Higher standards sought for M&A

Vu Dai Thang - Deputy Minister of Planning and Investment

M&A is an important channel for attracting investment capital in the coming time. The Vietnamese government will revise and add policies to push up M&A activities.

Over the years, thanks to the government’s continuous efforts on improving the investment and business environment, and the positive response from the business community and the people, Vietnam has gained encouraging social and economic achievements. Those achievements were shown by the GDP’s high level, the stable macroeconomy, and controllable inflation, as well as positive foreign investment, an increase of newly-established domestic enterprises, and the growing domestic private business community.

Moreover, Vietnam has been actively integrated into the regional and global economy through a series of bilateral and multilateral free trade agreements. These help the country open up larger markets for import and export, increase investment capital into the country, promote national production, and improve the nation’s competitiveness.

In particular, the government has continued to restructure the economy by renovating the growth format towards improving efficiency and competitiveness, highly focusing on restructuring public investments, as well as the financial and banking systems and state-owned enterprises.

For small- and medium-sized enterprises, there have been many solutions to push up equitisation and sell shares in enterprises where the state does not need to hold dominant shares, including those that are doing business effectively. Since 2016, more than VND200 trillion ($8.7 billion) was diverted from equitisation processes.

Along with that, the private sector has been identified as the motivation of the whole economy. The government, therefore, has also accelerated the completion of mechanisms and policies to improve the business environment for non-state sectors. The related laws have been revised and improved to eliminate overlapping and reduce costs for businesses. To achieve a true breakthrough in the M&A market, there should be stronger changes from the process of promulgating and enforcing policies to the implementation with innovation from buyers and sellers.

Masahiro Kotaka - Managing director, KPMG Japan

Transparency is highly valued by investors, and buyers will study market data and potential partners very carefully before making the next step, which is especially true for Japanese investors. They need to have a vision for post-merger and integration three to five years after the deal, which can be difficult unless there are in-depth dialogues between the partners. This will lay down the foundation for successful M&A, contributing to successful post-merger operations and integration.

Challenges after any M&A would begin when two sides decide to fix a transaction. If a Japanese company invests in a Vietnamese company, it is not a simple combination of two companies, but a fully new subject which can foster synergies of the advantages and strengths of the two sides in one body. Apart from investment capital, Japanese investors pay much interest in the management capacity of our partners. When we give advice to our customers, we require them to be able to answer the main questions, such as “What is the vision after three or five years?” Regretfully, not many Vietnamese companies can satisfy this very important question. They cannot imagine what they will be after M&A. This problem should be sorted out.

Andrew D. Kim - Manager Global M&A Center, KOTRA

South Korean investors are very active in Vietnam’s M&A market. They are keen on real estate, manufacturing, and heavy industry ­sectors. South Korean buyers are increasingly shifting their focus on infrastructure, utility, services, and consumer goods sectors.

In recent years, South Korean companies have placed their focus on the banking and finance sector in Vietnam. In addition to large corporations, South Korea’s small- and medium-sized enterprises (SMEs) have also expressed enthusiasm in these fields with a large number of transactions, despite rather low values.

In the first half of 2019, South Korean companies, namely SK and KEB Hana Bank, have made two high-profile deals in Vietnam worth over $1.8 billion. ­Before these transactions, several South Korean ­companies have already ramped up presence in ­Vietnam, such as Shinhan Bank’s purchase of Prudential Finance and Lotte Card’s buyout of Techcombank ­Finance.

Michael Han - Chief representative, SK Vietnam

Vietnam is a great place to invest in from South Korea’s perspective. It is amazing how similar Korean people are to Vietnamese, respecting the elderly and prioritising children’s education. When you have that kind of common ground, making investments becomes much easier. We may have different languages, but we think alike.

After our $470 million investment in Masan Group last year, we invested $1 ­billion in Vingroup this year. Are we done yet? Unlikely. We have set up our local ­office for the process of ­recruiting local people. By the end of this year, we are going to look for ­further investment opportunities in Vietnam. We will look at both small and large companies out there, as long as the investment brings value to us.

We have a very prudent investment strategy. One key is that our partners have to be very capable. They need to be a group of people that we are comfortable working with because we are not a silent investor who makes investments, stays quiet and hopes that share prices will go up. We want to work with the management and the founder of each business so that we can create value for shareholders, employees, and more Vietnamese customers.

We are working together with Vingroup to bring new business ideas and concepts to Vietnam. We are already very comfortable with these ideas in South Korea and want to see how these ideas will work in Vietnam.

Andy Ho - Chief investment official, VinaCapital

We are interested in all sectors that can benefit local people as well as promote the Vietnamese economy and exports, having carried out more than 200 M&A transactions in Vietnam. To conduct successful M&A deals, investors should be very careful in choosing the consultant. Chosen consultants must be able to show off at least five successful deals which they have made in the same sector. I have seen many deals fail because the consultant was not picked appropriately.

In general, the three sectors which will draw the most interest from investors in the coming time are healthcare, food and beverages, and real estate.