Tiểu luận m a trends in the world and in vietnam

M&A Trends in the World and in Vietnam

FOREIGN TRADE UNIVERSITY
CLASS DTUE 310.2

M&A Trends in the World
and in Vietnam

November 2012

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M&A Trends in the World and in Vietnam

Contents
Introduction......................................................................................................................................................3
1.Factors driving cross-border M&As...............................................................................................................4
The trend of cross-border M&As in the world.................................................................................................6
The trend of cross-border M&As in Vietnam................................................................................................19
Opportunities and Challenges for Vietnam...................................................................................................23
Conclusion.......................................................................................................................................................29
References.......................................................................................................................................................30

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M&A Trends in the World and in Vietnam

Introduction
Cross-border mergers and acquisitions (M&As) have grown rapidly recently. Some

transactions had the value about two times larger than the gross domestic product
of Vietnam such as Vodafone Airtouch PLC and Mannesmann merger at about
$183 billion and AOL Inc. and Time Warner at about $165 billion (Wikipedia,
Merger and Acquisition, Major M&A).
Cross-border M&Asmust now be included among the fundamental mechanisms of
industrial globalization. In addition, cross-border M&As now contributes a greater
part for total value of foreign direct investment rather than greenfield investment
does. It happens again and again in all geographical areas from developed
countries to developing countries, and all industries. However the proportion of
cross-border M&As in difference areas, difference industries are incommensurate
and it changes considerably over time.
Our paper aims to point out the recent trend of cross-border M&As in the world
and in Vietnam. In the first part, we list a number of factors that drive the M&As
trend. The second part shows the trend of M&As in the world from 2005 to 2011.
This trend is analyzed in both different geographical areas and different industries.
Next we present the trend of cross-border M&As in Vietnam in recent years. And
in the final part we briefly suggest pros and cons of M&As situation happening in
Vietnam.

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M&A Trends in the World and in Vietnam

1. Factors driving cross-border M&As
Why is the number of cross-border M&As higher than before? Why do most of cross-border
M&As happen in developed countries? The answer is that there are many driving factors behind
cross-border M&As. Each factor plays a particular role and all of them decide the trend of crossborder M&As as a result. Many factors affect the both two parts of foreign direct investment
which includes cross-border M&As and greenfield investment.However, we just mention factors
that mostly drive cross-border M&As. Most of these factors are realized based on empirical

evidences.In general, we can divide these factors into five groups as follows.

1.1.Macro-level factors
1.1.1. Economic growth
Economic growth affects both the supply and demand for cross-border M&As.
Obviouslyeconomic expansion increases the price of shares and earning so it raises the pool of
capital for companies in home country to invest abroad. Furthermore, an economic boom in host
countries increases the short-term profitability of target companies for acquisition. In contrast, an
economic crisis is likely to prevent cross-border M&As. According to the UNCTAD World
Investment Report, in 2007, in which the world economy boomed remarkably, the value of crossborder M&As reached $1,023billion; however, in 2009, in which the world economy suffered a
crisis, the value of cross-border M&As was only $250 billion.

1.2.Industrial-level factors
1.2.1. Major sector
Cross-border M&As tends to be concentrated in a few major industries recently. According to the
UNCTAD World Investment Report agriculture, petroleum, chemical and finance have remained
a significant proportion of the total M&As value. Out of these sectors, petroleum so far has been
one of the most significant sectors for M&As. One of the reasons is that petroleum has played a
significant role as one of the main fuel supply in all industries; moreover, many of the world’s
largest companies have been petroleum companies.
1.2.2. Related industry
Evidently, TNCs now often target firms which operate in the related industry for merger.
According to the UNCTAD World Investment Report, more than half of cross-border M&As
took place in the similar or related industry. Restructuring and concentration on a core business
stand for the purpose of this situation.

