|The second panel discussion of the 2023 M&A Vietnam Forum hosted by VIR
Nguyen Tien Hoa, senior partner, ASL Law Firm
Before we delve into the insights from our distinguished guest speakers on M&A, I'd like to present a viewpoint that I foresee will significantly influence M&A through 2023 and 2024. Economically speaking, as various countries adopt monetary policies to control money supply and inflation, Vietnam is enacting optimal financial strategies to bolster businesses and citizens amid these tough economic times.
The State Bank of Vietnam is adeptly managing open market operations, maintaining purchase sessions for securities in line with monetary policy goals to ensure liquidity in the financial system. Alongside, the central bank's repeated adjustments of interest rates are aimed at easing economic strains. This proactive monetary stance is a substantial boost for both the broader economy and individual enterprises. The government's efforts to enhance business access to capital indicate a multipronged approach to aid companies during these challenging periods.
Given these factors, the current period emerges as an opportune time for M&A to gain momentum towards late 2023 and into 2024.
Dang Van Thanh, chairman of TTC Group
For the past 44 years, TTC's primary focus has been on development and commerce. Apart from constructing a single sugar mill and a hotel in Doc Let (Khanh Hoa), all our growth has been through M&A. This strategy has been incredibly successful throughout our operation. Today, TTC operates 120 units across diverse sectors. The seeds of M&A were sown 20 years ago, during the transition from a controlled economy to a market economy, which aligned perfectly with our strategy and ambition.
M&A, if well-controlled and managed, can be a significant opportunity, especially in Vietnam's open economy. Despite global and local economic fluctuations in 2023, Vietnam stands at a new starting line, where challenges and opportunities naturally intertwine. M&A presents numerous opportunities for both buyers and sellers. Every enterprise has its strategic development direction; it's about choosing the right time and market segment. Sellers should find the optimal moment to realise their intrinsic value, while buyers should identify expansion potential.
I plan to acquire another sugar mill in Tay Ninh by the end of this year and an Indian sugar mill in Cambodia in early 2024, processing 5,000 tonnes of sugarcane per day, to expand our raw material area.
However, there are still some key considerations in M&A. Firstly, post-acquisition integration can be challenging, particularly regarding corporate culture. In terms of labour issues, we deploy a core team of TTC's essential personnel to retrain and employ the workforce, assessing and categorising them, assigning new responsibilities, or reducing tasks to facilitate their integration into TTC.
Secondly, M&A preparation involves more than just financial resources; human capital is also crucial. Enterprises, especially startups that opt to transfer ownership at their peak (in terms of market share or overall health), are regarded more highly than those waiting until decline. Buyers must strategically time their investments and have the courage to make purchases.
Angus Liew, chairman of Gamuda Land Vietnam
Vietnam's real estate sector remains an attractive investment destination, including for firms like Gamuda Land, due to the country's significant housing demand against a backdrop of limited supply, a large and young population, and a burgeoning middle class.
In Vietnam, unlike some other countries, we can sell properties even during construction, a key factor in our decision to invest here. Our strategy includes M&A as the fastest route to results in the real estate sector. Despite the challenges in 2020-2021, Gamuda Land has built a solid foundation in Vietnam and is actively pursuing further M&A. The evolving legal environment in the real estate sector is increasingly investment-friendly, although adapting to new regulations poses its challenges. One significant issue for foreign investors in the tourism real estate sector is the 50-year ownership limit, which can cause hesitation. For successful M&A, honesty and straightforward communication are essential, and engaging skilled consultancy firms can be a significant time-saver.
Dr. Melvin Heng, executive director and group CEO of Thomson Medical Group
M&A remain a cornerstone strategy for us. It is a choice between starting from scratch or leveraging existing strengths.
For Thomson Medical Group, M&As are not just a business manoeuvre but a testament to their confidence in the Vietnamese market, the professionalism of its medical practitioners, and a belief in the robustness of local mechanisms.
In Vietnam, and elsewhere, we are not just investing in businesses but in trust and expertise.
Our expansion strategy aligns with the growing health awareness in Southeast Asia, especially in Vietnam, where demographic trends towards an ageing population are driving new demands for healthcare services.
The elderly have become the predominant healthcare consumers. This, along with the shift towards universal healthcare in many Southeast Asian countries, including Singapore's new healthcare standards, presents us with substantial investment opportunities.
