M & A one solution to growth of SMEs - the case of gateway securities and Morgan Stanley Singapore

VIETNAM NATIONAL UNIVERSITY, HANOI
SCHOOL OF BUSINESS
Vu Minh Tuan
M&A: ONE SOLUTION TO GROWTH OF SMEs - THE
CASE OF GATEWAY SECURITIES AND MORGAN
STANLEY SINGAPORE
Major: Business Administration
Code: 60 34 05
MASTER OF BUSINESS ADMINISTRATION THESIS
Supervisors: Dr Ta Ngoc Cau
ĐAI H Ọ C Q U Ố C GIA HA NỘI
TRUNG ĨÃM THC'NG TIN THƯ VIỆN 1
I
A -lơ/ 65
f

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Hanoi - 2010
TABLE OF CONTENTS
ACKNOWLEDGEMENT i
ABSTRACT ii
TÓM TẮT iv
TABLE OF CONTENTS vi
ABBREVIATIONS ix
LIST OF FIGURES X
INTRODUCTION 1
1. Necessity of the Thesis 1
2. Research Purpose 1
3. Research Scope 2

4. Methodology 2
5. Contribution of the Thesis 2
CHAPTER 1 - LITERATURE REVIEW 3
1.1. GENERAL CONCEPT OF MERGES AND ACQUISITIONS. 3
1.1.1. Mergers and Acquisitions Definitions. 3
1.1.2. About Synergy 4
1.1.3. Types of Mergers and Acquisitions. 5
1.1.4. How to perform Mergers and Acquisitions transaction. 7
1.1.5. Overview about Mergers and Acquisitions transactions. 1 1
1.2. MERGERS AND ACQUISITIONS MOTIVATION FOR
15
SMEs.
1.2.1. Small and Medium Enterprises (SMEs) definitions. 15
1.2.2 Enterprise growth strategy and methodology. 15
CONTENTS Pages
21
21
1.2.3. Problems of SMEs. 16
1.2.3.1. Problem within SMEs. 16
1.2.3.2. Problems associated with financial institutions. 17
1.2.3.3. Limitations associated with financial policy. 17
1.2.4. Mergers and Acquisitions motivation for SMEs. 18
CHAPTER 2 - THE CASE OF GATEWAY SECURITIES
AND MORGAN STANLEY SINGAPORE.
2.1. INTRODUCTIONS ABOUT SECURITIES INDUSTRY AND
GATEWAY SECURITIES JSC (2007).
2.1.1. Vietnam Economy. 21
2.1.2. Introduction of Vietnam Securities Industry. 23
2.1.3. Gateway Securities Introduction. 25
2.2. M&A AND THE CHOICE OF GATEWAY SECURITIES’S

STRATEGY TO DEVELOP.
2.2.1. External and Internal analysis in Securities Industry to
define Opportunities and Threats.
2.2.1.1. External Analysis in Securities Industry. 28
2.2.1.2. Internal Analysis in Securities Industry - Five
37
Forces model.
2.2.2. Value chain analysis for Gateway Securities. 46
2.2.3. Summarization. 54
2.2.4. Mergers
&
Acquisitions - The choice of Gateway
Securities.
2.2.4.1 Morgan Stanley Singapore Introduction. 56
2.2.4.2 The Mergers
&
Acquisitions Transaction. 56
CHAPTER 3 - EVALUATE THE RESULT OF MERGER
&
58
28
28
vu
58
ACQUISITION TRANSACTION
3.1. Strategy of Morgan Stan ley/Gateway Securities - effects to
operating fields.
3.1.1. Strategy of Morgan Stanley/Gateway Securities. 58
3.1.2 Effects to operating fields. 59
3.1.3. Ev aluation key success factors of Morgan

