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Investors optimistic about M&A deals in coming years

Hung Le
Monday,  Aug 14,2017,20:38 (GMT+7)
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Investors optimistic about M&A deals in coming years

Hung Le

Minister of Planning and Investment Nguyen Chi Dung speaks at the Vietnam M&A Forum 2017 in HCMC - PHOTO: HUNG LE

HCMC – The number and value of mergers-and-acquisitions (M&A) deals in Vietnam is poised to grow strongly in the coming years although there remain many problems to be solved to rev up this investment channel, heard the Vietnam M&A Forum 2017 in HCMC last week.

The year 2016 saw the value of M&A deals in Vietnam hitting an all-time high of over US$5.8 billion, but it is still modest compared to around US$115 billion in the Southeast Asian region, said Jeffrey Pirie, executive director of M&A at Deloitte Southeast Asia.

He expected the number and value of deals will rise in the coming time, adding that many successful deals will help fuel the nation’s economic growth.

Seek Yee Chung, a lawyer from Baker & MCKenzie Law Company, said many favorable factors will emerge in the years to come, thanks to the Government’s legal reform efforts. This will help lure more investors into the market.

He added Vietnam’s drastic steps, especially the equitization of State-owned enterprises, are to create favorable business opportunities, promote growth, and attract foreign investors.

Although M&A deals are still faced with many obstacles, they are expected to increase by two or three times in the next five years, said Eric Solberg, CEO of EXS Capital Group.

Nguyen My Phuong, general director of Tien Phuc Real Estate JSC, stressed M&A deals will experience strong growth, as this kind of investment has become a viable solution for Vietnamese companies like her firm to boost growth.

Meanwhile, Danny Le, head of business development at Masan Group, noted Vietnam has many potential fields for M&A, particularly in food, consumer goods and agricultural products.

Barriers to be removed

At the forum, many participants also voiced their concerns over unsuitable procedures and regulations which will hamper foreign investments via M&A deals.

Seek Yee Chung said some regulations require foreign firms to obtain service licenses in certain industries like energy. He proposed the Government improve access for foreign investors in line with its commitments with the World Trade Organization.

Some said regulations in conditional business sectors that keep the lid on foreign ownership is another problem. The weak operation of local enterprises is also another barrier which makes their foreign counterparts stay away.

At many State-owned enterprises going public, their shareholders have the tendency to hold controlling stakes, while foreign investors want majority shares to be more proactive in business development orientations. Likewise, certain large private enterprises intend not to sell their companies entirely.

The access to potential companies is also quite tough to investors. Notably, financial reports and other information about local enterprises are not transparent enough.

The number of M&A deals in the January-June period suffered a decline, but according to speakers, this does not mean foreign investors are less keen on the Vietnamese market. The reasons include that investors might have not found targets of sufficient size and quality, and that transaction procedures are often prolonged and ineffective.

Solutions to support investors

Minister of Planning and Investment Nguyen Chi Dung said Vietnam is in the transitional period to full-fledged global integration, and regulations are gradually changed to be in line with international practices.

He added the Government is striving to abolish business conditions which are no longer suitable for the current development process.

In regard to the limited number of M&A commodities, Dang Quyet Tien, deputy head of the Corporate Finance Department under the Ministry of Finance, said the equitization of State-owned enterprises and the capital divestment of equitized enterprises are creating numerous products for the M&A market.

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