INTRODUCTION
BACKGROUND
Mergers and Acquisitions (M&A) have emerged as a significant driver of strategic change in businesses globally The frequency of M&A activities is on the rise across various industries in Europe, the US, and worldwide.
In recent years, Vietnam has witnessed a surge in mergers and acquisitions (M&A), particularly within the financial sector, including securities companies The Vietnam Stock Market has experienced significant growth over the past decade, expanding from just 8 securities firms in 2001 to 105 today However, the recent global economic crisis has negatively impacted the Vietnamese economy and led to a contraction in the stock market This situation underscores the urgent need for a comprehensive review and restructuring of the Vietnamese securities industry to improve service quality and achieve sustainable development, with M&A emerging as a viable solution.
The aim of this study is to give an overall picture of M&A and proposed solutions to improve M&A in securities industry in Vietnam.
MOTIVATIONS
Despite numerous reports on mergers and acquisitions (M&A) across various industries in Vietnam by esteemed experts and academic institutions, there remains a scarcity of academic research specifically focused on the M&A landscape within the securities industry Most existing studies are limited to articles or essays that merely identify problems or suggest solutions from a singular perspective This study aims to address the gaps in the current literature by offering a comprehensive, multi-faceted analysis of M&As in Vietnamese securities companies Additionally, it will propose practical solutions to enhance M&A practices in the Vietnamese securities sector based on a thorough examination of the current realities.
PRESENT THE PROBLEM
This study aims to analyze the growth of mergers and acquisitions (M&As) within the Vietnamese securities sector and to explore potential solutions for enhancing the current landscape The central inquiry guiding this research is focused on understanding the dynamics and implications of M&As in this market.
“How to create the most favorable conditions to develop M&As in securities in Vietnam?”
To fully understand the topic, it is essential to address two key questions: first, what advantages drive Vietnamese securities companies to pursue mergers and acquisitions (M&As), and second, what primary challenges impede this trend?
The first sub-question analyses the main causes of the increasing demand for M&As in Vietnamese securities companies
The second sub-question investigates the obstacles that hamper the trend Each issue is presented separately and detailedly to bring readers the clearest look at the topic.
THESIS DISPOSITION
The article begins with an overview of the study's motivation, problem statement, research methodology, and limitations It then delves into the theoretical framework surrounding mergers and acquisitions (M&As) in the securities industry Following this, the advantages and disadvantages of M&As for securities firms are thoroughly analyzed Finally, the article offers proposed solutions to the research questions based on the findings from the preceding analysis.
RESEARCH METHODOLOGY
The adductive approach is suitable for this study as it integrates theories with practical applications, subsequently generating new theoretical contributions from observed practices The author employs quantitative methods to gather foundational data before addressing the research question, while qualitative research is utilized to explore the motives behind mergers and acquisitions (M&As) in the Vietnamese securities industry This qualitative analysis allows for an in-depth investigation of the phenomenon, offering insights into the perspectives of the individuals involved (Walliman, 2006) Utilizing an exploratory approach, the author seeks to address the research problem, as exploratory studies are often conducted to fulfill the researcher’s curiosity and enhance understanding (Babbie, 1989) This method is particularly effective for examining new or under-researched subjects, as well as persistent phenomena.
The author employs content analysis, a research method that involves the examination of written documents such as newspaper articles, to investigate various situations and issues One of the primary benefits of content analysis is its unobtrusiveness, as the documents are pre-existing and cannot be altered during the study However, it is important to note that this method is confined to analyzing recorded communications (Babbie, 1989).
The report's author begins by analyzing the organization's publications and news to identify key issues, systematically gathering and categorizing common factors into distinct groups, while assuming the accuracy of all published information.
Conducting research in a specific field often faces challenges due to limited time and resources for analyzing new and relevant data The validity of a study largely depends on the information accessible to the researcher Despite efforts to gather comprehensive data, companies, particularly in the Vietnamese securities sector, seldom disclose detailed information about mergers and acquisitions (M&A) deals.
The findings of this study are relevant to the current situation in Vietnam and may evolve with changing market conditions The analysis relies on the author's subjective assessment of qualitative data, making it challenging to eliminate bias However, to mitigate this issue, the author has cross-referenced multiple sources to support the conclusions drawn.
