Rationale
In the 21st century, the global economy is experiencing a significant surge in mergers and acquisitions (M&A), characterized by diverse forms and unprecedented scale This trend extends beyond developed nations, impacting emerging economies and developing countries like South Korea and Singapore.
Since 2007, Vietnam has experienced significant growth in M&A activity, coinciding with the development of its stock market Notably, in 2009, the transaction value growth rate in Vietnam increased by 2% compared to 2008, contrasting sharply with declines of 22% in the USA and 38% in Southeast Asia This trend highlights Vietnam's potential as a burgeoning M&A market.
M&A consultancy will have chance to develop
Brokers and intermediaries play a crucial role in the success of mergers and acquisitions (M&A) by leveraging their extensive knowledge and practical experience They assist companies in making informed decisions, ultimately maximizing the benefits derived from M&A contracts.
There are 3 main roles of intermediaries based on consulting processes of an M&A:
Analyse and evaluate to select suitable enterprise for M&A, give assessments of business benefits that can bring the two sides.
Complete M&A implementation plan and the procedures for M&A quickly and efficiently.
Propose Post-merger plan that help business operate efficiently and create synergies.
In Vietnam, brokers have many advantages in developing M&A consultancy, but not many brokers in Vietnam find it is important to invest and develop M&A
Chuyên đề thực tập Tốt nghiệp consultancy This consultancy can bring intermediary revenues without risks.
However, consultants and intermediaries in Vietnam only focus mainly on the two first roles and forget to propose the post-merger plan This has reduced the effectiveness of M&A.
Mekong Securities Joint Stock Company (MSC), established in 2002, is a prominent brokerage firm in Vietnam known for providing consultancy services in mergers and acquisitions (M&A) However, it does not offer post-merger planning services to its clients.
To complete the M&A consulting process of MSC, the topic “Setting up
Post-merger Integration process for M&A consulting service at Mekong
Securities Joint Stock Company” is chosen for my thesis.
Research objectives
In order to solve the research problem above, the thesis focuses on clarifying the objectives as bellow:
- Understanding the theory of M&A, Securities companies and Post-merger process.
- Provide general information about M&A market in Vietnam in the past few years.
- Setting up a Post–merger Integration process for MSC.
- Proposing recommendations to operate a successful Post-merger Process.
Chuyên đề thực tập Tốt nghiệp
Research methodology
Data collection
In this thesis, the main method used to gather data and information is
- Theoretical background of M&A in text books, thesis and lecture’s materials.
- Market information and opinions in Newspaper and websites
- Laws and regulations published by the government.
Chuyên đề thực tập Tốt nghiệp
Research structure
Chapter 1: Theoretical background on M&A consulting service at securities company
Chapter 2: Setting up Post-merger Integration process for M&A consulting service at MSC
Chapter 3: Recommendations for launching process
Chuyên đề thực tập Tốt nghiệp
THEORETICAL BACKGROUND ON M&A CONSULTING
Theoretical background on M&A
Mergers and acquisitions (M&A) are key components of corporate strategy and finance, involving the buying, selling, and combining of companies These transactions enable enterprises to achieve rapid growth in their existing sectors or expand into new markets without the need for subsidiaries or joint ventures.
M&A transactions vary significantly in size, from large multi-million dollar mergers to smaller asset sales to investors or competitors While public perception may view these deals as threatening to jobs, they are typically motivated by a company’s need to refinance or restructure, aiming to enhance shareholder value and gain a competitive edge Essentially, the acquiring company seeks to improve its competitiveness, cost-efficiency, and market share through these strategic acquisitions.
According to Article 17 of Vietnam's 2004 Law on Competition, a merger occurs when one or more enterprises transfer all their lawful assets, rights, obligations, and interests to another enterprise, resulting in the termination of the merging enterprise(s) In contrast, an acquisition refers to the purchase by one enterprise of all or part of another enterprise's assets, sufficient to influence its operations.
Chuyên đề thực tập Tốt nghiệp to control or govern the activities of one or all of the trades of the acquired enterprise.”
1.1.2.1 Classification based on approaching types
-Merger is the case when the boards of directors of two firms agree to combine and seek stockholder approval for the combination In most cases , at least
50 % shareholders of the acquired company and the acquiring company agreed to the merger The target firm ceases to exist and becomes part of the acquiring firm.
One typical example for this type of M&A is the case of Hanoi Building
Commercial Joint Stock Bank (Habubank) and Saigon – Hanoi Commercial Joint
Stock Bank (SHB) Habubank is 100% merged into SHB.
-Consolidation is a type of M&A which the acquired company and the acquiring company combine and form into a new legal entity In most cases, at least
In a merger agreement, 50% of shareholders from both the acquired and acquiring companies must consent to the deal A notable example of this type of merger and acquisition (M&A) is the collaboration between Sony and Ericsson Sony, known for its music player production, joined forces with Ericsson, a mobile phone manufacturer, to create Sony Ericsson, a brand that offers mobile phones with enhanced music features, setting it apart from competitors.
A tender offer occurs when a company seeks to acquire shares of a target firm to gain control over its board of directors The acquiring firm typically bids a substantial number of shares at a premium price to persuade the target's shareholders to sell their stakes This approach allows the acquiring firm to bypass the need for approval from the target's board, often leading to the perception of a hostile takeover.