Stanley/Gateway Securities.
3.1.3.1. Strength of Morgan Stanley as a Leading
61
Investment Bank and Securities Firm in the World.
3.1.3.2. Key success factors of Morgan
Stanley/Gateway in comparison with other 64
company.
3.2. Analysis financial performance. 66
RECOMMENDATION AND CONCLUSION 71
REFERENCES 72
VI11
ABBREVIATIONS
For the purpose o f this thesis, the following abbreviations apply:
M&A
: Mergers and Acquisitions
SMEs
: Small and Medium Enterprises
FDI
: Foreign Direct Investment
SOEs : State Owners Enterprises
I IoSTC
: Hochiminh Securities Trading Center
HaSTC
: Hanoi Securities Trading Center
LIST OF FIGURES
Names
Figure 1.1: M&A Process
Figure 1.2: Strategic Planning and Organization
Figure 1.3: Identifying the Targets process
Figure 1.4: Negotiating a Definitive Agreement process

Figure 1.5: M&A transactions in the world
Figure 1.6: M&A Supplier - follow industry (up to Ql-2008)
Figure 1.7: M&A transactions in Vietnam industries (%)
Figure 1.8: Typical M&A transactions in Vietnam
Figure 2.1 : Asean Economic Statistics — 2007
Figure 2.2: Vietnam’s GDP by sector
Figure 2.3: Top subscribers holder
Figure 2.4: Top trading volume implementer
Figure 2.5 : Gateway Securities Structure
Figure 2.6: GDP and real GDP Growth rates of Vietnam
Figure 2.7: Annual inflation rate of Vietnam
Figure 2.8: Saving rate comparing with real GDP
Figure 2.9: FDI in Vietnam Overview
Figure 2.10: Market capitalization of Vietnam
Figure 2.1 1 : SOE reforms are strengthening the private sector
Figure 2.12: Number of registered trading account
Figure 2.13: Some typical securities firms
Figure 2.14: Increasing in number of companies
Figure 2.15: Formal markets - trading overview
Figure 2.16: fixed cost in comparison with other competitors
Figure 2.1 7: human resources demand of hot field for Q4/2007
Figure 2.1 8: human resources supply of hot field for 04/2007
Figure 2.19: Requirement capital according to Securities Law
Figure 2.20: Services providers’ comparison
Figure 2.21: 2007 - Securities companies ranged by Chartered Cap
Figure 2.22: 2007 - Revenues from operation activities in VND mill
Figure 2.23: Compare Gateway’s activities with competitors
Figure 2.24: M&A Transaction history'
Figure 2.25: Capital Structure of new company - Morgan
Stanley/Gateway Securities

Figure 3.1 : capacities of new company compare with other providers
Figure 3.2: Morgan Stanley/Gateway Income Statement
Figure 3.3: Financial Performance within industry on 2008
Figure 3.4: Financial Performance within industry on 2007
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42
44
46
47
51
54
57
57
66
67
69
70
XI
INTRODUCTION
1. Necessity of the Thesis
Vietnam Economy as other emerging economies has transformed in two
decades of rapid. It has opened its door to the outside world and liberalized its
economy. There emerge high competition within industry, between domestic
enterprises and foreign enterprises.
How to win in competition, to exist and develop in the high competitive
environment as Vietnam? This is the problems with every Vietnamese firms,
especially with Small and Medium Enterprises, who lack of capitals,
resources, technologies in compared not only with bigger domestic but also
with foreigner companies, that are strongly penetrating into Vietnam economy.