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M&A Trends in the World and in Vietnam

1.3.Firm-level factors
1.1.1. Achievement of competitive advantage
Competitive advantage becomes an important reason for TNCs to conduct M&As. For example,
a TNC is certain to improve its competitive advantage through synergy from M&As such as
production knowledge, labor skills, marketing capabilities, brand name and so on. These
advantages can be applied repeatedly and simultaneously to multiple locations and businesses in
a non-rivalry manner.
1.3.1. Difference of skills
For many TNCs, the difference of skills is possible to create different decisions for M&As. It has
been observed that firms with technological skill frequently target greenfield investment while
others with organizational and managerial skill prefer cross-border M&As (OECD Science,
Technology and Industry Working Papers,2001). Here,technologicalskill is related to technology
development and the ability to innovate in research and development, while organizational and
managerial skill is associated with the ability to absorb and use existing knowledge.
1.3.2. Difference of firm strategies
Firms with difference strategies tend to have difference decision of foreign direct investment. For
example, a firm which has a shortage of strategic assets to be competitive frequently choose
M&As as a sensible solution. By merging with others, this firm is likely to gain more strategic
assets such as facilities, human resources… In contrast, a firm which has abundant strategic
assets seem properly target greenfield investment. Thanks to greenfield investment the firm is
able to protect its strategic assets such as secret recipes, managerial method…

1.4.Technology-related factors
1.4.1. Difficulty of R&D
In the business world today, R&D not only become more important but it also cost more money
compared to the past. The soaring costs of R&D, combined with the uncertainties of
technological change, have forced firmsto co-operate with others in global markets through
various unions and strategic alliances in order to fundresearch expenditures for new products.
For example, the large R&D costs required to develop newgenerations of drugs is considered the

major driving force for M&As in the pharmaceuticals sector.
1.4.2. New technology
Evidently new technology creates new markets and businesses such as in information technology
industry. Mergers and acquisitions can be a quick and easy way to react to competitors and
acquire entry into new sectors and markets. For instance, at the beginning of the 21 st century,
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M&A Trends in the World and in Vietnam

TNCs merged many firms in telecommunications, media and information industries in order to
capture new markets created by new technologies, particularly the growth of the Internet, and to
provide more integrated global services.

1.5.Government-related factors
1.5.1. Government Policy
In addition to the above factors, government policy plays an important role to decide whether a
TNC will get a M&A deal. For example the repeal of all remaining restrictions on acquisitions
by foreign investors in Korea at the end of the 20 th century attracted a large amount of M&A
investment inflows into Korea. One more example is that privatization policy that opens up the
sale of State-owned enterprises to foreign investors can contribute to cross-border merger
activityby increasing M&A targets and opening up economies to increased competition.

The trend of cross-border M&As in the world
1.6.Overview
1.6.1. Cross-border M&As and Greenfield investment
Cross-border M&As is defined as a form of Foreign Direct Investment in which an enterprise
from one country buys the whole asset or controlling percentage of an enterprise in another
country. Cross-border M&As consists of horizontal M&As, vertical M&As and conglomerate
M&As

Greenfield investment is also Foreign Direct Investment where a parent company sets up the
completely new production venture at the host country
While Greenfield investment adds new productive facility, which is an addition to existing
production capacity of the economy, M&A transfers the ownership of existing asset into foreign
companies. In recent year, cross-border M&As seems to take some advantage over Greenfield
Investment in some aspects such as technology transfer, economies of scale, strategic assets, etc.
Because of the more efficiency in resources, the growth of cross – border M&As has been more
popular than Green field Investment.
1.6.2. Cross – border M&As and Domestic M&As
Based on the nationalities of the transacting parties, M&A transactions can be divided into two
categories: domestic M&As (where participating parties are of same nationality) and crossborder M&As (where participating parties come from different countries). In attempt to trade
with other foreign countries for mutual benefits, domestic companies usually merge or acquire
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with other foreign companies in spite of their domestic countries. This is due to the ambition to
become more powerful abroad, to integrate with other countries, etc. Recently, cross-border
M&As has been largely overshadowed by domestic M&As, both in the number of transactions
and in their total value.
Overall, compared with Greenfield Investment and domestic M&As, Cross-border mergers and
acquisitions (M&As) have rapidly increased in recent years, accelerating the globalization of
industry and reshaping industrial structure at the international level. M&As are taking place in a
range of regions –developed countries; developing countries and industries - including mature
manufacturing sectors, high technology fields and service sectors - and reflect a need to
restructure and strengthen global competitiveness in core businesses.
This fact will be proved in the next two parts of this working paper.