As long as the acquiring firm collects enough amounts of shares of the target then it could turn out to be a merger
Chuyên đề thực tập Tốt nghiệp
Asset acquisition is a form of mergers and acquisitions (M&A) where the acquiring company purchases all the assets of the target company, leading to the eventual dissolution of the latter This strategy is typically utilized for firms that possess a significant amount of tangible fixed assets, such as factories and machinery A notable example of this is the case of Kinh Do.
Corporation buying out the Unilever’s Wall ice cream machinery system is an illustration for the acquisition of assets.
-Individual buyout is the separated type of M&A compared to other 4 types.
In an individual buyout transaction, a board member or a group of investors aims to gain control of a target firm, typically through a tender offer This process is termed a management buyout when management board members are involved, and a leveraged buyout when the acquisition is financed through borrowed funds In leveraged buyouts, the firm's operational cash flow is utilized to repay the borrowed capital.
Chuyên đề thực tập Tốt nghiệp investors
Figure 1.1: Classification of M&A base on approaching types.
(Source: Takeovers, Restructuring and Corporate Governance)
1.1.2.2 Classification based on the relation between products
A horizontal merger occurs when companies in the same industry, often competitors offering similar goods or services, consolidate their operations This type of business merger is prevalent in industries with fewer firms, where competition is intense The potential synergies and market share gains from such mergers are significantly higher, making horizontal mergers a strategic move for firms looking to strengthen their position in the market.
Chuyên đề thực tập Tốt nghiệp
A vertical merger involves the combination of two companies that produce different goods or services contributing to a single finished product This type of merger occurs when firms at various levels of an industry’s supply chain join forces The primary motivation for such mergers is to enhance synergies, allowing the merged entities to operate more efficiently as a unified organization.
-Market-extension merger: Two companies that sell the same products in different markets
-Product-extension merger: Two companies selling different but related products in the same market
A conglomerate is a corporation that consists of various seemingly unrelated businesses, where one company holds a controlling stake in multiple smaller companies Each subsidiary operates independently, yet their management reports to the senior management of the parent company This structure allows for diverse business operations under one corporate umbrella while maintaining operational autonomy for each subsidiary.
1.1.2.3 Classification based on geographical location
-Domestic merger: A merger occurs between firms inside a country
-Cross-border merger: A merger occurs between firms in different countries, usually used as one of the most effective investment approach of companies into new markets
1.1.2.4 Classification based on the attitude of target firms toward the merger
A friendly takeover occurs when the management and board of directors of a target company consent to a merger or acquisition by another firm In this process, the acquiring company makes a public offer, either in stock or cash, which is then endorsed by the target company's board However, the buyout terms still require approval from shareholders and regulatory bodies.
Chuyên đề thực tập Tốt nghiệp
A hostile takeover occurs when one company, known as the acquirer, seeks to acquire another company, referred to as the target company, without the consent of its management This is typically achieved by appealing directly to the target company's shareholders or attempting to replace its management to secure approval for the acquisition Hostile takeovers can be executed through methods such as a tender offer or a proxy fight.
Undervalued firms present lucrative acquisition opportunities for investors who identify market mispricing, allowing acquirers to capitalize on the gap between true value and purchase price as surplus To successfully execute this strategy, three essential components must align.
1 A capacity to find firms that trade at less than their true value : This capacity would require either access to better information than is available to other investors in the market, or a better analytical tool than those used by other market participants.
2 Access to the funds that will be needed to complete the acquisition : Knowing a firm is undervalued does not necessarily imply having capital easily available to carry out the acquisition Access to capital depends upon the size of the acquirer – large firms will have more access to capital markets and internal funds than smaller firms or individuals – and upon the acquirer’s track record – a history of success at identifying and acquiring undervalued firms will make subsequent acquisitions easier.
Theoretical background on Post-merger
Post-merger integration refers to the essential process of aligning two companies to operate cohesively as a single entity This involves a range of activities, including procedural, physical, managerial, and socio-cultural integration, all aimed at achieving effective inter-firm coordination and system control following a merger or acquisition.
Post-acquisition integration is a long-term process that starts with the signing of the acquisition agreement and can extend for several years This process involves managing organizational activities and resources effectively to achieve combined goals It is characterized as an evolving organizational process, focusing on the integration and combination of the acquiring and acquired organizations.
The graduation internship focuses on management initiatives and planned activities that address key issues, including the levels of integration and autonomy assigned to the acquired company, as well as the speed of the integration process.
1.2.2 Role of Post-merger Integration in M&A:
Post-merger integration is the phase that occurs after the closing of a merger agreement, where the assets, personnel, and business operations of the merging companies are combined This crucial process can take anywhere from several months to several years to complete, depending on the complexity of the merger.
Following a merger, management is under strict time pressure to address challenges such as defining strategic integration priorities and identifying synergies.
The post-merger integration (PMI) process presents several crucial questions:
• How do we ensure we are incorporating the key success factors for PMI?
• What functions must be integrated quickly, and how do we focus on realizing synergies?
• How can we best integrate two different cultures and deal with conflicts between them?
