New Investment Channel: Business Acquisition

Dong Nai Youth Joint Stock Company (Donacorp)’s acquisition of Cheefield Vina Co. Ltd at a price of only US$1 has attracted the attention of a lot of investors who are keen on business trading in Vietnam. According to economic experts, the acquisition will take place more often when Vietnam joins the WTO. This is another attractive business opportunity.

 

According to the Central Institute for Economic Management (CIEM), Vietnam now has some 6,000 foreign-invested companies, 170,000 private-invested companies, 5,000 State-owned enterprises and 15,000 business households. Several specialists forecast 42 per cent of those companies tend to be merged or transferred after Vietnam’s admission to the WTO because they cannot stay alone on severe market competition pressures. The figures from the United Nation Conference on Trade and Development (UNCTAD) showed that foreign investors have spent US$74 million to buy Vietnamese companies. The company trading in Vietnam is a potential market with an annual growth of between 30- 40 per cent. Hence, it is not a surprise when the interest in this field is being further increased.

 

The new website www.muabandoanhnghiep.com of the International Urban Development and Investment Joint Stock Company (IDJ) has frequently visited by domestic and international investors. Mr. Tran Trong Hieu, Director of IDJ, said 1,000 enterprises have registered for buying and selling on this site. Several enterprises have been sold. In Vietnam, there is no official market for trading enterprises; hence, IDJ opened this website to create a common playfield and provide related services for the business acquisition activities. IDJ also set up IDJ Enterprise Investment Fund Management Company with a registered investment capital of VND100 billion (US$6.25 million). IDJ plans to call VND1,000 billion capital from foreign investors. The long-term objective of IDJ is to buy and sell enterprises in accordance with customers’ request through the Enterprise Investment Fund Management Company. According to Hieu, the establishment of an enterprise trading market is indispensable like in other developed countries in the world. This will create a new channel for foreign investors to do business in Vietnam: acquiring operational companies.

 

Internationally, the trading of companies is very familiar. People can become billionaires from buying inefficient companies, which will be then restructured to gain profits. Mr. Le Dang Doanh, a senior economic expert, said at many seminars that ineffective companies will go bankrupt when Vietnam opens its door more widely. Bankruptcy is normal in a market economy, especially in developed ones. With a new boss, the company will have more positive changes. If the enterprise trading market is inactive, loss-making enterprises will have more time to stay. This is actually a waste of the society’s resources.

 

Vietnam is considered a very potential market in almost all sectors and business fields, regardless of imported fields. The ineffective operation of domestic companies is due to the absence of suitable owners. The activity of buying and selling enterprises will help investors to find out suitable companies and vice versa. According to estimates, such owners will increase in Vietnam when the business opportunities are created, especially when Vietnam joins the WTO.

 

Under the current laws in Vietnam, if domestic investors want to merge or acquire an enterprise, which has an investment capital size of VND15 billion (US$937,500) and is not included in conditional investment list, they don’t need to carry out investment registration procedures. Domestic investors only need to submit an investment registration document when they merge or acquire an enterprise, which has an investment size of from VND15 to VND300 billion (US$18.75 million) and is not included on the conditional investment list. Foreign investors only need to submit investment registration document to the provincial or municipal authorities if they want to merge or acquire an enterprise with an investment capital size of less than VND300 billion and without being included on the conditional investment list.