1.7.Regional trend in cross – border M&As

Due to the difference in the mode of investment, cross border M&As is expected to exhibit
different impacts on host countries (the sellers) and TNCs countries (the buyers). In this working
paper, we will find out the trend of cross – border M&As through both host countries and TNCs
countries.
The table below shows the net cross-border sales and net cross-border purchases by
regions/economies of the world reported by UNCTAD 2012 of some selected countries in the
world during the period 2005 - 2011.

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TABLE 1: VALUE OF CROSS – BORDER M&As, BY REGION/ECONOMY OF SELLER/PURCHASE
2005 -2011 (MILLIONS OF DOLLARS) - (Source : UNCTAD 2012 –Annex I.3)

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1.7.1. Host countries ( the sellers)
There may be a number of reasons for a firm to become the selling party to a cross-border M&A
transaction. Besides simply being targeted by a foreign investor which wishes to enter the host
country by buying into a local firm, it can be because of a firm’s urgent need for capitals to get
rid of its financial troubles when there are limited financial resources available in its home
country; or it may be the strategy of a domestic firm to have a stronger presence in the world
market. Furthermore, the host countries can take advantage of technology transfer and make use
of some strategic assets from TNCs. Accordingly, the sellers in cross-border M&As are also
playing the crucial role, which may affect many aspects of the transactions.

Different organizational structures of the sellers may produce different legal consequence to
cross-border M&As. Trends in cross-border M&As differ among developed countries,
developing countries and countries in transition. Nevertheless, developed countries play a major
role as the host countries
•

Cross- border M&As trend of developed host countries

According to the UNCTAD definition of developed countries, which includes 24 OECD
countries (excluding Korea, Mexico, Poland, Hungary and the Czech Republic), plus South
Africa and Israel.
It is clear that the developed countries play an crucial role as the host countries of cross –border
M&As. During the period from 2005 to 2011, they took up a major proportion in M&As in the
world. Last year, developed countries reach 409,691 million dollars, accounting for nearly 80%
of the total. From this above table, there was a boom in net cross –border M&As sales in 2005 –
2007. In 2007, the net cross – border M&As sales of the developed countries and the world was
891,896 million dollars; 1,022,725 million dollars, respectively. According to UNCTAD’s
analysis, this cross - border M&A sales boom is partly caused by increase in the activities of
collective investment funds – private equity funds and hedge funds – in FDI. In 2005, cross–
border M&A activities increased significantly, which took up to 88% the net cross – border
M&As sales of the world, drove the rise in FDI inflows to developed countries. Flows were
particularly buoyant in the United Kingdom, France, and the Netherlands. The European Union
as a whole continued to be the largest host region, attracting almost 40 % of total FDI inflows in
2007.
After reaching at the peak of net cross – border M&As sales in 2007 and dropping sharply during
the next two year because of the world financial crisis, the developed host countries’ net sales
have been improved. There may be a promising future for the net cross – border M&As sales of
the developed countries.

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M&A Trends in the World and in Vietnam

FIGURE 1: Cross – border M&As trend of developed host countries in term of value (2005 – 2011)
(Source: UNCTAD 2012 – annex table I.3)

•

Cross – border M&As trend of developing host countries

South Asia, East Asia and South-East Asia together were the largest recipient of FDI among all
developing regions. The region accounted for two fifths of FDI inflows. Such flows raised US$
249 billion, 18 % increase over 2006. The contribution to this growth were significant crossborder M&As, amounting to almost US$ 100,381 million – an increase of 12% compared with
the previous year. China and Hong Kong (China) remained the two largest FDI recipients in the
region as well as among all developing countries. Vietnam was one of the countries, which were
less attractive to foreign investors in early 2005. However, in recent year, the net cross – border
sales in Vietnam pumped up dramatically. Last year, Vietnam earned US$1,460 million from
cross – border M&As activities as a host country.
The world crisis and economic downturn also had a dampening effect on cross-border M&As,
the value of which fell considerably in 2009. However, developing countries has gradually
recovered in the near future.

