VietNamNet Bridge – Deputy head of Central Institute for Economic Management Vo Tri Thanh weighs over diverse aspects in Vietnam’s M&A market development and explains why it is now a good time for M&A deals.

What factors are important to propel mergers and acquisitions (M&As)?

Completing an M&A is not simple. Some argued there would need a specialised legal framework for M&As to enhance transparency and accessibility.

In fact, if that specific law was in place, the interactions with other laws would be crucial, particularly regarding Vietnam’s commitments for opening market as well as deepening international integration with the world community.

Besides, M&As also relate to market conditions, economic development perspective, cultural factors and negotiation results of relevant parties.

What are your comments on foreign investors’ proven interests into state-owned enterprises (SOEs)’ equitising process versus their prudence when partaking in buying these SOEs?

Transparency factor has attracted foreign investors’ particular attention, so does the process of SOEs’ restructuring, particularly equitising. I expect the on-going restructuring process would help reduce state controlling stake in SOEs as well as bolster state capital usage efficiency, technology and management expertise.

To achieve these goals, businesses need support from strategic partners. This issue, however, relates to benefits. Many SOEs have yet to get ready for altering their way of thinking. They fear of losing long-time benefits particularly land related interests once embracing equitising or M&As. Changing this old-way of thinking is then important.

It seems that M&As have become a vehicle for firms to seize dominant market slices and establish monopoly in some particular fields. Is that the case?

Businesses about to take M&As need to look at the market in a comprehensive manner and pay heed to the Law on Competition.

We vote against monopoly, but some businesses used M&As to take over firms retaining controlling role in particular fields and sectors which have impinged on the Competition Law. Hence, in my view the Ministry of Industry and Trade’s Vietnam Competition Authority needs to set eyes on every M&A deal to ensure healthy market performance.

At recent Vietnam M&A Forum 2013 many business executives shared their carrier success thanks to resorting to M&As. Should firms include M&As into their medium and long-term development strategies?

There are three ways for business development through M&As. Business executives, based on their own goals, may apply this way or that to bring them utmost efficiency.

First, if businesses were strong and wanted to enlarge business scope, they could take M&As to secure decisive role in acquired businesses.

Second, if businesses were ‘weak’ and faced some limitations either in capital, technology or management capacity, they would resort to M&As to tackle weaknesses while still retaining executive role.

Third, businesses wanted to sell out a company to venture into another field with more shiny growth perspectives.

What factors could underpin Vietnam M&A market’s booming development in the future?

International cash flows still abound, but alluring these capital flows largely depends on macroeconomic conditions and businesses’ development strategies. Vietnam’s economy would rebound within the next three years and long-term investors would return. Therefore, it is a good time to mull M&As and sit on negotiations to source best price terms.

Besides, M&A would come into vogue thanks to more open and transparent legal system since Vietnam is under the pressure to leave its door more and more open to foreign investors under commitments with the World Trade Organization.

Source: VIR