consumer goods, technology and e-commerce. Minister Bui Quang Vinh highlighted that Vietnamese enterprises should be aware of and take advantage of the opportunities the second wave of M&A brings.
Nguyen Thanh