My thesis will analyze the case of Morgan Stanley/Gateway Securities JSC,
the mergers and acquisitions transaction result between Morgan Stanley
Singapore - one official member of Morgan Stanley and Gateway Securities
one mall securities enterprise, to explain why Gateway has chosen mergers and
acquisitions as their way to growth and comment how this strategy affected on
it.
2. Research Purpose
This thesis based on the strengths and weakness, the opportunities and threats
that Gateway have to face, to find that mergers and acquisitions is one of good
ways to implement their problem in operation in a emerging and high
completion market like securities industry of Vietnam.
My analysis of Morgan Stanley/Gateway Securities JSC leads me to the
conclusion that with a small and medium company in emerging market like
Vietnam, mergers and acquisitions is the good choice to help company growth
by taken full advantages of one bigger company that have strong resources.
I
3. Research Scope
Thesis only centers to analyze the existed problems of Gateway Securities JSC
as the reason lead the managers of company choose mergers and acquisitions
as a way to develop and growth in competitive environment of industry,
economy and results after followed this way.
4. Methodology
The methodology will be base on by collecting data as: statements, reports
from newspapers, magazines, and announcements of companies and other state
departments like General Statistic Office or State Securities Commission and
Ministry of Finance , reviewing all the studies related to competitive
strategies.
5. Contribution of the Thesis
The student hopes this thesis will contribute one significant thing to other
students who are interested in researching on the competitive strategy in future

and choice one suitable strategy for company.
CHAPTER 1 - LITERATURE REVIEW
1.1 GENERAL CONCEPT OF MERGES AND ACQUISITIONS.
1.1.1 Mergers and Acquisitions Definitions.
Mergers & acquisitions (M&A) refers to the management, financing, and
strategy involved with buying, selling, and combining companies, they are one
of the popular topics in business today [Michael E.S.Frankel, 2007].
Mergers & acquisitions is a commonly used term however its meaning can
vary depending on the context. Often the term are incorrectly used
unchangeable or the group name M&A is used.
The key principle is to create shareholder value over and above that of the sum
of the two companies. Two companies together are more valuable than two
separate companies - at least, that's the reasoning behind M&A.
This rationale is particularly alluring to companies when times are tough.
Strong companies will act to buy other companies to create a more
competitive, cost-efficient company. The companies will come together
hoping to gain a greater market share or to achieve greater efficiency. Because
of these potential benefits, target companies will often agree to be purchased
when they know they cannot survive alone.
Distinction between Mergers and Acquisitions.
Mergers
A merger takes place when two or more firms combine to form a single
enterprise, owned by a single set of stockholders to a single management staff.
Mergers are classified according to how the merger takes place, the
management’s attitudes toward the merger and relationships between the
3
merging parties. The two major means by which firms merge are the sales of
assets or the sale or exchange of stock. Mergers may increase profitability by
reducing costs, improving cooperation, removing ineffective management or
eliminating competition.

Acquisitions
An acquisition is the purchase by one company of a substantial part of the
assets or securities, normally for the purpose of restructuring the operations of
the acquired entity. The purchase may be a division of the target firm or a
substantial part of the target’s voting shares. Bids are sometimes directed
towards the acquiring firm’s own shareholders, as in a minority buyout or in a
leveraged buyout (LBO). For example, where a group of investors, typically
involving the firm’s own management, acquires all the outstanding voting
shares.
1.1.2. About Synergy.
Synergy is the magic force that allows for enhanced cost efficiencies of the
new business. Synergy takes the form of revenue enhancement and cost
savings. By merging, the companies hope to benefit from the following:
• Staff reductions - As every employee knows, mergers tend to
mean job losses. Consider all the money saved from reducing the
number of staff members from accounting, marketing and other
departments. Job cuts will also include the former CEO, who typically
leaves with a compensation package.
Economies of scale - For example, whether it's purchasing
stationery or a new corporate IT system, a bigger company placing the
orders can save more on costs. Mergers also translate into improved
purchasing power to buy equipment or office supplies - when placing
4
larger orders, companies have a greater ability to negotiate prices with
their suppliers.
• Acquiring new technology - To stay competitive, companies need
to stay on top of technological developments and their business
applications. By buying a smaller company with unique technologies, a
large company can maintain or develop a competitive edge.
• Improved market reach and industry visibility - Companies buy

