VietNamNet Bridge – Merger and acquisition (M&A) was once considered the best way for enterprises to expand their business scale. However, the latest surveys on the post-M&A period showed 61 percent of the deals led businesses to failures.

According to the M&A research team--Vietnam Forum, the M&A market witnessed a five fold growth rate in 2009-2013, from $1.08 billion to $5.1 billion. Most of the deals were made in consumer goods manufacturing, totaling $1 billion in 2012, or 25 percent of the total M&A value in the whole year 2012.

Though the total value of the M&A deals in 2013 is forecast to be lower, at $4 billion, the market would still see a stable and high growth rate of 25-30 percent in the long term.

39 percent of businesses reap fruits after M&A

The M&A of Vinpearl and Vincom has been cited as a typical success story. After the merger, the new group – Vingroup – has been developing well on the existing advantages of the two companies.

The audited finance report showed that by the end of 2012, the total assets of Vingroup had reached VND55.824 trillion, an increase of VND20.3 trillion in comparison with 2011. Meanwhile, the net turnover and post tax profit also reached the record high of VND7.9 trillion and VND1.84 trillion, respectively.

As for Phan Quoc Cong, General Director of ICP, a household goods manufacturer, his M&A deal brought “more gains than loses.” Two years after the sale of 85 percent of stakes at $60 million to Marico, an Indian consumer goods and service group, ICP has been growing very well.

In 2011, ICP net turnover reached VND550 billion, up by 45 percent over 2010, while the profit increased by four times. In 2012, the turnover increased by 20 percent over 2011. Especially, in the year, ICP successfully penetrated the Malaysian market and some other Asian and African countries.

Vinacafe has turned out to be lucky after being taken over by Masan Group. The finance report of Vinacafe showed that in 2012, the coffee company earned VND2.114 trillion, an increase of 30 percent over 2011, while the post tax profit increased by 41 percent, the 3-year highest profit.

What happened with the other 61 percent of businesses?

Business Week, which surveyed 302 M&A cases, has found that 61 percent of the deals could not bring the expected success.

Meanwhile, Dominic Scriven, CEO of Dragon Capital, said more than a half of the M&A deals could not create added value. M&A deals have made the buyers’ values decrease.

Hung Vuong Seafood, which runs the campaign of taking over other seafood companies in the plan to scale up the production, has to take on the debts incurred by the companies it bought. In 2012, Hung Vuong’s turnover did not increase, while the gross profit margin decreased and the post tax profit reduced by 28 percent to VND302.2 billion.

Truong Phu Chien, General Director of Bibica, a sweets manufacturer, has recently admitted that it was a wrong decision to cooperate with the South Korean Lotte Group.

A lot of the important business plans could not be implemented because the two partners could not reach a common voice. The 2013 shareholder’s meeting still could not be held, while it’s still unclear about the future of Bibica.

However, analysts have noted that there have been not many hostile takeover cases so far.

DDDN