THEORETICAL FRAMEWORK ABOUT M&A OF
MERGERS AND ACQUSITIONS OVERVIEW
2.1.1 Definition of mergers and acquisition
A merger is defined as the combination of two companies into one, while an acquisition involves the purchase of one company by another, including the acquisition of assets (Oxford Dictionaries, 2012) According to Encyclopedia Britannica, a merger can occur when one firm purchases the assets or shares of another using cash or securities (EB, 2012) Gaughan (2011) notes that in a merger, only one corporation survives, rendering the other entity obsolete Epstein (2005) differentiates mergers as a union of two equal companies, whereas acquisitions involve integrating a smaller company into a larger one Despite the notion that mergers involve relatively equal partners, they often function as acquisitions, with one company exerting control over the other.
2.1.2 Distinction between Mergers and Acquisitions
Although they are often uttered in the same breath and used as though they were synonymous, the terms merger and acquisition mean slightly different things
A merger involves two or more companies combining to form a stronger entity, whereas an acquisition occurs when one company takes control of another by purchasing a majority stake In an acquisition, the acquiring company becomes the new owner, leading to the dissolution of the target company from a legal perspective.
"swallows” the business and the buyer's stock continues to be traded
A merger, often termed a "merger of equals," occurs when two companies of similar size decide to unite as a single entity instead of continuing as independent operations In this process, the stocks of both companies are relinquished, and new shares are issued for the combined company A notable example of this is the merger between Daimler-Benz and Chrysler, which resulted in the formation of the new company, DaimlerChrysler, effectively dissolving both original firms.
Actual mergers of equals are rare; typically, one company acquires another while allowing the acquired firm to label the transaction as a merger This terminology is often used to mitigate the negative perceptions associated with being bought out In cases where both CEOs agree that the merger benefits both companies, it may be referred to as a merger However, in hostile takeovers, where the target company resists the acquisition, the deal is always classified as an acquisition.
The distinction between a merger and an acquisition hinges on the nature of the purchase—specifically, whether it is friendly or hostile—and the manner in which it is announced Essentially, the key difference is rooted in how the transaction is communicated to the target company's board of directors, employees, and shareholders.
2.1.3.1 Types of M&A by functional roles in market
The M&A process itself is a multifaceted which depends upon the type of merging companies
A horizontal merger occurs when two companies within the same industry join forces, such as one healthcare system acquiring another This strategic move can lead to various synergies, including enhanced market share, cost reductions, and the exploration of new market opportunities.
A vertical merger occurs when a business acquires its supplier, exemplified by a healthcare system purchasing ambulance services from its service providers This type of merger aims to lower operational overhead costs and achieve economies of scale.
Conglomerate mergers and acquisitions (M&A) involve the merger of two unrelated companies, such as a healthcare system acquiring a restaurant chain The primary goal of this type of M&A is to diversify capital investments and reduce risk by entering different industries.
An arm's length merger is a merger:
1 Approved by disinterested directors and
The two elements work together rather than replace each other The first element highlights the directors' role as capable and proactive bargaining agents, a function that disaggregated stockholders lack However, due to the potential ineffectiveness or unfaithfulness of these agents, the second element is essential, as it empowers minority stockholders to reject the decisions made by their agents.
A strategic merger involves the long-term acquisition of a target firm, focusing on creating synergies that enhance market share, expand the customer base, and strengthen corporate capabilities Strategic acquirers often offer a premium to the target firm, anticipating the value generated through the merger and acquisition process.
Mergers occur when companies believe that their combined strengths will create greater value than operating independently, often summarized by the idea that "1+1=3" or "2+2=5." Strategic and financial motivations for mergers include enhancing market share, achieving cost efficiencies, and accessing new technologies or markets.
The emergence of two firms through acquisition presents an opportunity for large-scale production, significantly reducing the per unit cost by optimizing resource utilization This cost reduction is particularly evident in horizontal acquisitions, where companies in the same industry increase production capacity By acquiring unused production facilities, firms can lower their overhead costs per unit For instance, Tata Teleservices' acquisition of VSNL exemplifies how economies of scale can be achieved Ultimately, these large-scale operations enable companies to pass on lower per unit costs to consumers.
Mergers and acquisitions (M&A) primarily drive growth, a measurable objective that many firms pursue to gain a sustained competitive advantage By expanding their size, companies aim to strengthen their market position and create effective barriers against competition Additionally, M&A provides access to new markets, allowing firms to leverage the acquired company's sales organization, market knowledge, and established relationships to enhance their own sales efforts.