•

Cross – border M&As trend of host countries in transaction

Besides developed countries and developing countries, countries in transition have also been the
potential destination of foreign investors recently. It was a remarkable improvement of countries
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in transaction to reach the net cross – border sales of US$ 32,970 million in 2011 from US$
-5,279 million in early 2005. This results has led to the 6% of the total net cross - border

FIGURE 2: The proportion of net – cross border sales of the world in 2011
(Source: UNCTAD 2012 – annex table I.3)

1.7.2. TNCs (the buyers)
Theoretically, a cross-border M&A transaction starts with the buyer’s initiative forstrategic
expansion. The motivations and conditions of the buyer decide a number of keyissues concerning
the transaction, such as the type of the target, as well as the patternfollowing which the
transaction will proceed.
TNCs have impacted differently on national economies when considering developed and
developing countries and countries in transition. In the case of developing countries, the
conclusion of M&As may allow national governments to pursue development policy. In fact, the
location of the new corporate entities can be a useful tool for the takeoff of the national economy.
As far as developed countries are concerned, M&As can be used to reduce or eliminate economic
unbalances within national borders by encouraging the location of some affiliates of the new
corporate entities in depressed regions, thus stimulating national growth.
According to UNCTAD 2012 (as mentioned in TABLE 1 in this working paper), the net – cross border M&As purchases of the world has been increased in recent year. We will specify this
trend by regions/economies in the following contents:
•

Cross – border M&As trend of developed TNCs countries

As reported by UNCTAD 2012, the United States is the single most important TNCs country,
which took up 25% (about US$130,615 million) the net cross – border purchases of the total in

2011. This is clearly illustrated in Figure 3, in which the United States is the leader among the
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M&A Trends in the World and in Vietnam

top ten developed countries in terms of cross-border M&As purchases. United Kingdom and
Canada remained their position in the top 10 regions which have the highest cross – border
M&As purchases. In 2011, we have seen the recovered of Japan cross – border M&As.
Compared to 2010, its cross – border M&As net purchases was doubled in 2011 ( US$ 62,687
millions of dollars). This helped Japan reach the 2nd position in the top 10, after United States.

FIGURE 3: Top 10 TNCs developed countries in term of cross – border M&As purchases during 2005 – 2011
(Source: UNCTAD 2012 – annex table I.3)

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M&A Trends in the World and in Vietnam

•

Cross – border M&As trend of developing TNCs countries

FIGURE 4: The developing countries’ net purchases during 2005 – 2011
(Source: UNCTAD 2012 – annex table I.3)

The developing countries’ net purchases have been rather quiet during 2005 - 2011, mainly as a
result of the debt crisis which affected these countries. Many firms have huge debts, and may
have in effect defaulted on loans. This situation allowed little scope for cross – border M&As

purchases. In detail, in the beginning of the financial crisis in 2007, cross – border M&As net
purchases of developing countries accounted for only 14% of the total (US$ 73,975 millions of
dollars out of US$ 525,881 millions of dollars)
•

Cross – border M&As trend of TNCs countries in transition

FDI to transition economies, expanded significantly, by 41 %, to a new record of US$98 billion
in 2007.This was the seventh year of uninterrupted growth of FDI in the region. Outflows almost
doubled to the region thanks to the increase in the cross – border M&As of TNCs in transition
economy. In 2011, it reached US$ 13,510 millions of dollars, accounting for 2.6% of the world in
total. However, transition economy still plays a minor role as TNCs in the world.

1.8.Sectional trend of M&As
Cross – border M&As appears to occur to different extents across sectors as primary industries
(gas, oil, petroleum, etc.); manufacturing industries (vehicles, chemistry, car, motorbikes,etc.)
and services industries (banking, financing, telecommunication, insurance,etc.). The factors
generating cross – border M&As by section are identified in the flourishing of regulatory
changes at global and in the fast pace of technological change which has enhanced business and
marketopportunities, technological interrelatedness, and communications and cross –
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borderrestructuring. This paper will examine in which industries the propensity to engagecross –
border M&As has been the highest.
The table bellows show the value of cross – border M&As, by sector/industry in millions of
dollars during the period 2005 -2011, which was reported by UNCTAD 2012

TABLE 2: VALUE OF CROSS – BORDER M&As, BY SECTOR/INDUSTRY, 2005 – 2011 (Millions of dollars)
(Source: UNCTAD 2012 – annex table I.5)

