A woman walks past a Vinmart+ in Hanoi. (Photo: VNA) Hanoi (VNS/VNA) - Merger and acquisition (M&A) deals will likelyincrease post-pandemic, which industry insiders see as a chance for enterprisesto restructure their operations to be more viable.
Data from the Foreign Investment Agency under the Ministry of Planning andInvestment showed Vietnam attracted nearly 14 billion USD worth of foreigncapital in the first five months of this year, down 17 percent year-on-year.This figure included newly-registered capital, adjusted capital and capitalcontributions to buy equity.
There were 3,528 deals worth nearly 3 billion USD to buy the equity ofcompanies, up 11.6 percent in volume but down 59 percent in value compared tothe same period of last year.
Although the value of deals declined sharply, partly blamed on thecoronavirus pandemic and falling value of companies, market insiders havepredicted M&A activities will sharply increase soon.
Putting aside worries about being taken over at cheap prices, some experts havepointed out M&A could be a good opportunity for enterprises to restructuretheir operations, attract more capital to overcome the crisis and developfurther.
Economist Dinh Trong Thinh said the COVID-19 pandemic had greatly impacted thewhole economy and enterprises, especially those involved in import and exportactivities. Weak financial capacity has forced many businesses to seek M&Adeals amid the pandemic which could be a good solution to have more resourcesand increase resilience to cope with uncertainty in the future.
According to Pham Xuan Anh, head of the Banking Investment Division at MBSecurities JSC, M&A is an effective tool to reshape businesses and a wayfor firms to expand or narrow their operations to create greater value forshareholders, enhance governance and reduce risks.
Talking to thoibaoganhang.vn, Anhcited the deal in which Masan acquired VinMart and VinMart from Vingroup'sretail arm to expand its retail system in 2019.
The deal was considered to benefit both sides as Masan can take advantage ofVingroup's national network to achieve its goal of becoming the leadingdomestic retail and consumer group while Vingroup can save resources for itscore activity - manufacturing and technology.
Anh said firms could use M&A to focus on a key business. Manylong-established European businesses have been known for one type of product,while Vietnamese businesses tend to invest across many industries, resulting ina lack of capital and resources to develop.
However, Anh also said there are always risks in this activity, so businessesshould seek M&A deals only when they are ready. If business leaders stillsee risks and are not confident enough, the deal will struggle to succeed.
He pointed out many factors for investors to decide whether to invest in thebusiness or not, in which the quality of assets is crucial. Asset quality isthe first thing that attracts investors to a business and this is also thestrength on which business can negotiate better prices with investors.
Other important factors include intangible assets like the business culture andcorporate governance which are often the weakness of small- and medium-sizedenterprises, Anh added.
According to Baker McKenzie, despite a slowdown in global deal-making due toworldwide economic uncertainty, Vietnam remains active in M&A in 2020. TheUS law firm predicted cross-border acquisitions to dominate M&A deals inthe coming years, as the country’s solid fundamentals continue to attractoverseas investors.
Vietnam is being praised for its efforts to control the pandemic. Inaddition, the ratification of the trade pact between the country and the EUwill offer businesses greater opportunities for trade and investment.
However, economist Dinh Trong Thinh has warned about the risk thatVietnamese enterprises will be acquired by foreign investors for cheap prices.
He said the State authority needs to consider a number of sectors which aresusceptible to foreign acquisitions and have an adverse impact on the economyif they are sold for strict management./.
VNA