A company strives to become a market leader by engaging in mergers and acquisitions (M&A) with its competitors When these M&A deals are substantial, they can lead to monopoly gains, allowing the firms to achieve above-normal profits This dominant market position not only enhances the company's bargaining power but also contributes to increased profitability.
Mergers and acquisitions (M&A) within the same industry can effectively reduce competitive uncertainty By diversifying their activities across different business lines, firms can minimize risks and stabilize revenues This strategy helps companies avoid sales and profit volatility, sidestep unfavorable growth trends, and mitigate adverse shifts in competition.
M&A SECURITIES COMPANIES
A securities company primarily engages in securities brokerage, financial advisory services, investment banking, and securities trading While investment management may be offered, it is not the main focus of these firms.
According to Article 60 of the Vietnam Securities Law (2006), securities companies are authorized to conduct various business operations, including securities brokerage, proprietary dealing, underwriting for securities issuance, and providing securities investment consultancy.
Brokerage involves a securities company executing stock and bond trades on behalf of clients Authorized brokers within the company handle buy and sell orders, subsequently updating clients on transaction outcomes Clients are charged a securities commission for these services.
Proprietary trading involves a company trading stocks and bonds for its own profit, either on centralized trading markets or over-the-counter (OTC) markets To engage in proprietary trading, securities firms must comply with legal capital requirements.
Underwriting is a commitment made by a securities company to the issuer, ensuring the completion of the public offering process The firm agrees to purchase any unsold shares on a pro rata basis, based on their initial commitments.
This is a business in which securities companies provides investors with analysis results, analyzing reports and advices on securities trading
Securities company offers customers depository services and payment service, registration service for private placement of securities
In this sector, securities company plays the role of consultant who gives customers advice on financial aspects such as restructuring organization, M&A, investment portfolio management, margin transaction …
2.2.2.1 Definition of M&A of securities companies
M&A of securities companies is defined as M&A between two securities companies or a securities company and other organization, commonly financial organization
2.2.2.2 Features of M&A of securities companies
The business of securities companies revolves around unique assets, with price fluctuations significantly impacting the nation's economy Consequently, government and regulatory bodies closely monitor industry developments In addition to the general factors influencing successful mergers and acquisitions (M&As), the M&A process for securities firms necessitates attention to various industry-specific considerations.
Mergers and acquisitions (M&A) in securities companies differ significantly from those involving general enterprises Notably, the Securities Law lacks specific definitions for M&A concepts such as demerger, consolidation, merger, and enterprise conversion, which are addressed in the Competition Law.
The demerger, consolidation, merger, and conversion of Securities Companies are governed by the Competition Law and the Enterprises Law A key distinction between the M&A processes for Enterprises and Securities Companies is that the latter must submit their application to the Securities Commission for approval before proceeding with any changes This requirement exists because Securities Companies serve as intermediary financial organizations within the Securities Trading Centre, and any significant alterations can profoundly affect socio-economic activities.
To ensure effective integration, the buyer must thoroughly understand the products offered, executed, cleared, advised, or managed by the target company This knowledge is essential for assessing the alignment and potential success of the acquisition.
- The buyer will need any transitional services
- The buyer has comparable product offerings that it would like to integrate with the target’s products
- There will be any issues involved with converting the target’s customers over to the buyer’s platform
The success of acquiring a securities company largely hinges on the revenue generated by the acquired business, primarily from commissions and fees associated with customer accounts To ensure customer retention post-acquisition, buyers focus on maintaining the relationship between clients and their registered representatives, making representative retention crucial in securities industry mergers and acquisitions (M&A) This often necessitates offering financial incentives to representatives to remain with the firm and grow their business after the acquisition Consequently, when structuring the purchase price and adjustments, buyers must carefully consider the compensation structure in the transaction agreement to avoid compensating for value created during the seller's ownership.
In the securities industry, companies are obligated to maintain their books and records for a specified duration, ensuring they can be readily accessed by regulators upon request Therefore, prospective buyers should carefully evaluate the management of both current and historical records associated with the target company.
In the event of a merger between securities companies, the newly formed entity will assume all rights and obligations previously held by the merging companies towards their investors Should any conflicts arise regarding these commitments, the involved parties are expected to reach a mutual agreement If an agreement cannot be achieved, they must adhere to prior commitments or take actions that prioritize the interests of the investors.