companies to reach new markets and grow revenues and earnings. A
merge may expand two companies' marketing and distribution, giving
them new' sales opportunities. A merger can also improve a company's
standing in the investment community: bigger firms often have an easier
time raising capital than smaller ones.
1.1.3. Types of Mergers and Acquisitions.
Varieties of Mergers
There are some types of mergers that are distinguished by how the merger is
financed. According to Chiu, X.C.,(2000) each has certain implications for the
companies involved and for investors:
Purchase Mergers - As the name suggests, this kind of merger occurs
when one company purchases another. The purchase is made with cash or
through the issue of some kind of debt instrument; the sale is taxable.
Acquiring companies often prefer this type of merger because it can provide
them with a tax benefit. Acquired assets can be written-up to the actual
purchase price, and the difference between the book value and the purchase
price of the assets can depreciate annually, reducing taxes payable by the
acquiring company. We will discuss this further in part four of this tutorial.
• Consolidation Mergers - With this merger, a brand new company is
formed and both companies are bought and combined under the new entity.
The tax terms are the same as those of a purchase merger.
From the perspective of business structures, there is a whole host of different
mergers. Here are a few types, distinguished by the relationship between the
two companies that are merging:
Horizontal Merger - Two companies that are in direct competition and
share the same product lines and markets.
• Vertical merger - A customer and company or a supplier and company.
Think of a cone supplier merging with an ice cream maker.
Market-extension merger - Two companies that sell the same products
in different markets.

Product-extension merger - Two companies selling different but related
products in the same market.
• Conglomeration - Two companies that have no common business areas.
Acquisitions
An acquisition may be only slightly different from a merger. In fact, it may be
different in name only. Like mergers, acquisitions are actions through which
companies seek economies of scale, efficiencies and enhanced market
visibility. Unlike all mergers, all acquisitions involve one firm purchasing
another - there is no exchange of stock or consolidation as a new company.
Acquisitions are often congenial, and all parties feel satisfied with the deal.
Other times, acquisitions are more hostile.
In an acquisition, as in some of the merger deals above, a company can buy
another company with cash, stock or a combination of the two. Another
possibility, which is common in smaller deals, is for one company to acquire
6
all the assets of another company. Company X buys all of Company Y's assets
for cash, which means that Company Y will have only cash (and debt, if they
had debt before). Of course, Company Y becomes merely a shell and will
eventually liquidate or enter another area of business.
Another type of acquisition is a reverse merger, a deal that enables a private
company to get publicly-listed in a relatively short time period. A reverse
merger occurs when a private company that has strong prospects and is eager
to raise financing buys a publicly-listed shell company, usually one with no
business and limited assets. The private company reverse merges into the
public company, and together they become an entirely new public corporation
with tradable shares.
Regardless of their category or structure, all mergers and acquisitions have one
common goal: they are all meant to create synergy that makes the value of the
combined companies greater than the sum of the two parts. The success of a
merger or acquisition depends on whether this synergy is achieved.

1.1.4. How to perform Mergers and Acquisitions transaction.
The acquisition or merger of businesses is a complex process which should be
understood by all parties involved. It is essential to have a qualified team in
place, working with company owners and managers to develop the objectives
and strategy for that company.
It is also important to bear in mind that a buyer and seller do not need to be at
the same stage in this process when they first enter into communication.
Sellers and buyers may identify and approach target companies which are not
actively pursuing the possibility of acquiring or being acquired.
There are four main processes to run Mergers and Acquisitions transaction,
which both the “buyer” and “seller’’ have to consider.
7
Figure 1.1: M&A Process
Strategic Planning and Organization
Buvers
Doth
Seilers
♦Assem ble M & A Team
♦Define Strategic Objectives
♦Define Acquisition Strategy •D efin e Selling Strategy
♦Define A cquisition Criteria
••Define B uyer Criteria
♦■FVepare Selling Memo
Figure 1.2: Strategic Planning and Organization
Companies need to determine their strategic objectives very early, as they form
the foundation for all that follows.
For buyers, M&A is nearly always a strategic, a.s opposed to a financial,
decision. They typically desire to strengthen their competitive position by
acquiring products, technology, distribution or in-place customers. Sellers may
desire to exit their company for financial purposes, o r they may determine that

