Merger and acquistion in Vietnam securities sector identify motives nennefits and obstacles Luận văn thạc sĩ

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY By TRUONG NU PHUONG LOAN MERGER AND ACQUISITION IN VIETNAM SECURITIES SECTOR IDENTIFY MOTIVES, BENEFITS AND OBSTACLES Ology: Finance – Banking Ology code: 60.31.12 MASTER’S THESIS Advisor PhD. Nguyen Thu Hien HO CHI MINH CITY 2010 ACKNOWLEDGEMENTS First of all, I would like to express my deepest gratitude and sincere thanks to Dr Nguyen Thu Hien, my thesis advisor, for her valuable advises and support throughout every stage of my study. Secondly, I am also grateful for the suggestions and comments from my friends, colleagues, relatives during the time of study. Thirdly, I would like to extend deep senses of gratitude to all of my teachers who have taught and guided me throughout the period of MBA Program at University of Economics Ho Chi Minh City . Fourthly, I would like to thank my family for the constant encouragement and moral support given to me throughout my studies. Lastly, this study paper is the meaningful gift to my mother who always expects me to progress in the life. Ho Chi Minh City, Vietnam October, 2010 Truong Nu Phuong Loan ABSTRACT M&A activity is still rather new to the Vietnam’s economy. Together with the stock market, M&A has just appeared and been developing for 10 years in Vietnam. Although, it has not had a long development history, the M&A activity has obtained certain critical development milestones as there have been more and more companies choosing M&A as a way to expand business, and achieve objectives of business growth as well. This researching topic aims at exploring and discovering the motives, potential benefits, and obstacles of the M&A activities of the companies in the securities sector in Vietnam. In order to achieve the set targets of the research, it was started by studying relevant basic theories of the international researchers on the motives, potential benefits and obstacles of the M&A activity. Researching method used was namely the qualitative and quantitative approach. The data of the quantitative method was done by researching 32 securities companies in Ho Chi Minh City The results of relevant tests showed that the companies paid more attentions to the motives of improving operation management, market penetration, penetration into new market, as well as efficiency factor. The results of relevant test also showed that the most critical obstacle to which the companies of the securities sector in Vietnam did face with were those of regulatory and administrative procedures. TABLE OF CONTENTS ACKNOWLEDGEMENTS i ABSTRACT ii TABLE OF CONTENTS iii LIST OF FIGURES vii LIST OF TABLES vii LIST OF ABBREVIATIONS xi CHAPTER I : INTRODUCTION 1 1.1 General background 1 1.2 Research objective 4 1.3 Scope of study 5 .CHAPTER II: LITERATURE REVIEW 6 2.1 General views 6 2.2 Characteristics of Merger and Acquisition waves in the USA 7 2.3 Research theories on merger motives 10 2.4 Concept of Synergy as a Main Motive for M&A 12 2.5 Obstacles preventing M&A activities 17 2.6 Vietnam M&A activity review – 2009 19 2.7 M&A in Vietnam securities sector in indispensable 22 CHAPTER III : RESEARCH METHODOLOGY 28 3.1 Research model 28 3.2 First phase – Qualitative research 29 3.2.1 Interview 29 3.2.2 Build questionnaire 29 3.2.3 Pilot testing 30 3.3 Second phase – Quantitative research 31 CHAPTER IV: RESULT 32 4.1 Sample profile 32 4.2 Results of qualitative research step 33 4.3 Group of factors 34 4.3.1 Measurements scales of variables “Motives, benefits of M&A in Vietnam securities sector” 34 4.3.2 Measurements scales of variables “Obstacles of M&A in Vietnam securities sector” 35 4.4 Exploratory Factor Analysis 37 4.4.1 Measurement scales of “Motives, benefits of M&A in Vietnam securities sector” 38 4.4.2 Measurement scales of “Obstacles of M&A in Vietnam securities sector” 41 4.5 Reliability analysis 43 4.5.1 Measurement scales of “Motives, benefits of M&A in Vietnam securities sector “ 44 4.5.2 Measurement scales of “Obstacles of M&A in Vietnam securities sector” 50 4.6 Observing variances and Cronbach’s Alpha after reliability analysis 54 4.6.1 Result of Cronbach’s Alpha for factor of “Motive, benefits of M&A activity” 54 4.6.2 Result of Cronbach’s Alpha for factor of “ Obstacles of M&A activity” 57 4.7 Descriptive statistic of motives, benefits and obstacles of M&A activity 60 4.7.1 Number of years experience factor 61 4.7.2 Chartered capital factor 62 4.7.3 Profit before tax factor 66 4.7.4 M&A dynamic factor 67 CHAPTER V : CONCLUSIONS 73 5.1 Summary of findings 73 5.1.1 Motives and benefits of M&A after analyzing the factors and measuring the reliability of the scales 74 5.1.2 Exploration of obstacles of M&A after analyzing the factors and measuring the reliability of the scales 75 5.1.3 Result of Descriptive statistics and ANOVA test on classification variables 76 5.2 Limitation of research 77 5.3 Recommendations 78 REFERENCES 79 APPENDICES Error! Bookmark not defined APPENDIX 1: SURVEY QUESTIONNAIRE – ENGLISH 81 APPENDIX 2: SURVEY QUESTIONNAIRE – VIETNAMESE 88 APPENDIX 3: LIST OF M&A DEALS FOR SURVEY 95 APPENDIX 4: LIST OF INTERVIEWEES 102 LIST OF FIGURES Figure 2.1: Vietnam Deal Activity 2008-2009 by quarter. 20 Figure 2.2: M&A target in Vietnam Percentage of announced deals by the top five most active industry sectors 21 Figure 2.3: M&A deals in Vietnam securities sector from 2007 to now 25 Figure 3.1: Research model 28 Figure 3.2: Qualitative research 31 LIST OF TABLES Table 1.1: Announced M&A deals 2 Table 2.1: Common Theories of What Causes Mergers and Acquisitions 14 Table 2.2: Commonly Citied Reasons for M&A Failure 17 Table 2.3: Deal Activity Summary 20 Table 2.4: M&A deals in Vietnam securities sector 24 Table 4.1: Characteristic of samples 32 Table 4.2: Descriptive Statistics in Motives, and Benefits 36 Table 4.3: Descriptive Statistics in Obstacles 37 Table 4.4: KMO and Bartlett’s test with scales of “ Motives, benefits of M&A in Vietnam securities sector 38 Table 4.5: Extracting Component Analysis with Varimax rotation with scale of “Motives, benefits of M&A activities in securities sector” 39 Table 4.6: KMO and Bartlett’s test with scales of “ Obstacles of M&A in Vietnam securities sector. 