HISTORY OF M&A OF SECURITIES COMPANIES ALL OVER
M&A activity among securities companies has been prevalent globally, particularly in the USA, where numerous cases have been recorded alongside market fluctuations A significant growth phase for these companies began in 1975 with the removal of fixed commissions, which fostered increased competition and innovation in financial instruments However, the market crash in November 1987 severely impacted revenues and profits within the securities industry, intensifying competition among banks, insurance firms, and financial consultancies In response, securities companies shifted their focus towards consultancy and fund management services while also engaging in M&A to enhance profitability through economies of scale Additionally, large securities firms pursued acquisitions of insurance companies and other financial entities to bolster their market positions, exemplified by Kemper's acquisition of five brokerage agencies across various regions.
The number of securities companies decreased significantly from a peak of 9,515 in 1987 to 7,610 by 1992 However, between 2000 and 2009, mergers and acquisitions (M&A) flourished, resulting in numerous high-value deals that provided substantial benefits During financial crises, M&A played a crucial role in preventing bankruptcy for many firms, exemplified by JP Morgan Chase's acquisition of Bear Stearns for $240 million, which marked the end of the 85-year independent operation of one of Wall Street's largest banks.
Amidst the challenges posed by the financial crisis, the M&A market on Wall Street is undergoing significant restructuring In early 2009, two major deals emerged: Citigroup sold 51% of Smith Barney to Morgan Stanley for $2.7 billion, leading to the formation of Morgan Stanley Smith Barney, which now manages $17 trillion in customer accounts and generates annual earnings of $14 billion Additionally, Bank of America acquired Merrill Lynch for approximately $50 billion, or $29 per share, solidifying Merrill Lynch's status as a leading securities firm before the crisis This acquisition enabled Bank of America to inherit around 17,000 securities counselors and manage $1.6 trillion in customer funds, making it the largest broker globally with over 20,000 counselors and total assets of $2 trillion.
The M&A market in the U.S during the 19th century was vibrant, driven by a robust competition law system and proactive adjustments by the Department of Justice (DOJ) The first wave of M&A, from 1897 to 1907, saw the introduction of the Sherman Antitrust Act, while the second wave, spanning World War I until the stock market crash of 1929, was complemented by the Clayton Act, which established the Federal Trade Commission to oversee business practices The third wave, from 1965 to 1969, was shaped by the Celler-Kefauver Act, and the flourishing of M&A securities firms characterized the fourth wave (1981-1989) and fifth wave (1993-2000), as the legal framework for M&A matured Similarly, M&A activity in the securities industry is significant in both developed and emerging markets Taiwan's stock market saw a rise from 28 securities companies in 1988 to 297 in 1990, before plummeting to 48 companies Thailand experienced a similar trend, with the number of securities firms dropping from over 200 to around 50 China's stock market also faced a decline, with the number of securities firms falling from 2000 to 134 by 2004, following the closure of several bankrupt firms between 2002 and 2003 The China Securities Regulatory Commission (CSRC) implemented a supervision strategy categorizing firms by risk levels, with a focus on supporting stronger firms while eliminating those with high risks and illegal activities On July 29, 2005, the State Council announced a Comprehensive Plan for Consolidation of Securities Firms, aimed at restructuring the industry to mitigate risks and enhance regulatory frameworks over a two-year period.
CURRENT SITUATION OF M&A IN VIETNAMESE
OVERVIEW OF VIETNAM’S STOCK MARKET
The health of securities companies is closely tied to stock market fluctuations Vietnam's stock market experienced significant growth from July 2000, peaking at 1,711 points in March 2007 during a major boom from 2006 to 2009 However, this rapid rise was followed by a sharp decline, with the VN-Index plummeting to 288.85 points by March 2009, marking one of the market's darkest periods.
Source: http://www.hsx.vn
In 2012, Vietnam Stock Market underwent two reverse trends In the first half of the years, there was a significant increase in VN-Index by approximately 150 points from 340 to 480 points
Source: http://www.stoxplus.com/
The trend was driven by two causes:
1 The inflation rate declined dramatically from over 20 percent in 2011 to about 7 percent Consequently, it pushed interest rates to decrease by 5 percent
2 In the end of 2011, the prices of securities plunged and investors believed the market hit the trough Meanwhile, State Bank of Vietnam started to allow small commercial banks to borrow via rediscounting channel
In late May, the Vietnam Stock Market experienced a decline due to the public debt crisis in European countries While global stock markets faced volatility throughout May, they rebounded in the latter half of the year following temporary solutions in Europe and the implementation of the U.S "QE3" package Unfortunately, despite the recovery of most stock markets surpassing their May peaks, the Vietnam Stock Market continued to trend downward.