they cannot continue on a desired strategic path witlhout combining resources
with an acquirer.
8
These strategic objectives lead directly to the next planning step. A potential
buyer should develop acquisition criteria which define what kind of target
company will help them meet their strategic goals.
Similarly, a seller should define the characteristics of a desirable buyer, and
develop a selling plan to guide them in approaching potential buyers.
identifying the Targets
Buvers Both
Sellers
♦Distribute Acquisition Criteria
♦Distribute Selling M emo
♦Identify Potential targets
♦Evaluate Strategic Fit
♦Accomplish Initial ♦Accom plish Initial
Acquisition Screen Buver Screen
♦Prioritize Targets
Figure 1.3: Identifying the Targets process
At this point in the process both the buyer and seller will distribute their
respective acquisition criteria or Selling Memorandum through their contacts
or those of their agents. Depending on the strategies chosen, this initial
distribution may be very widespread, or limited, pending identification of high
priority targets.
It is important for both buyers and sellers to require binding (on themselves
and any outside advisors) confidentiality agreements concerning any data
which is released, both now and later in the process.
The buyer and seller, as well as their agents, will then go through the process
of identifying potential buyer or seller “targets”, using established networks, as
well as searching through the vast mountain of available information which

modern technology has created.
Approaching Potential Targets
9
Executives of buying and selling companies may contact the identified priority
targets directly or through an agent, which may have several benefits.
For a selling company, using an agent has the obvious advantage of
maintaining the confidentiality of their company’s availability on the market,
thus maintaining the internal morale of the company through some of the early
exploratory discussions.
Buyers will be gathering available public information on any companies they
wish to approach, as well as analyzing the available selling material from their
target. Typically a buyer will want more information on a target company than
the seller wants to release, resulting in early negotiations and discussions
centered on access to information.
Negotiating a Definitive Agreement
Buvers
Both Sellers
♦Accomplish In-Depth Due ♦Support In-Depth Due
Diligence
Diligence
♦Plan Operational Integration
♦Prepare Detailed Valuation
♦Address Legal k Tax Issues
♦Negotiate Definitive A greem ent
♦Close
Figure 1.4: Negotiating a Definitive Agreement process
Negotiation of a Definitive Agreement can be time consuming, and will
typically divert senior management attention from the running of their
respective businesses, which should remain their highest priority. It is helpful
for both buyers and sellers to have a “quarterback” for this phase, who can

handle team coordination, and can optimize the time use of senior executives,
who must remain involved. This “quarterback” (who may be internal or
external) can also facilitate negotiations by proposing “straw-man” options and
positions which might not be appropriate for the respective company
principals.
10
When a definitive agreement has finally been negotiated to the satisfaction of
the buyer and seller, a formal “closing” will normally be held. Often the final
financial terms will not be known exactly at that time, and the agreement will
specify how the settlement will be affected by a strict accounting taken as of
that date. Deals have been broken at the closing table, so the teams should be
prepared to respond to issues even at this point. After closing is complete, and
the signatures are dry, the acquiring company must then build on the
foundation of the Definitive Agreement to build a healthy and profitable new
expanded operation.
1.1.5. Overview about Mergers and Acquisitions transactions.
Mergers and Acquisitions in the world.
Trading value (USD mil)
total in number
2007 2008
%
change
2007
2008
%
change
In the
world
4,169,287 2.935.960 -29.6%
43,817

39.597 -9.60%
United
States
1.570.848
986.283 -37.2%
11.296 9,165
-1 8.90%
China
75,390
104,253 38.3%
2,587
2,983 15.30%
Asean
75,675 75,176 -0.7%
2.001
2,065 3.20%
Vietnam
1,719 1.009
-41.3%
108
146 35.20%
Figure 1.5: M&A transactions in the world
Source: Price Waterhouse Cooper
1 1
Industry
Tratling value
Ranking
Market
Number of
(billions USD)

share
(%)
transactions
Customer Product 141.14
518
Deutsche Bank AG
28.83
1 20.4
8
JP Morgan
23.89
2
16.9
5
Credit Suisse
18.12 3 12.8 6
J Finance
119.39
944
Goldman Sachs&Co
41.36
1 34.6 25
JP Morgan
33.86
2
28.4 17
Citi
33.37 3 28.0 23
L
_________________