We're exploring the creation of a healthcare technology company to augment our hospital network. Recognising the abundant talent in Vietnam, our activities will expand, further broadening the Thomson Medical Group ecosystem,
Nguyen Van Thien, chairman of the Board, Binh Duong Water - Environment Corp – JSC (Biwase)
I strongly disagree with the view that M&A is simply a case of 'big fish swallowing the small ones.' It's far more about sharing expertise and offering assistance. In instances where there's a deficiency in management acumen or capital, we are prepared to step in and provide support. Currently, I serve on the boards of several industry-similar companies, contributing our expertise in management, service development, and in enhancing comprehensive water supply systems to minimise water loss.
I view M&A not as a predatory strategy, but as a means to extend support to struggling businesses, helping them to not only survive but to retain their businesses and assets.
Our approach when Biwase invests is collaborative. We join the board of the company we invest in, focusing on improving their services and growing together, rather than aiming for a takeover.
In fact, Biwase has often come across companies deeply passionate about the water sector, companies that have invested in building plants in what is known to be a relatively stable industry.
However, they've encountered difficulties and incurred losses due to their singular focus on investment without developing a full-fledged water supply network and services. This is where Biwase comes in, co-investing and aiding in the development of these networks and systems, providing professional services for mutual growth.
Crucially, the provision of water and water infrastructure plays a significant role in poverty alleviation. A reliable clean water supply enhances public health, leading to a reduction in illness and, consequently, poverty.
Luu Thi Thanh Mau, founder and CEO, Phuc Khang Corporation
Throughout recent times, we've seen a significant uptick in both the number and scale of M&A transactions, marking a shift towards prioritising quality over quantity. This approach is crucial as it ensures that post-M&A, businesses not only resonate better with buyers and sellers enhancing their capacities but also elevate the quality perceived by consumers.
This alignment with global standards, including environmental, social, and governance (ESG), has been a cornerstone of our strategy at Phuc Khang for over a decade. In real estate, slow periods are opportunities to reassess and re-balance portfolios for better quality, location, and long-term value. Sellers need to clearly understand their objectives, as a lack of goal clarity can hinder the learning process and cultural development during M&A.
Setting clear targets fosters understanding and collaboration with partners. Successful M&A brings four key benefits: enhanced capital and finance, improved product quality, market expansion, and increased services and resources. We view post-M&A as a responsible partnership, akin to a marriage, where successful transition breeds happiness. Our success with Japanese partners at Phuc Khang has instilled a confidence that we carry into other partnerships.
Truong An Duong, general manager for North Vietnam and Residential, Frasers Property Vietnam
Vietnam is well-equipped to accelerate economic growth, particularly in the industrial real estate sector, which is experiencing increased demand driven by a surge in foreign direct investment. Looking ahead, we are optimistic about the continued growth of the industrial real estate market and expect a rise in M&A activities within this sector.
In addition, we also believe in the vast potential of the office real estate segment. We are actively participating in the redevelopment of office real estate, a sector brimming with opportunities. In the years ahead, we foresee substantial potential for M&A in various real estate segments.
On the topic of successful M&A transactions, there are some essential factors to consider. For instance, accurate valuation is paramount, along with transparency and understanding between all parties. Post-agreement, a concerted effort to finalise the deal is crucial, and maintaining transparency and building trust remain key in the post-M&A landscape.
Vu Minh Tien, vice chairman of VIAD Group
In 2023, despite facing supply chain disruptions and economic fluctuations, there's a persistent optimism among entrepreneurs. The economy, much like a heartbeat, requires fluctuations; a stagnant market signals concern. A downturn for one can create opportunities for another, positioning M&A as an inevitable and vital trend for economic progress.
There are three key strengths in M&A. Firstly, trust is paramount, with domestic companies needing faith in their partners' capabilities, while foreign firms focus more on market stability and potential.
Secondly, the interplay of financial strength and technological advancement is crucial in the 4.0 era, where technology ownership is a definitive advantage. Additionally, capital motivation through M&A is essential, given the high risks associated with equity capital and the challenges in loan capital access due to legal barriers and a declining bond market appeal.
It is a positive indicator that while the overall value of M&A has decreased, the value of individual transactions has increased, suggesting effective capital allocation that benefits both buyers and sellers.
An important factor in successful M&A is the strength of connectivity across various sectors, where synergy and leveraging mutual strengths are key to achieving strategic success for all parties involved.
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