Diagram 3.3: Comparison of Vietnam Stock Market and regional markets
Source: http://www.stoxplus.com/
The sluggish market since May has been primarily driven by the problem of bad debts within the commercial banking system, significantly impacting the economy Additionally, the negative repercussions from the arrests of Bau Kien, co-founder of ACB, have further exacerbated the situation.
Ly Xuan Hai, general director of ACB… worsened the situation
3.2 CURRENT SITUATION OF M&A SECURITIES COMPANIES
3.2.1 Current operation of Vietnam’s securities companies
Turning back to Vietnamese securities companies’ business, it is clearly seen that 2012 was still a challenging year According to statistics, there are
106 securities companies with total of 125 branches, 70 transaction offices, decreasing 20 branches and 11 transaction offices compared to 2011 Over fifty percent of securities companies suffered heavy losses in 2012 and over
70 percent of them experienced accumulative losses In 2012, 11 securities companies were put under special watch, 4 securities companies withdrew their operations, 3 securities companies were suspended, 4 securities companies were revoked licenses
Table 3.1 Ten companies with greatest losses in 2012
Code Name Stock exchange Profit after tax 2012
SBS Sacombank Securities company HSX -127.581.533.274
PHS Phu Hung Securities Company HNX -101.465.661.440
SVS Sao Viet Securities company HNX -34.139.736.191
Source:http://www.cophieu68.com/
In the first quarter of fiscal 2013, a report on 93 securities companies revealed that 31 experienced losses while 62 reported profits Notably, 25% of the profitable companies achieved only modest gains, amounting to several hundred million dongs.
Diagram 3.4 Profit of Vietnam securities industry in Q3/2013
Profit of secutitites companies Q1/2013 profit < 1 profit 1-10 profit 10- 50 profit>100 loss > 5
Source: http://www.ssc.gov.vn
Total profit of securities industry in the first quarter of 2013 was 585 million dongs, decreasing 27 percent compared with that of 2012
Diagram 3 5 Top 10 profit-makers in Vietnam securities industry
Source: http://www.cophieu68.com/
While the quarterly losses were not as severe as those experienced in the same period last year, they have contributed to an increase in the overall accumulated losses faced by securities companies.
Diagram 3.6: Top 10 losers in securities industry in Q1/2013
Source: http://www.hsx.vn
3.2.2 Overall picture of M&A of securities companies in Vietnam
Mergers and acquisitions (M&A) in the securities industry have become a significant topic in various emerging markets In Taiwan, the number of securities firms surged from 28 in 1988 to 297 in 1990, before plummeting to just 48 Similarly, during China's stock market boom, the number of securities companies reached around 2,000, only to sharply decline to 70 Thailand experienced a comparable downturn, with its securities firms dropping from 200 to merely 50.
Table 3.2: Number of securities companies in some countries
Total value of market (billion USD)
Total transaction value per day(billion USD)
Source: http://www.saga.com.vn/
Between 2008 and 2010, there was a notable trend of mergers and acquisitions (M&A) involving foreign and local securities companies in Vietnam, driven by the promising potential of the country’s stock market At that time, only about 1.5% of the Vietnamese population had investment accounts, compared to neighboring countries like Taiwan, where the number of accounts was roughly equivalent to the population Additionally, as developed markets approached saturation, foreign securities firms sought new growth opportunities in emerging markets like Vietnam, where the top five domestic firms held significant market share.
Table 3.3: Cases of M&A securities companies in period of 2008-2010
Morgan Stanley Huong Viet Securities Click and Phone
Securities Companies Golden Bridge 49% Click & Phone
Source: http://www.muabansapnhap.com/
During the period, local securities firms in Vietnam experienced significant acquisitions by both foreign institutions and domestic players Notable minority investments from foreign investors in 2011 included SBI's investment in FPTS and Nikko Cordial's acquisition of Petrol Securities Inc Additionally, there were key controlling stake transfers among domestic firms, such as Maritime Bank's acquisition of Standard Securities Inc and Xuan Thanh's purchase of Vincom Securities.