Power
94.94 651
UBS
24.52 1 25.8
9
Deutsche Bank AG
23.42
2
24.7 10
Citi
20.38
3
21.5 10
Materials
89.91 1,036
Citi
16.93
1 18.8 1 1
UBS
15.80
2
17.6
14
12
Lehman Brother
15.13
3 16.8 3
High tech
78.79
1,278

Morgan Stanley
16.48 1 20.9
12
Goldman Sachs&Co
15.5
2
1
19.6
11
Lehman Brother
14.75 3
18.7
6
Figure 1.6: M&A Supplier - follow industry (up to Ql-2008)
Source: Thomson Financial - 2008
Mergers and Acquisitions in Vietnam.
4 5.0%
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
1 0
.0 %
________

________

________

________
5.0% ■ ■ m m m m ■ m i -2 0 0 3
0.0%
ij
I J h
■ 2 007
v<>^ ^ n$> -cr
k ^ ^ X X
c>>
<.0 jy
^ o°
Figure 1.7: M&A transactions in Vietnam industries (%)
Source: Price Waterhouse Cooper -2008
13
Date
Buyer Seller
Industry
3/2008 Technology ex
Aulac Securities JSC Securities
3/2008 RUB Investment Bank -
Malaysia
Vietnam Securities
JSC(VSEC)
Securities
2/2008
Golden Bridge Securities
and Investment Company
Ltd
Click and Call

Securities JSC
Securities
2/2008 Morgan Stanley
(Singapore) Holdings Pte
Vietnam Gateway
Securities JSC
Securities
7/2007 indochina Capital Hoang Quan Real-
estate JSC
Real - estate
6/2007
HSBC
Techcombank Bank
5/2007 VinaCapital Finance
Company
Omni Saigon Hotel Restaurant
4/2007
Anco JSC
Nestle Milk Factory Food
2/2007
;
Deutsche Bank Habubank
Bank
1/2007
Daiichi Vietnam
Insurance Company
Bao Minh Insurance
Company
Insurance
12/20061

Citigroup Inc East Asia Commerce
Bank
Bank
Figure 1.8: Typical M&A transactions in Vietnam
Source: synthesize - 2008
14
1.2. MERCERS AND ACQUISITIONS MOTIVATION FOR SMEs.
1.2.1. Small and Medium Enterprises (SMEs) definitions.
Small and Medium Enterprises (SMEs) is one important group of companies
in national, they could be defined or distinguished from the other by number of
employees that they used or by their capital level.
There are deferent criteria to define type of SMEs in each country, each
region.
For example, according to European Commission, one company that called as
medium when they have 50 to 250 employees and their balance sheet total of €
10 to 43 millions.
In Vietnam they defined SMEs follow number of employees, as in definition,
small enterprises: engaging up to 49 employees, medium size enterprises:
engaging up to 299 employees.
Now, SMEs become are socially and economically important in each economy
by their contributions to entrepreneurship and innovation, prov iding jobs,
sharing to Gross Domestic Product (GDP).
1.2.2. Enterprise growth strategy and methodology.
In managing Small and Medium Enterprises (SMEs), a company can take
growth, stabilization or even extract strategy to influence its responses to both
external competitive advantage and internal strength.
The main two themes addressed here are as follows. After SMEs set their
development objective as a growth strategy, how should they choose the
appropriate method of achieving this goal of the growth. If SMEs decide to
meet their strategic goals by Mergers and Acquisitions (M&A), what mode of