41 Table 4.7: Extracting Component Analysis with Varimax rotation with scale of “ Obstacles of M&A activities in securities sector” 41 Tables 4.8: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FM _1” 44 Table 4.9: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FM _2” 45 Table 4.10: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FM _3” 45 Table 4.11: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FM _4” 46 Table 4.12: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FM _5” 46 Table 4.13: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FM _6” 46 Table 4.14: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FM _7” 47 Table 4.15: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FM _8” 48 Table 4.16: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FM _9” 49 Table 4.17: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FO _1” 50 Table 4.18: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FO _2” 51 Table 4.19: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FO _3” 52 Table 4.20: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FO _4” 52 Table 4.21: Results of Reliability analysis on Cronbach’s Alpha [...]... takeover market in Vietnam has been very active recently and will be very potential in the future, especially for the securities sector Therefore, this thesis focuses on identifying the motives, benefits and obstacles of mergers and acquisition activities going on in the securities sector of Vietnam with a purpose to find out the factors behind the growing trend of M&A in securities sector and provide... turmoil in this sector which meant that deals in economies such as Vietnam were off the agenda for most major financial institutions 2.7 M&A in Vietnam securities sector is indispensable While many securities companies (Securities) is falling into a difficult position Losing, many foreign financial institutions are now looking the Vietnam Securities Companies via share purchase, merger is increased... are looking for a strong financial institution to take a minority stake in them in order to gain access the investor’s expertise, offshore client base and their funding resources Foreign investors for their part still see Vietnam as an attractive, developing market but in general are moving cautiously and will not willing to pay the sorts of multiples seen in past securities company Merger and Acquisition... vendors to provide securities services across borders certain services related to securities such as financial information, intermediary services and support securities trading…, to establish joint venture to 49% foreign capital immediately after joining WTO From 2007 to now, there are 43 M&A deals in Vietnam securities sector In there: Table 2.4 : M&A deals in Vietnam securities sector Status Completed... important sector of the economy 1.2 Research objective The objective of this thesis is to identify motives that foster Vietnamese securities companies to do merger and acquisition, potential benefits of Merger and Acquisition, and also obstacles preventing securities companies in doing Merger and Acquisition successfully Specifically, it attempts to investigate the following questions: 1 What are motives. .. M&A related information is improving in Overall we believe that access to M&A related information is improving in Vietnam and we expect further improvements going forwards as the number of public companies increase and interest in M&A continues to rise During 2009, the industrial sector accounted to almost a quarter off all announced M&A deals targeting Vietnamese companies, up from 15% in 2008 The... services remained in place Besides, the development of stock market in Vietnam also attracts funds from local investors, who used to choose gold, foreign currencies and real estates to be only choices before the introduction of stock market Interest in Merger and Acquisition has remained extremely high in Vietnam during 2008 Successful domestic companies have been increasing open to deal making as they... Ocean group acquired a 59% interest, or 8.9 million ordinary shares, in Ocean Securities Joint Stock Company In addition, the private investors are interested in this field Mr Tran Minh Tien acquired a 42.86% stake in Royal Securities Corp, a securities brokerage firm, Mr Trinh Van Tuan acquired a 16.92% stake in VietNam International Securities JSC, a securities brokerage firm, from Ms Nguyen Thi Thu Trang... take part in exploiting Vietnam s stock market better According to the measure of local experts there are many reasons to see that the trend of Mergers and Acquisition of securities companies in Viet Nam are indispensable: Firstly, financial markets in Viet Nam in general and M&A markets in particular, become more transparent and attract domestic investors and foreign investors Interest rates of key... boosting the organizations and individuals pour more money into company to hold share, stocks instead of sending money to the bank to get profit Cash flow of private investment funds is getting increasingly, as well as the company is listed on the trading world floor to promote M&A activity significantly, including M&A activities in securities industry Secondly, many small scale securities companies, infrastructure . MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY By TRUONG NU PHUONG LOAN MERGER AND ACQUISITION IN VIETNAM SECURITIES SECTOR IDENTIFY MOTIVES, . scales of Motives, benefits of M&A in Vietnam securities sector “ 44 4.5.2 Measurement scales of Obstacles of M&A in Vietnam securities sector 50 4.6 Observing variances and Cronbach’s. potential in the future, especially for the securities sector. Therefore, this thesis focuses on identifying the motives, benefits and obstacles of mergers and acquisition activities going on in the