CHAPTER 2 SETTING UP POST-MERGER INTEGRATION PROCESS
2.2. Overview of M&A activities in Vietnam
2.2.2. Current situation of M&A activities in the last few years
M&A activity in all over the world has more than ever become increasingly explosive. In Vietnam, M&A has just begun. The figure of value and the number of M&A in Vietnam in recent year has presented as follow:
Figure 2.2: M&A Total Deal Size and Number of Deals in Vietnam (Source: StoxPlus) Observing the table above about the size and number of M&A deal in Vietnam from 2003 to 2013, it is easily to realize that there is a significant increase from 2006 to 2010 in number of deals and peaked at 345 deals after a stable period between 2003 and 2006. From 2010 to 2012, number of M&A deals decreased sharply to about 157 deals. In terms of value, M&A deals’ value peak at about 6.3 billion US dollar in 2011 in spite of the drop in number of deals. In 2012, there is a small decrease in value of M&A deals to approximately 4.9 billion US dollar.
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Figure 2.3: Number of M&A deals in 2011
(Source: StoxPlus) In 2011, the M&A deals in small scale which has value less than 5 million USD are the major trend in M&A market with 148 deals ( about 55%). The following popular M&A size is the big scale which has the value more than 30 million USD with 51 deals (about 20%). The rest 25% is accounted by deals with value between 5 and 30 million USD.
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Figure 2.4: Percentage types of M&A
(Source: StoxPlus) Which
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 acquire foreign companies. It seem Vietnamese companies which operate ineffectively and have financial problem are the target of foreign companies which has the goal to extent their market share in Vietnam.
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M & A is becoming increasingly urgent for Vietnam enterprises especially in developing economies today. M&A activities are becoming more and more popular in many fields, which may include a number of sectors such as:
Banking sector:
In 2012, it is probably the most active year for M&A in the banking sector when there are two hostile acquisitions related to Sacombank and Southern Bank, two strategic business investments in the country (DOJI invested in Tien Phong 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 (BTMU invested in Vietinbank ) .
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.
M&A in banking sector is expected to remain active in the next year due to the industry restructuring schedule of State Bank of Vietnam. The number of commercial banks will be reduced from the current 39 to 13-15 in 2017.
Consumer Finance:
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.
In the context of commercial banks focus primarily on corporate credit, it is one of the main causes leading to high Non-performing loan rate, the strategic shift to the personal financial services, in including consumer finance is a strategic choice. Many commercial banks are building and promoting array of consumer finance services. Therefore, M&A between companies providing
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consumer finance which have available networks, processes and system is an effective strategy, however, there are not many such companies in this industry.
M&A in consumer finance sector is forecasted to grow in future due to low market penetration, growth potential both in terms of size and profitability of this industry is very large. The biggest obstacle is the new licensing issues.
However, this issue can be solve by the large financial institution acquiring small banks which have license but are in difficulties.
Real estate:
In 2012, foreign investors (South Korea’s Lotte, Jappan’s AEON, etc) acquired principally engaged in the projects of commercial center and retail center segment. The apartment projects have not been spent much attention by foreign investors. M&A activities in this segment are mainly transactions to increase the ownership of the foreign partners like Perdana Parkcity Malaysia which increased ownership from 75 % to 100 % in a joint venture with 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.
Food and Beverages:
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
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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.
Barriers for the big deal is mainly due to the shareholders of these enterprises are still enjoying good results efficiently and stable cash flow and they only sell when they reach high valuations.
Cement
In 2012, there were 4 M&A deals in the cement industry. The highlight of the year's acquisitions appear from foreign countries (Indonesia’s PT Semen Gresik acquired Thang Long cement plant from Geleximco with $230 million USD).
Gresik is the biggest state own cement corporation in Indonesia. The main purpose for this acquisition is to gain access to the mining and exporting clinker material backwards Indo market (where there is lots of demand for cement). Gresik was not even interested in grinding and is for sale in the south of Thang Long.
Continuing the trend in 2011, large domestic cement corporations continue to aggressively acquire small cement companies or companies owned by the State which made loss. May 7th 2012, Northern Cement Company acquired 31% stake of Yen Binh Cement companies under restructuring plans in 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.
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