Believe in the future of the economy, M&A will "bloom"

Mr. Dang Xuan Minh, representative of the Enterprise Investment and Purchase Research Institute (CMAC), co-founder of Vietnam M&A Forum.

What is your opinion about Vietnam’s M&A situation?

- There are different views on Vietnam's M&A trends for the 2020-2021 period. In the 2019 report of the M&A Forum, the research team identified that the M&A market started to slow down, and it was not easy to reach the record of US$10 billion in 2018. Partly because of the divestment State capital in Sabeco in 2018, with a value accounting for 50% of the total M&A value of that year, which made a breakthrough.

However, the bright spot in Vietnam's M&A in recent years, especially in late 2019 and early 2020, belongs to private corporations, who are pioneers in seeking new M&A opportunities, as well as organizing and restructuring their businesses.

How does the Covid-19 pandemic affect M&A activities?

- The Covid-19 pandemic will be the main cause affecting M&A activities this year and probably in the first half of 2021. Many small businesses have faced difficulties, so they want to sell themselves. However, big businesses also have difficulties, so they have to spend resources to restructure their units. Therefore, I think in the second half of the year, there will be M&A deals but at small and medium scales. The sectors that are expected to continuously attract capital are retail, consumer goods production, finance and banking.

Basically, Vietnam’s market is still small, so a big deal will make an important contribution to pushing up the M&A value in the market. However, Covid-19 will greatly affect the entire process of implementation and completion of transfer sales. Therefore, although the price may be cheaper, the procedures and conditions for implementation are not easy. It may not be until 2021 that we will witness more achievements that investors, businesses and consultants are making efforts now.

Many economic organizations and experts have made optimistic comments about a wave of investment movement into Vietnam after Covid-19. In your opinion, how will this wave affect domestic M&A activities?

- Some economic experts have forecast a wave of investment movement into Vietnam after Covid-19. However, personally, it is necessary to follow a specific move in order to make an accurate conclusion about this wave. The movement of new investment into Vietnam, if it takes place, will be very good for our economy in general and indirect investment activities in particular. Indirect investment and strategic investment can also increase thanks to the direct investment wave.

There are also views that after the Covid-19 pandemic, many large and important enterprises may be acquired by foreign companies at low prices, so M&A activities must be restricted or even suspended at this time. What do you think about this issue?

- In fact, many Vietnamese large enterprises are still wholly owned by the State, or have a large percentage of state ownership, such as Vinamilk, Habeco, MobiFone, Vietcombank, and BIDV. Therefore, it is not easy to acquire these units, because large state shareholders have not made any divestment. However, I agree with some experts that in the context of domestic enterprises facing difficulties and at risk of bankruptcy due to the pandemic, some foreign companies and funds are considering buying real estate and retail businesses.

However, contributing capital and purchasing shares in businesses is normal, so let them occur naturally according to market rules. Of course, from the perspective of divesting state-owned enterprises, management agencies can carefully consider the time of holding auctions or offering, because the State divestment auctions in this period may not reach the price target and strategic partner as expected.

According to a report of Foreign Investment Agency (Ministry of Planning and Investment), in the first five months of 2020, there were 3,528 times of capital contribution and share purchase by foreign investors in the whole country, up 11.6% over the same period, the total value of contributed capital was US$2.99 billion, equaling 39.1% over the same period last year. Although the number of times of capital contribution and share purchase has increased, the scale of capital contribution was small, an average of only US$0.85 million/capital contribution, much smaller than the average scale in the first five months of 2019.

The value structure of capital contribution and share purchase in total registered investment capital also decreased significantly compared to the same period in 2019, from 45.7% in the first five months of 2019 to 21.5% in the five months of 2020.

What are the regulatory agencies' solutions to promote and increase the efficiency of M&A activities in the second half of this year and the coming years, sir?

- Firstly, the Government's economic stimulus measures will be an important driving force for economic development in general and for investment and M&A activities in particular. Businesses and investors who believe in the future of the economy will seek and implement investment opportunities, including new investments and M&A.

Secondly, besides economic stimulus measures, the completion of the legal basis for M&A activities, facilitating businesses to merge with the purpose of restructuring will contribute to promoting M&A activities of businesses and investors.

Thirdly, continuing to promote the restructuring of state-owned enterprises, including equitization and divestment of state capital in the roadmap, will create sources for M&A deals in Vietnam. The authorities need to encourage and take measures for state-owned enterprises to make information disclosure and transparency in order to facilitate investors to access information.

Thank you, sir!