Table 3 4 Cases of M&A securities companies in 2011
FPT SECURITIES (FPTS) SBI HOLDINGS INC FPT SECURITIES (FPTS) PETROL VIETNAM
SECURITIES INC (PSI) NIKKO CORDIAL PETROL VIETNAM
COMPANIES CITI GROUP Horizon securities
Source: http://www.muabansapnhap.com/
Despite support from numerous experts and enterprise managers for the promotion of mergers and acquisitions (M&A) among securities companies, the actual development of M&A activities in Vietnam has fallen short of expectations.
2012, there was no official announcement of any M&A case in securities industry, which showed that the supposedly inevitable trend is not prevalent
3.2.3 Analyzing advantages and disadvantages of M&A securities companies in Vietnam
3.2.3.1 Advantages of M&A securities companies in Vietnam
The Vietnam stock market is facing intense competition due to an oversupply of operational securities companies, with 105 brokerage houses vying for a relatively small market volume of VND 500-600 billion daily on both HOSE and HNX Despite brokerage being the primary function of these firms, the top 10 brokers, including HSC, SSI, and FPT Securities, control 60% of the market share, leaving over 90 other companies struggling for a diminishing share of profits With transaction fees ranging from 0.15% to 0.3%, many small and medium-sized securities firms are experiencing significant losses, as they heavily depend on brokerage and custody services.
Diagram 3.7 Market shares in brokerage of Vietnam securities companies in Q1/2013
Source: http://www.stockbiz.vn/
Compared to neighboring countries like Thailand, Indonesia, and Singapore, Vietnam's stock market generates income from transaction fees that is significantly lower, ranging from 20 to 40 times less Despite this disparity, the number of securities companies operating in Vietnam is double that of these other nations.
Dissolving securities companies is challenging due to complex procedures, regulations, account settlements, debt payments, contract liquidations, assets, and tax issues Additionally, the involvement of third parties, such as investors, commercial banks, and shareholders, complicates the process Therefore, mergers and acquisitions (M&A) are seen as a more effective solution to reduce the number of securities firms while allowing smaller companies to enhance their business performance.
Securities companies facing consecutive quarterly losses struggle with capital mobilization in the current market conditions This challenge has led many small, emerging firms to explore merger and acquisition (M&A) opportunities At the same time, larger companies are looking to acquire smaller firms to facilitate restructuring, operational changes, and adjustments to their chartered capital.
- Acquire available technology and market products
The evolution of the stock market has led to a diverse array of financial products and services, prompting securities companies to innovate, particularly in software that streamlines customer account management Advancements in technology enable these firms to build customer trust and boost their competitive edge Mergers and acquisitions (M&A) serve as an effective strategy for securities companies to access cutting-edge technology, exemplified by the merger between Golden Bridge and Click and Phone Securities.
Company in which Golden Bridge aimed at a popular software of Click and phone Securities Companies, iClick Pro Iphone
- Low growth of securities companies
SOLUTIONS TO IMPROVE M&A IN SECURITIES
SOLUTIONS FROM LEGAL FRAMEWORK
The M&A of securities companies in Vietnam is an emerging trend, yet it operates within a vague legal framework Current regulations are scattered across various legal documents, including the Civil Code, Enterprises Law, Investment Law, Competition Law, and Securities Law As M&A transactions are fundamentally financial and commercial, there is a pressing need for specific regulations that address critical aspects such as enterprise sales, pricing, legal entity transfers, and financial obligations Additionally, essential issues like auditing, valuation, consultancy, brokerage, and information confidentiality remain unaddressed To rectify this, the Ministry of Planning and Investment (MPI) is drafting a Decree aimed at establishing a clear legal framework for M&A involving foreign entities, particularly focusing on harmonizing ownership ratios for foreign investors, which currently lack consistency across existing laws.
To enhance mergers and acquisitions (M&A) in the securities sector, it is essential to implement a preferential tax rate for companies involved in M&A activities A significant barrier to M&A in this industry is the lack of investor interest in smaller securities firms, despite many of them actively seeking partners By offering targeted tax and financial incentives, potential M&A practitioners may be more inclined to engage with these smaller companies Furthermore, the government and relevant authorities should establish clear guidelines to facilitate a more favorable environment for M&A in the securities industry.
SOLUTIONS FROM WATCHDOG AGENCIES
To foster mergers and acquisitions (M&A) in enterprises, especially within securities companies, it is essential to adopt practical measures M&A transactions typically remain confidential until all parties involved finalize agreements through documentation Establishing a professional M&A market requires the implementation of specific tasks.