• How do we keep employees focused on business and customers during the integration process? Chuyên đề thực tập Tốt nghiệp
Resolution Procedural Design accounting systems and procedures
Eliminate contradictory rules and procedures
Physical Encourage sharing of resources
Measure and manage the productivity of resources
Design compensation and reward systems
Table 1.1: Post-merger Integration tasks
(Source: Journal of Business Strategy)
Integration is necessary because large organizations operate through functionally different departments that perform a narrow set of specialized tasks such as production, marketing, accounting, and finance Integration across departments involves
Effective coordination of activities is essential for achieving organizational goals, as it involves monitoring and controlling departmental functions to ensure they align and maintain high standards of quality and output Additionally, addressing conflicts among individuals and their varying subgoals is crucial for fostering collaboration and unity within the organization.
Chuyên đề thực tập Tốt nghiệp
Merging firms must navigate their unique systems and procedures, necessitating the abandonment of certain established practices from both entities This process involves transferring assets and systems between the companies while also establishing new management leadership to ensure a cohesive integration.
To achieve successful integration after a merger, it is necessary to understand the different types of integration There are three types of post-merger Integration:
Procedural Integration, Physical Integration, and Managerial and Sociocultural
Procedural Integration is the process of unifying the systems and procedures of merged companies across operational, management control, and strategic planning dimensions The primary goal of this integration is to standardize and streamline work procedures for enhanced efficiency.
Standardization of procedures facilitates communication between acquiring and acquired companies It also improves productivities and reduces the cost or processing information.
Integrating legal entities during a merger involves transferring ownership titles and consolidating accounting systems Two primary methods for this integration are the pooling method and the purchase method, each influencing the balance sheet and profit and loss accounts The selection of these methods depends on the merger's objectives, terms, purchasing arrangements, and the goal of enhancing the balance sheet structure through effective use of price-earning multiples and leveraging strategies.
Chuyên đề thực tập Tốt nghiệp
In mergers, management control systems and procedures can be transferred between firms, particularly in functional areas If one merging firm has advanced and effective systems for tasks such as inventory control, production scheduling, material requirements planning, sales analysis, order processing, and costing, these systems can be adopted by the partner firm to enhance operational efficiency.
Transferring systems at the functional level can be disruptive, often requiring the collection of new data, modifications to report formats, redesigning work procedures, structural adjustments, and potential changes in personnel.
Strategic Business Unit (SBU) integration entails managing the acquired business as an independent profit center while incorporating it into the overarching corporate strategic planning framework This process includes establishing comprehensive guidelines that define the SBU's role within the corporate portfolio and outlining its objectives for the upcoming years.
The newly established Strategic Business Unit (SBU) will focus on formulating strategic plans and recommending targeted programs to meet its objectives Corporate management will review and approve these plans, ensuring appropriate resource allocation for successful execution Importantly, the integration of the SBU will not alter operational processes; most production and marketing activities will proceed as they were prior to the merger.
Physical integration of resources and assets often goes hand in hand with procedural integration, focusing on the consolidation of product lines, facilities, equipment, and real estate This process is typically labor-intensive and requires significant time investment.
Post-merger integration frequently faces challenges related to the redeployment of assets during resource-sharing Mergers typically involve firms with overlapping asset bases, indicating that the merging entities share certain common assets while also having distinct resources.
The concept of mutually exclusive assets is crucial for effective internship projects, as it highlights the importance of asset continuity within firms This continuity allows companies to share resources effectively, fostering collaboration When these mutually exclusive assets are utilized together, they can create synergistic operations that enhance the overall performance of the combined firm.
Theoretical background on Securities companies
1.3.1 Theoretical background on Securities company
A Securities Company is a licensed financial institution operating in the securities market, authorized by the State Securities Commission to engage in various business activities within this sector As a legal entity, it possesses its own capital and financial accounting system, allowing it to conduct one or multiple professional business activities related to securities.
According to the business formulation which is regulated in the Law on
Enterprise 2005, a securities company can be: a joint stock company, a limited liability company or a partnership company.
A partnership is a business structure involving at least two partners who jointly own and operate the company under a shared name In this arrangement, there is typically a general partner who is personally liable for all partnership obligations, along with the possibility of limited partners who have restricted liability.
In a partnership, individuals are only responsible for debts to the extent of their capital contributions, meaning their liability is limited Additionally, partnerships are prohibited from issuing any form of securities.
A limited liability company is an enterprise of which members can be organization and/or individual and total number of members is no more than fifty.
Members are liable for the enterprise's debts and obligations only up to the amount of their committed capital contributions, and the enterprise is not authorized to issue shares.
A joint stock company is an enterprise where the charter capital is divided into equal shares, allowing for ownership by both individuals and organizations It requires a minimum of three shareholders, with no upper limit on the number of shareholders Shareholders are only liable for the company's debts and obligations up to the amount of their investment Additionally, a joint stock company can issue securities to raise capital effectively.
Joint stock companies and limited liability companies offer more advantages than disadvantages when compared to partnerships, making them the preferred choice for securities firms Consequently, most securities companies opt to establish themselves as either joint stock companies or limited liability companies.
1.3.1.3 The roles of Securities Company
Securities companies are crucial in facilitating fund mobilization for issuers, primarily through public offerings Currently, the process of public issuance is predominantly handled by consulting firms, specifically securities companies, which is mandatory for both initial and public offers.
A securities company enhances investor efficiency, saves time, and minimizes risks through expert consultation They also boost the liquidity of financial products and supply vital information to administrative authorities for effective market management.