M&A.
15
There are some factors behind mergers and acquisitions transactions that
involve and affect to company’s strategy, including:
Growth strategy: is when an enterprise aims at a much higher standard than
before, this targeted standard is market share or sales necessarily increase.
A firm could implement a growth strategy by developing internally or merging
with external businesses, according to three methods, including:
Increasing the number of points of sale to gain new customers;
Improving existing products or creating new but similar products to
maintain present customers and attract new' customers, and
• Taking over a competitor or a forward/backward-related company
through a merger.
[Aldag Stearns, 1991. p 204]
Growth as improvement in the operation o f an organization, including more
revenue, increase staffing and market share. Growth can be achieved by direct
expansion, mergers with similar firms or diversification. Present/future
competitors cannot easily maintain alliances, especially when the two involved
parties differently value the relationship. Competition is always dynamic and
strategies should be similarly dynamic, allowing change in organization and
implementation.
A stability strategy: focuses on maintaining a company's market share. The
primary goal of such a strategy is to strengthen the company internally. An
extraction strategy seeks to solve existing problems, increase management
efficiency and layoff workers or withdraw funds from certain business units.
1.2.3. Problems of SIMEs.
1.2.3.1. Problem within SMEs.
16
Capital shortage and weak financial structure: Most SMEs are family-
owned businesses that cannot easily raise capital from capital markets and

external sources.
• High private loan ratio, financially risky: SMEs loan ratio is as high as
25.5%, indicating relatively poor financial health.
Insufficient security: SMEs lack immovable property, and cannot easily
make a debt by movable property's guarantee. SMEs have no reliable source of
help.
• Weak accounting systems, incomplete financial reports: SMEs suffer
from a shortage of accounting professionals. SMEs prepare two sets of
financial reports for internal and external use to evade taxes.
• Unable to gain complete information about loans: Owners of SMEs tend
not fully to understand the channels through which loans are available, and
they miss out on soft loans.
• Besides financial weakness as main problems them, S M L Ỉ S are known as
lacking of resources like: human, technology, management, market and
productivity
To Conclusion, most SMEs are small and owned/operated by families, so their
ability to raise capital is usually limited. Additionally, their internal accounting
systems are weak, and these companies do not provide complete financial
reports nor provide proof of solvency. SMEs therefore tend to be able to obtain
less capital from the financial system than large enterprises. Accordingly,
SMEs always face the pressure of raising capital and maintaining capital at an
appropriate level. The inability to raise capital and the limited channels to
external capital are serious problems faced by SMEs.
1.2.3.2. Problems associated with financial institutions.
ĐAi H Ọ C Q U Ổ C GIA HÀ M 0 : ,
TRUNG TÁM THÒNG TIN THU VIcNj
1 1

—

Numerous loan items, a low credit line, and high cost of credit: Banks
burden SMEs by requiring onerous applications to be made for small loans.
• Conservative attitude towards loans because of the high risk of bad debt:
SMEs are limited by budget and audit policies, and the conservative attitudes
of banks and financial institutions to lending money.
Insufficiency of financial service branches: SMEs are nationwide, but
branches of institutions that provide financial services are too few.
1.2.3.3. Limitations associated with financial policy.
Almost SMEs cannot raise money from the market. Many medium enterprises
have a strong potential to raise capital from the capital market, but are
prevented by financial policies from going public.
Limited capital, imperfect financial structure: The new security law allows
SMEs to go public through a reporting system that allows them to raise capital
from the market. Small companies can obtain loans from banks, but when
middle-sized firms want to become large, they typically require more capital
than the bank can offer.
1.2.4. Mergers and Acquisitions motivation for SMEs.
Mergers and acquisitions motivation theories are of two kinds - value
maximization and non-value-maximization. Theories based on value
maximization include efficiency theory, information and signaling theory, the
market power hypothesis, and the financial motivation hypothesis; theories
based on non-value maximization include shareholder and managers and the
free cash flow hypothesis.
The motivation for M&A is to add value to the new company as compared
with the combined value of the merged companies. The main purpose of M&A
behavior is to gain economic benefit follows: the total value of the new
18