M&A activity may not prosper in banking industry this year
By Thanh Thuong and Thu Nguyet - The Saigon Times Daily
HCMC – Merger and acquisition (M&A) activity in the banking industry is not expected to heat up this year, according to speakers at the Vietnam M&A 2010 Forum, organized by the Vietnam Investment Review, Avalue and the Ministry of Planning and Investment’s Legal Department, in HCMC on Tuesday.
|Experts share M&A transaction experiences at the Vietnam M&A 2010 Forum - Photo: Thanh Thuong|
To Hai, Viet Capital Securities’ CEO, said some M&A transactions would occur in the future as local banks are under pressure to increase their capital to VND3,000 billion by the end of this year in accordance with the State Bank of Vietnam’s regulations on small banks.
Hai added bankers have plans to spur capital, mostly via stock issuance, but also via M&A transactions, which are being taken in low value and not announced. Among them, Navibank purchased My Xuyen Bank stocks, and a group of Techcombank shareholders acquired VPBank stocks.
Nguyen Cong Ai, deputy general director of KPMG Limited told the Daily, that few M&A transactions between small banks could take place this year but this might increase in 2011 as bankers may face hardships caused by capital-increase plans.
As Vietnamese law on credit institutes is issued, shareholding requirements are clearer, leading to an increase in acquisitions in Vietnam’s banking industry, Ai added.
According to Tran Hao Hung, deputy director of the Legal Department under the Ministry of Planning and Investment, Vietnam has few restrictions on acquisitions in the banking industry, except for foreign shareholding limits, which equal 30% of the equity of local banks for all foreign shareholders. Hung explained that foreign bankers would quickly control the market if they were allowed to buy more than the current limit.
Hung added that legal framework has already been built but is still complicated for M&A transactions, which are affected by three laws, including regulations on competition, corporation and investment. Therefore, enterprises must understand all relevant laws to avoid M&A failure.
According to an Avalue Vietnam report, the finance and banking industry had the most M&A deals in Vietnam last year. Notably, BNP Paribas (BNP) increased its stake in Oceanbank to 15%, and Maybank acquired 20% of An Binh Bank’s equity. Besides, PetroVietnam (PVN) purchased 20% holding in Oceanbank, becoming strategic shareholders of the bank.
Local enterprises to acquire more foreign companies
Vietnamese enterprises now have enough financial capacity to acquire foreign companies in other countries, including the U.S., Ai of KPMG Limited told reporters at the M&A forum.
Ai added acquisition was considered a good way for Vietnamese enterprises to expand their businesses and increase competitiveness.
Christopher Kummer, president of the Zurich-based Institute of Mergers, Acquitions and Alliances (IMAA), suggested Vietnamese enterprises acquire companies in emerging countries.
Many of the country’s company owners, however, seem to make improvised decisions on M&A transactions, Ai said.
Therefore, enterprises are suggested to have pre- and post-acquisition strategies, which suit the company’s development plan, and cover all possible risks and opportunities.
Human resource and cultural issues that emerge after mergers and acquisitions are considered the most common failure factors.