Chuyên đề thực tập Tốt nghiệp
SETTING UP POST-MERGER INTEGRATION PROCESS
Introduction of of Mekong Securities Joint Stock Company
2.1.1 Overview of Mekong Securities Joint Stock Company:
Mekong Securities Joint Stock Company (MSC), established in 2002, received its Business Certification No 103001480 on October 14, 2012, and was licensed by Vietnam’s State Securities Commission under No 10/GPHDKD on February 18, 2003 MSC primarily focuses on serving institutional clients.
Vietnamese securities broker-dealer providing customized services tailored to institutions trading the Vietnamese equities markets.
The Company operates with located in its Hanoi and Ho Chi Minh City offices and holds seats on both the Ho Chi Minh City Stock Exchange and the Hanoi
Securities Trading Center Clients are generally sophisticated institutions leveraging
Mekong Securities’ sophisticated trading operations and highly regarded company research to intelligently access Vietnam’s generally opaque listed and OTC markets.
The Company is lead by a top tier management team comprised of expatriates and
Vietnamese nationals with combined experiences in both the foreign and
Chuyên đề thực tập Tốt nghiệp
Chuyên đề thực tập Tốt nghiệp
Ms Phan Thi Tuyet Nhung, Chairwoman
Master of Finance, having over 10 years of experience throughout various positions: Chief Accountant, CFO… and deep knowledge of the financial sector.
Ms Tran Thi Hue Chi – Member of Board of Management
Master of Banking and Finance, having 20 years of experience in the financial sector and enrolled in the ECC Securities Corporation and Vietnam Development
Mr Vu Van Hung – Member of Board of Management
A distinguished businessman with over 20 years of experience in investment and corporate governance in Vietnam, he has cultivated strong relationships with key partners in the industry.
Mr Pham Sy Long – Director of the Investment Banking Services Sector
MBA, California State University – Fullerton, the United States; Bachelor of
Finance, RMIT University Australia; having over 10 years of experience as lecturer at the Business School, National Economics University, Hanoi and over
8 years as the expert in the financial consulting services sector.
Mr Pham Tri Thanh – CFO
With a degree from the National Economics University and eight years of experience as a senior auditor for leading companies, I specialize in corporate finance consulting and firm valuation across diverse sectors.
Ms Trinh Quynh Giao – Specialist of the Investment Banking Services Sector
Master of Finance and Banking, University of Paris Dauphine and European
The School of Management at the University of New South Wales, Australia, offers a Bachelor’s degree that equips students with essential skills for the finance and banking sectors With seven years of experience in both international and Vietnamese enterprises, including prominent organizations like PricewaterhouseCoopers and the Bank of Investment and Development, graduates are well-prepared to excel in their careers.
Vietnam (BIDV) Securities Corporation, Indochina Capital Company.
Chuyên đề thực tập Tốt nghiệp
2.1.3 Professional service and key accounts:
Evaluate the value of VTB and hold the first auction to sell VTB’s shares.
Consult exclusively Equitization process of VIPESCO in 2005.
Chuyên đề thực tập Tốt nghiệp
Hanoi Liquor joint stock company
Evaluate the value of HALICO, consult Equitization process and hold the auction to sell HALICO’s shares
Hold the IPO of Vinacoal
Total value is about 150 billion VND
Chuyên đề thực tập Tốt nghiệp
Issue 6 million share of VIPESCO with total value of
Analyze and consult portfolio investment such as bonds and shares
Viet Long Plaza Consult debt restructuring, propose Sales plan, raising fund and find strategic partners
Chuyên đề thực tập Tốt nghiệp
COTEC Group Consult bond issuances, corporation activities
Consult in negotiating M&A contract with Lhoist
Sell 10% share of FPT to Intel Capital and Texas Pacific Growth
Chuyên đề thực tập Tốt nghiệp
Exclusively consult in penetrating the market and cooperate with Vinamilk
Overview of M&A activities in Vietnam
While M&A has been a very popular activitiy in the world, however, it is a very new term and operated very basically in Vietnam The M&A transactions in
Vietnam first appeared since the Law on Enterprise 1999 published At that time,
M&A transactions were usually very small This activity has only been really developed in the last 5 years This can be explained by several following reasons:
Vietnamese economy growing quickly leads to a numbers of opportunities generated for investors.
A series of fundamental laws as Law on Enterprises, Law on Investment,
Law on Competitions, Law on Bankruptcy, Law on Securities have contributed to the effective adjustment of M&A activities, though there is no unified legal framework
Joining the WTO of Vietnam has created more favorable conditions for foreign investors to have more confidence to invest in Vietnam which makes M&A more popular.
Chuyên đề thực tập Tốt nghiệp
2.2.2 Current situation of M&A activities in the last few years:
M&A activity worldwide has reached unprecedented levels, and in Vietnam, this trend is just beginning to take off Recent statistics indicate a significant increase in both the value and volume of M&A transactions in the country.
Figure 2.2: M&A Total Deal Size and Number of Deals in Vietnam
Observing the table above about the size and number of M&A deal in
Between 2003 and 2013, Vietnam experienced a notable surge in M&A deals, particularly from 2006 to 2010, peaking at 345 deals after a stable period However, from 2010 to 2012, the number of M&A transactions sharply declined to approximately 157 deals Despite this decrease in the number of deals, the total value of M&A transactions reached its highest point at around 6.3 billion US dollars in 2011.