4.2.1.1 Attach more importance to information transparency
Information is crucial in mergers and acquisitions (M&A) as it allows parties to accurately assess deal values Management agencies must implement regulations for enterprise information disclosure, particularly in the securities industry Many securities firms fail to report financial indicators accurately, leading to confusion among both foreign and local investors interested in M&A transactions To enhance the transparency of published reports, it is essential to enforce strict standards for accounting, auditing, and the supervision of securities companies' financial accounts.
The M&A market, especially within securities firms, requires the expertise of specialists in law, finance, and trademarks, along with a significant pool of skilled professionals to ensure successful transactions However, the Vietnamese labor market currently faces a shortage of highly qualified personnel in this emerging field, leading to a gap between demand and available talent.
Consequently, to develop this highly qualified manpower is a must in order to satisfy the requirements of M&A deals, particularly in transactions with foreign partners
The challenges facing securities companies stem not only from a bearish market but also from significant internal issues, including rampant illegal activities such as misappropriation of client funds, yield guarantees in discretionary accounts, and market manipulation While these actions generated substantial profits during rising share prices, they have led to considerable losses and increased pressure on management during periods of decline This instability also negatively impacts M&A practitioners, discouraging their participation in the market To enhance the securities industry in Vietnam, regulatory agencies must closely examine company operations and improve corporate governance and operational capacity This can be achieved by establishing regulations on capital levels, implementing risk management guidelines, and aligning securities business ratings with international standards for better classification and supervision.
SOLUTIONS FROM SECURITIES COMPANIES
To reach successful M&A practice, securities companies should take following issues into account: due diligence, cultural factors and implementation difficulties
Due diligence extends beyond legal aspects to encompass business and management considerations, necessitating a thorough examination of prospective partners Companies must ensure there are no legal issues, such as pension funding, environmental concerns, or product liabilities Key factors such as the relevance of accounting records, equipment quality, and cost control measures should be assessed It's essential to evaluate the potential for product improvements and the dynamics of management relationships, ensuring that a business combination enhances managerial capabilities The integration of resources across multiple dimensions is crucial, alongside an analysis of how the two management systems will align and whether personnel changes are needed Firms must stay informed about new developments that could benefit the organization or necessitate adjustments Ultimately, the acquired entity should add greater value as part of the acquiring firm than it would independently or with any other company.
Corporate culture encompasses an organization's values, traditions, norms, beliefs, and behavior patterns, which are expressed through both formal statements and informal relationships It significantly influences a company's operating style and is reflected in the behaviors that are rewarded within the organization Effective management of corporate culture is crucial, especially before engaging in mergers, as a disordered culture can exacerbate integration challenges Consistency between stated values and rewarded actions is essential, alongside proactive employee training and communication systems that highlight individual development and contributions When planning for external growth through mergers and alliances, firms must consider cultural factors alongside financial and operational elements Recognizing and integrating the various systems and cultures is vital for organizational effectiveness, making cultural due diligence a critical aspect of the acquisition process A prudent acquirer prioritizes cultural considerations from the outset of planning discussions.
Implementing mergers and acquisitions (M&As) effectively begins long before the merger agreement is signed; it requires a firm to have efficient operations and a strong shareholder value orientation Companies should pursue mergers that align with their corporate strategy, addressing weaknesses and creating new growth opportunities Successful integration demands a dedicated leader with management experience and credibility, as the complexities of integration and regular operations cannot be managed by one individual alone Effective communication is crucial; good integrators develop plans that provide clear, timely updates to alleviate employee concerns To prevent M&A failures, firms must prioritize swift integration while maintaining day-to-day operations, utilizing cross-functional teams to tackle integration challenges Advance planning for integration is essential to achieve the desired outcomes of the M&A process.
Mergers and acquisitions (M&A) have emerged as a powerful strategy for enhancing securities firms globally, particularly during market downturns In Vietnam, the current stock market conditions highlight an urgent need for M&A activities within the industry However, the M&A process for securities companies in Vietnam has been hindered by various challenges, leading to a slower-than-expected progression Despite some initial successes, significant obstacles remain that deter practitioners from fully engaging in M&A efforts.
This thesis provides practical solutions for Vietnam's securities companies and M&A firms based on a comprehensive analysis of the current stock market conditions The findings outline actionable strategies for securities companies, regulatory agencies, and stakeholders to enhance the M&A process Additionally, further research is essential to address specific challenges faced by M&A securities companies, including the development of suitable valuation methods, tax frameworks, and deal structures.