Phuc Khang outlines M&A strategies

December 01, 2023 | 11:17
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On the sidelines of the Vietnam M&A Forum 2023 held by VIR on November 28 in Ho Chi Minh City, Luu Thi Thanh Mau, CEO of Phuc Khang Corporation, spoke with VIR’s Bich Ngoc about her assessment of the mergers and acquisitions (M&A) market in Vietnam. Khang outlines M&A strategies
Luu Thi Thanh Mau, CEO, Phuc Khang Corporation

Could you explain why M&A is a popular investment channel in the context of the fluctuations in the global economy?

Statistics over the past 20 years show that Vietnam has witnessed more than 4,000 M&A deals with a value of nearly $50 billion, ranking third in Southeast Asia in terms of value. Vietnam is considered a dynamic country in this respect, as it continues to attract foreign capital flows. In particular, deals in the real estate sector account for a large proportion.

However, in light of the challenges and unpredictability in both domestic and foreign markets, it can be confusing for investors who pursue M&A investment methods. Whether this will continue to be a popular investment channel in the future is a problem that needs to be solved, as investors are more cautious in the current period.

In particular, they will carefully monitor issues related to policies and institutions. In the past, they participated in M&A deals more freely, aiming for high profits and a quick capital recovery.

Currently, investors have strategies to participate in M&A deals in various fields, such sustainable development, environmental protection, and advanced technology.

The Vietnamese government's measures look to improve the business environment, prioritise projects related to environmental, social, and governance initiatives, and build investor confidence. The acquisition of state-owned enterprises has positively affected the M&A market.

Besides this, the Vietnamese market is considered the most attractive and potential-rich in the region for international corporations, thanks to the open and deeply integrated economy that brings multidimensional capital flows from around the globe.

According to some investors, when the market is in difficult circumstances, it is a golden time to carry out investment activities. Many foreign businesses are expanding their markets and strengthening their positions through acquisitions.

Therefore, the M&A investment method in Vietnam will continue to develop over time and be of interest to investors, especially those from overseas. Deals related to real estate projects will become even more exciting after the National Assembly passes the Draft Land Law (amended).

What new synergistic value is created from M&A deals in today's context, and what factors determine it?

In an M&A deal, value is created from the advantages of each party, including financial synergy. It allows for the exploitation and allocation of capital more effectively, increasing the scale of a company through mutual support.

Management synergy combines good teams from each party to improve operational performance and efficiency.

With operational synergy, it increases market power through the combination of the advantages of the brands, technologies, facilities, human resources, and customers of each party.

In terms of technology and resources, parties can absorb the technological benefits from their partners when implementing projects.

Achieving synergistic value in an M&A deal depends on various factors such as corporate culture, the goodwill of the parties, the business environment, national policies, and more.

What are the issues that Vietnamese businesses need to focus on to ensure a successful M&A deal with international partners?

Businesses in Vietnam need to identify the goals and advantages of the partner they want to cooperate with. From there, they can determine the appropriate strategies and targets for the deal.

Secondly, it is important to look into the partner's strategy to avoid disagreements and culture shock during the implementation of cooperation activities.

In addition, it is necessary to have a team of good lawyers with an in-depth understanding of M&As, Vietnamese legal regulations, agreements to which Vietnam is a member, and the legal requirements that apply to the international partners.

They have to evaluate the legal documents provided by the foreign partners and ensure all M&A activities take place legally. Businesses also need to carefully draft contract terms and prepare specific dispute resolution options in the contract to limit future risks.

Finally, good preparation and planning will always decide the success of any M&A deal.

What is your experience of businesses with excellent M&A strategies?

Businesses with good strategies focus on choosing industries with high-potential development opportunities, such as consumer goods, food, real estate, high-end commercial centres, and seafood processing.

They should also choose a field that is consistent with the government's development goals and policies, such as green real estate projects, environmental urban development, renewable energy, or advanced technology.

A good team has a strong effect on the quality of an M&A strategy. It must be knowledgeable about laws, procedures, and project implementation methods, or hire consultants for specialised issues to control risks. As ever, clear goals and plans for M&A activities are vital.

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By Bich Ngoc

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