2012, there is a small decrease in value of M&A deals to approximately 4.9 billion US dollar.
Chuyên đề thực tập Tốt nghiệp
Figure 2.3: Number of M&A deals in 2011
In 2011, the M&A deals in small scale which has value less than 5 million
The M&A market is predominantly driven by USD transactions, comprising 148 deals, which accounts for approximately 55% of the total activity Following this trend, large-scale deals valued over 30 million USD represent around 20% of the market, with 51 transactions recorded The remaining 25% consists of deals valued between 5 and 30 million USD.
Chuyên đề thực tập Tốt nghiệp
Inbound is M&A deals which foreign companies acquire Vietnamese companies
Outbound is M&A deals which Vietnamese companies acquire foreign companies
Domestic is M&A deals which Vietnamese companies acquire Vietnamese companies
The chart above shows that M&A which foreign companies acquire
Vietnamese companies accounted the biggest part with 70% the total number of
M&A deals in 2011 Following type is domestic which Vietnamese companies acquire each other (24%) Finally, only 6% of all deals in 2011 are M&A which
Vietnamese companies are increasingly becoming targets for foreign acquisitions, particularly those struggling with inefficiency and financial challenges These foreign firms aim to expand their market share in Vietnam by acquiring local businesses that may benefit from new investment and management strategies.
Chuyên đề thực tập Tốt nghiệp
Mergers and acquisitions (M&A) are becoming increasingly essential for Vietnamese enterprises, particularly in today's developing economies These activities are gaining popularity across various sectors, highlighting the growing trend of M&A in the region.
In 2012, the banking sector experienced significant activity in mergers and acquisitions, marked by two hostile takeovers involving Sacombank and Southern Bank Additionally, strategic investments were made, including DOJI's investment in Tien Phong, highlighting the dynamic landscape of the industry during that year.
Bank and Viettel invested in MB Bank), an acquisition which Thien Thanh
Group acquired TrustBank and the a largest M&A deal in the history of Vietnam
In early 2013, after the transaction has been partially implemented, PVFC has officially announced its merger with Western Bank Earlier 3/2013, the
Government allowed Saigon Commercial Bank (SCB) to sell shares to foreign individuals.
Mergers and acquisitions (M&A) in the banking sector are anticipated to remain robust in the coming year, driven by the restructuring initiatives of the State Bank of Vietnam This strategic overhaul aims to decrease the number of commercial banks from 39 to an estimated 13-15 by 2017.
In Vietnam, except commercial banks, consumer finance services currently are provided by 8 financial companies and consumer finance In particular, the biggest companies providing consumer finance are Prudential
Finance, Société Générale Viet Finance (SGFV) and PPF.
Commercial banks, primarily focused on corporate credit, often experience high non-performing loan rates To address this issue, a strategic shift towards personal financial services, including consumer finance, has become essential As a result, many commercial banks are actively developing and promoting a diverse range of consumer finance services, leading to increased mergers and acquisitions among companies in this sector.
Chuyên đề thực tập Tốt nghiệp consumer finance which have available networks, processes and system is an effective strategy, however, there are not many such companies in this industry.
The consumer finance sector is expected to experience significant growth in mergers and acquisitions (M&A) due to its low market penetration and substantial potential for size and profitability However, the industry's advancement faces challenges, primarily related to new licensing issues.
However, this issue can be solve by the large financial institution acquiring small banks which have license but are in difficulties.
In 2012, foreign investors, including South Korea's Lotte and Japan's AEON, primarily focused on commercial and retail center projects, while apartment developments received less attention Mergers and acquisitions in this sector mainly involved foreign partners increasing their ownership stakes, such as Perdana Parkcity Malaysia, which raised its ownership from 75% to 100% in a joint venture.
Vinaconex Citadel before financial pressures and Vinaconex repayment.
In addition, there are a number of office buildings and resorts projects transferred to the bank in the form of bank loans deductible already overdue.
Most of the property is a capital structure of the debt are common features are already in operation and stable cash flow.
In 2012, Food and Beverages M&A deals are mainly small-scale business except for the $96 million that Masan Group bought 40% stake of Proconco and
$34 million that Ezaki Glico (Japan) bought 10% of Kinh Do Bakery, the remaining 15 deals valued at less than $10 million.
There is no hundreds of millions of dollars deals as in 2011 related to CP
Pokphand China - CP Vietnam ( 609 million dollars ) , Carlberg - Hue Beer ( $
94 million ) or Kirin - IFS ( 92 million USD) In 2012, M&A activities are now dealt in the niche market of Food and Beverage Specifically, nutritious dairy
Chuyên đề thực tập Tốt nghiệp products, Abbott of the United States buy 100 % stake 3A Nutrition Company
Vietnam, India's United Spirits bought stock of wine JSC Vietnam - Sweden ,
Japan's Kirin Group increase its ownership to over 80 % (from 57 %) of the
International Food company (IFS) ; Panga Holdco of Singapore bought 23.3%
Go Dang Seafood company, etc.
Major brands like Sabeco, Habeco, Vietnam Hanoi Beer, Dai Viet Beer,
Tan Hiep Phat will still be attractive for corporations in the industries, foreign corporations to investment or increase ownership or acquire properties.
Shareholders of large enterprises often face barriers to selling their stakes, primarily because they continue to benefit from strong performance and stable cash flow They typically choose to sell only when valuations reach significantly high levels.
In 2012, the cement industry witnessed four significant mergers and acquisitions, notably marked by Indonesia's PT Semen Gresik's $230 million acquisition of the Thang Long cement plant from Geleximco.
Gresik, Indonesia's largest state-owned cement corporation, aims to enhance its market position through strategic acquisitions, specifically to secure access to mining and exporting clinker materials in the Indo market, which has a high demand for cement Additionally, Gresik is not focused on grinding operations and is available for sale in the southern region of Thang Long.
In 2011, large domestic cement corporations intensified their acquisition strategies, targeting small cement firms and state-owned companies facing financial difficulties On May 7, 2012, Northern Cement Company successfully acquired a 31% stake in Yen Binh Cement as part of its restructuring efforts.
Yen Binh Cement Vinaconex Recently, the Government has accepted for The
Vissai to purchase entire Dong Banh Cement Joint Stock Company transfered from COMA.
M&A in the cement industry is forecasted to become more active in the next year due to inevitable trend of divestments restructuring.
Chuyên đề thực tập Tốt nghiệp
Setting up Post-merger process for M&A consulting service at MSC
2.3.1 Legal requirements for providing Post-merger consulting service:
According to Section 7, Article 60 Circular No 120/2012 TT-BTC of
According to the Ministry of Finance, securities companies are authorized to offer financial consulting services, which include advising on restructuring, mergers, consolidations, reorganizations, and business sales This implies that MSC must operate as a securities company to provide financial consulting services, particularly in the area of M&A post-merger activities.
In fact, MSC is a securities company which has established and operated since 2002 with certification of Business No 103001480 on October 14th, 2012.
Therefore, MSC has appropriate right to provide financial consulting service or
2.3.2 Situations Post-merger Integration service provided:
There are two situations that MSC can provide Post-merger consulting service:
- Companies which MSC provide M&A consulting service from the strategy planning step.
- Companies which are provided M&A consulting service by other consulting companies without the Post-merger Integration step and come to MSC to have consultancy of the final step.
MSC offers comprehensive M&A consulting services, which are structured into three key steps: M&A Strategy, Target Screening, and Transaction Execution This streamlined process ensures that clients receive expert guidance throughout their mergers and acquisitions journey.
Chuyên đề thực tập Tốt nghiệp
Figure 2.5: M&A consulting process at MSC
MSC help their clients to identify their strategic opportunities and impartially assess their relative capabilities to exploit these opportunities, identifying gaps that may be filled through acquisition.
MSC provides an unbiased assessment of potential value and feasibility in acquisitions The company establishes criteria to identify suitable acquisition targets and potential buyers for divested assets All recommendations from MSC are based on a comprehensive understanding of the transaction landscape, including market dynamics, competition, and regulatory factors.
With an M&A strategy firmly in place, finding the right partner is the first step in a value-based M&A process.
MSC assists companies in identifying strategic, financial, and organizational screening criteria that effectively narrow down potential targets, thereby enhancing the likelihood of successful and value-generating transactions.
Chuyên đề thực tập Tốt nghiệp then able to execute target screening assignments within the required timeframes to generate a short-list of potential high value acquisition candidates.
MSC has experience that driving value from acquisitions demands an overwhelming focus on understanding the sources and magnitude of merger benefits as well as the risks of achieving them.
MSC assists clients in identifying their target markets and opportunities to streamline operations, enhance baseline performance, leverage economies of scale, and create additional value by effectively utilizing the combined resources of both acquiring and target companies By pinpointing and quantifying potential merger benefits, MSC establishes a benchmark for pricing, guides the negotiation process, and, crucially, sets the stage for rapid value extraction after the merger is finalized.
A comprehensive understanding of the target company, extending beyond publicly available data such as annual reports, statutory filings, and press releases, is crucial for making informed decisions during the M&A process.
MSC undertakes rapid strategic and financial position assessments of potential targets to inform all stages of the M&A process, including pricing negotiations, deal structure and takeover defense.
All too often companies forget that winning in the M&A arena is not just about securing the right assets but the right assets at the right price.
MSC helps clients to develop the approach, negotiations and market communications strategies to achieve a win-win transaction at a win-win price.
Chuyên đề thực tập Tốt nghiệp
MSC ensures a value-driven and unbiased approach during the transaction process, facilitating seamless execution and quick adjustments to strategies and tactics as the landscape changes, informed by new information, competitive strategies, and target behaviors.
2.3.4 Setting up Post-merger process for M&A consulting service at MSC
After studying the Post-merger Integration process of a numbers of international M&A transactions, this following Post-merger Integration process is proposed for MSC to complete their M&A consulting service:
Figure 2.6: Post-merger Integration process proposed
(Source: PWC) Phase I: a, Set the course:
Articulate the strategy for the combined company: Since one new entity is generated through a merger process, the new company or function does not have
The graduation internship topic emphasizes the importance of strategy from the outset A well-defined strategy is crucial in business as it significantly impacts overall results Consequently, new companies must develop a strategy that fosters growth and maximizes benefits.
After a merger, it is essential to evaluate the level of integration achieved and identify any non-negotiable elements that cannot be merged Understanding the current situation of the company will enable leaders to develop effective solutions and prevent potential issues, ensuring a smoother transition and minimizing risks.
Identify and protect core operations out of integration scope: This will help the company maintain their advantage and core value.
Customize the integration structure and approach: Choose the suitable model of structure will help company receive optimal result.
Designate integration leadership at all levels and establish the Integration
Effective management involves assigning leadership roles to specific employees, ensuring clear responsibility for tasks This approach minimizes conflicts over managerial positions and enhances organizational efficiency Integration management plays a crucial role in coordinating these efforts, fostering collaboration and alignment within the team.
Office will help the integration happen smoothly and solve the problem about the integration quicker.
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Creating and implementing an effective communication plan is essential for maintaining strong relationships with customers, employees, and stakeholders This proactive approach not only fosters ongoing engagement but also mitigates the risk of losing valuable customers or suppliers.
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Immediately after closing, a welcoming letter or individualized e-mail is to be sent to the employee of the acquired entity Ideally the message is translated into local language, including:
Welcoming words from the CEO or top manager
New location (ensure that every transferring employee is assigned a work place and is aware of it)
Who to contact for questions/answers etc.
The buyer’s corporate communications function should arrange for all customers to be sent a letter informing them about the acquisition and anticipated changes from their point of view.
Key customers should also be individually contacted by sales individuals and management, where appropriate
Identify all important vendors and partners that need to be informed
Prepare a letter informing about the acquisition and anticipated changes
Co-ordinate with corporate communications function for a unified message b, Plan for “Day one”:
On Day One following a change of ownership, it is essential for all functions to collaborate effectively, aligning their tasks and personnel with the support of the Integration Team to ensure a smooth transition.
Develop 100 Day Plan including quick wins: Based on the design of
Future State, 100 Day Plan with specific actions will be built and makes sure that the future wanted will become true and satisfy the owner.
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Secure resources and implement retention programs
Chuyên đề thực tập Tốt nghiệp c, Design the future state:
To create effective functional and operational "to be" states, it is essential to align the company's goals and expectations with the owner's desires and available resources, ensuring that the final outcomes meet the owner's satisfaction and the organization's needs.
Identify, value, and prioritize key integration initiatives and synergies:
The integration initiatives and synergies will have to be addressed clearly Then, they will keep track and propose actions to achieve those initiatives and synergies.
To establish a robust organization, it is essential to develop a clear and effective organizational structure, which should be a top priority for every corporation Rapidly building this structure and appointing the right individuals to key positions will enable the company to progress sustainably.
To ensure a successful merger, it is essential to assess cultural differences and develop a cultural integration plan Cultural conflict often arises during mergers due to varying work habits and employee apprehension towards change Balancing managerial personnel from both companies in leadership roles can help mitigate conflicts and facilitate a smoother integration of the two corporate cultures.
Phase II: a, Create detailed Integration plan:
RECOMMEMDATIONS FOR LAUNCHING SERVICE
General comment
Mergers and acquisitions (M&A) are increasingly prevalent in Vietnam's business landscape, leading to a surge in M&A transactions This rise in activity has heightened the demand for specialized consulting services in the sector MSC stands out as a key financial institution offering expert guidance in M&A.
M&A consulting services are crucial for companies looking to enhance their competitive edge By effectively implementing the Post-merger Integration process, MSC can gain a significant advantage over its rivals However, as other financial institutions recognize the shortcomings in their own M&A consulting processes, they are poised to address these gaps, which will present new challenges for MSC in the competitive landscape.
MSC boasts a large and experienced financial consulting team that has played a pivotal role in numerous successful M&A transactions Their expertise enhances MSC's reputation and distinguishes it from other financial firms that offer M&A consulting services but lack a strong consulting team.
MSC offers competitive pricing for its services, charging approximately 1.3% of M&A deal values This pricing strategy raises customer awareness, especially considering that M&A deals often involve substantial amounts, such as $10 million USD.
M&A deal, MSC’s M&A consulting service is cheaper than usual 10 thousand
USD This feature is also an advantage of MSC
MSC leverages its extensive network of relationships with prominent companies, established through successful past deals These connections not only introduce MSC to new customers but also foster trust through positive endorsements, enhancing the company's credibility and appeal in the market.
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As competition intensifies among financial consulting firms, many are refining their service processes, which may diminish MSC's competitive edge in M&A consulting Additionally, an increasing number of securities companies are entering the M&A consulting market, further challenging MSC's position.
- In last few years, the number of M&A deals reduces significantly If this trend continues, M&A consulting market will be more competitive and not profitable anymore.
Research process
In this thesis, the main method used to gather data and information is
- Theoretical background of M&A in text books, thesis and lecture’s materials.
- Market information and opinions in Newspaper and websites
- Laws and regulations published by the government.
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Chapter 1: Theoretical background on M&A consulting service at securities company
Chapter 2: Setting up Post-merger Integration process for M&A consulting service at MSC
Chapter 3: Recommendations for launching process
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CHAPTER 1 - THEORETICAL BACKGROUND ON M&A CONSULTING
Mergers and acquisitions (M&A) are crucial elements of corporate strategy and finance, focusing on the buying, selling, and combining of companies to facilitate rapid growth in existing markets or to enter new sectors and locations This approach allows enterprises to expand without the need for subsidiaries, child entities, or joint ventures.
M&A transactions can vary significantly in size, from multi-million dollar mergers of large corporations to smaller deals involving the sale of a company's assets to investors or competitors While the public may view these deals as threatening to jobs, they are often motivated by a company's need to refinance or restructure to enhance shareholder value and gain a competitive edge Ultimately, acquisitions aim to improve competitiveness and cost-efficiency while expanding market share.
Under Article 17 of Vietnam's 2004 Law on Competition, a merger is defined as the transfer of all lawful assets, rights, obligations, and interests from one or more enterprises to another, resulting in the termination of the merging enterprise(s) In contrast, an acquisition refers to one enterprise purchasing all or part of another enterprise's assets, which must be sufficient to constitute a significant portion of that enterprise.
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1.1.2.1 Classification based on approaching types
-Merger is the case when the boards of directors of two firms agree to combine and seek stockholder approval for the combination In most cases , at least
50 % shareholders of the acquired company and the acquiring company agreed to the merger The target firm ceases to exist and becomes part of the acquiring firm.
One typical example for this type of M&A is the case of Hanoi Building
Commercial Joint Stock Bank (Habubank) and Saigon – Hanoi Commercial Joint
Stock Bank (SHB) Habubank is 100% merged into SHB.
-Consolidation is a type of M&A which the acquired company and the acquiring company combine and form into a new legal entity In most cases, at least
In a successful merger, 50% of shareholders from both the acquired and acquiring companies must agree to the transaction A notable example of this type of merger and acquisition (M&A) is the collaboration between Sony and Ericsson Sony, known for its expertise in producing music players, joined forces with Ericsson, a leader in mobile phone manufacturing, to create Sony Ericsson This partnership resulted in the development of mobile phones that offer superior music features compared to competitors in the market.
A Tender Offer occurs when a company seeks to acquire shares from a target firm to gain control over its board of directors The acquiring firm typically bids for a substantial number of shares at a premium price, incentivizing the target firm's shareholders to sell their stakes This approach allows the acquiring company to bypass the need for board approval, which often leads to the perception of the transaction as a hostile takeover.
As long as the acquiring firm collects enough amounts of shares of the target then it could turn out to be a merger
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Acquisition of assets is a form of mergers and acquisitions (M&A) where the acquiring company purchases all the assets of the target company, leading to the eventual dissolution of the latter This strategy is often utilized for firms with significant tangible fixed assets, including factories and machinery A notable example of this is the case of Kinh Do.
Corporation buying out the Unilever’s Wall ice cream machinery system is an illustration for the acquisition of assets.
-Individual buyout is the separated type of M&A compared to other 4 types.
In an individual buyout transaction, an individual or a group of investors aims to acquire a controlling interest in a target firm, typically through a tender offer When members of the management board are involved, this is referred to as a management buyout Conversely, if the acquisition is financed through borrowed funds, it is known as a leveraged buyout, where the firm's cash flow is utilized to repay the borrowed capital.
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Figure 1.1: Classification of M&A base on approaching types.
(Source: Takeovers, Restructuring and Corporate Governance)
1.1.2.2 Classification based on the relation between products
A horizontal merger is a business consolidation between companies within the same industry, often involving competitors that provide similar goods or services These mergers are prevalent in markets with fewer firms, where heightened competition increases the potential for synergies and significant market share gains for the merging entities.
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A vertical merger occurs when two companies that produce different goods or services for a specific finished product combine their operations This type of merger typically involves firms at different levels of an industry’s supply chain The primary rationale behind a vertical merger is to enhance synergies and improve efficiency by operating as a single entity.
-Market-extension merger: Two companies that sell the same products in different markets
-Product-extension merger: Two companies selling different but related products in the same market
A conglomerate is a corporation that encompasses various seemingly unrelated businesses, with a parent company holding a controlling stake in multiple smaller subsidiaries Each subsidiary operates independently, managing its own business activities, while still reporting to the senior management of the parent company This structure allows for diversified operations under one corporate umbrella, enhancing financial stability and growth potential.
1.1.2.3 Classification based on geographical location
-Domestic merger: A merger occurs between firms inside a country
-Cross-border merger: A merger occurs between firms in different countries, usually used as one of the most effective investment approach of companies into new markets
1.1.2.4 Classification based on the attitude of target firms toward the merger
A friendly takeover occurs when a target company's management and board of directors consent to a merger or acquisition by another firm In this process, the acquiring company typically presents a public offer of stock or cash, which the target company's board publicly endorses However, this agreement may still require approval from shareholders or regulatory bodies before it can be finalized.
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A hostile takeover occurs when one company (the acquirer) acquires another company (the target) without the target's management agreement, instead approaching the target's shareholders directly or attempting to replace management This aggressive acquisition strategy can be executed through a tender offer or a proxy fight.
Undervalued firms present lucrative acquisition opportunities for investors who identify market mispricing, allowing acquirers to profit from the difference between the company's true value and the purchase price For this acquisition strategy to be successful, three essential elements must align effectively.
Investors with the ability to identify companies trading below their intrinsic value possess a significant advantage in the market This skill necessitates access to superior information or advanced analytical tools that surpass those utilized by other market participants.
Access to the necessary funds for an acquisition is crucial, as identifying an undervalued firm does not guarantee easy capital availability Larger firms typically have better access to capital markets and internal resources compared to smaller firms or individuals Additionally, an acquirer's track record plays a significant role; a proven history of successfully identifying and acquiring undervalued firms can facilitate future acquisitions.