1.8.1. Primary industry
Primary industry is an industry involved in the extraction and collection of natural resources.
According to UNCTAD analysis, primary industry consists of Agriculture, hunting, forestry and
fisheries; mining, quarrying and petroleum. From TABLE 2, we can see the sharply decrease in
cross – border M&As in Agriculture, hunting, forestry and fisheries but a boom in mining sector.
This trend has accelerated between 2005 and 2010. Annual cross-border M&A net purchases in
the primary sector; mining, quarrying and petroleum; between 2005 and 2010 globally, increased
from less than $3 billion in 2005 which accounted for less than 1% of cross-border net purchases
in all sectors combined, to $52 billion in 2010, which accounted for 15% of the total cross-border
net purchases in all sectors globally. Compared to the overall trends in global FDI outflows, and
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M&A Trends in the World and in Vietnam

specifically global M&A net purchases, cross-border M&A net purchases in the primary sector
have exhibited absolute strength over five and six year periods, and consistent relative strength
on a yearly basis. The value of natural resource FDI projects reached a total of $254 billion in
2010, giving the primary sector a 22% global sectors share of total FDI. This is an increase from
14%, where the sector's share was in 2007 onset of the financial and economic crisis.

FIGURE 6: The net sales/purchases of Primary sector Mining, Quarrying and Petroleum 2005 -2011
(Source: UNCTAD 2012 – annex table I.5)

1.8.2. Manufacturing industries
Manufacturing industries refers to those industries which involve in the manufacturing and
processing of items and indulge in either creation of new commodities or in value addition.

Industries

Net sales Net purchases

Food,berverage and tobacco

43,578

27,393

Chemical and chemical products

76,424

87,749

Electrical and electronic equipment 27,564

19,514

Precision instruments

11,354

17,763

Metals and metal products

6,574

18,969

TABLE 3: TOP 5 MANUFACTURING INDUSTRIES IN 2011
(Source: UNCTAD 2012 – annex table I.5)

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M&A Trends in the World and in Vietnam

Technological factors have impacted on the growing M&A strategy in the chemical and chemical
products industry. In this industry, cross – border M&As has taken place as a means of achieving
cost savings and speeding up innovation in response to the fast pace of technological changes in
this sector. Therefore, enterprises will accumulate resources for financing research and
development.
In this sense, cross-border unions may provide a means of expanding the corporate asset base
and reserves of technological strength. Another industry which contributes to the increase in FDI
of the world is Food, beverage and tobacco. Last year, there was an increase in the net sales of
this industries (from US$ 37,911 millions of dollars to US$ 43,578 millions of dollars), but there
was also a considerable decrease in its net purchases (from US$ 37,911 millions of dollars to
US$ 43,578 millions of dollars).
1.8.3. Services industries
In the modern society, the business sector always plays an important part in boosting FDI.
Therefore, this working paper will focus on analyzing business services industries and the
financing services. Deutsche Bank–Bankers Trust New York Corporation, HSBC Holdings–
Republic New York Corporation, and HSBC Holdings–Safra Republic Holdings are just three of
the cross-border M&As accounting for more than U.S. $1 billion each. The elimination of the
borders between banking and securities in the United States, the financial liberalization in Japan
and the deregulation in the EU have all contributed to a cross-border merger strategy for the sake
of competition. Cross – border M&As have provided a means for exploiting geographical and

sectoral synergies in order to compete globally. Due to the major underlying trends affecting this
sector, the theoretical motives which appear most valid for explaining M&As in this case are
market power and defensive reactions; moreover, it also becomes synergies and reduction of
transaction costs.

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FIGURE 7: Cross – border M&As trend in services industry in term of value and numbers of deals during 2005 -2011
(Source: UNCTAD 2012 – annex table I.5 & I.6)

1.9.Prospects and conclusion
Based on the statistic data reported by UNCTAD 2012 on the cross – border M&As net
sales/purchases 2005 – 2011 in term of value (millions of dollars), we have forecasted the trend
of cross – border M&As net sales/purchases in the near future as follows.
This below table is summarized the total net cross - border M&As sales/purchases in the world
during 2005 - 2011.
Year
2005
2006
2007
2008
2009
2010
2011

Net sales/purchases
Time period

(millions of dollars)
(X)
(Y)
1
462253
2
625320
3
1022725
4
706543
5
249732
6
344029
7
525881

TABLE 4: Total cross – border M&As net sales/purchases 2005 – 2011
(Source: UNCTAD 2012 – annex table I.3)

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Model: OLS, using observations 2005-2011 (T = 7)
Dependent variable: y

const

x

coefficient
725882
-40881.8

Mean dependent var
Sum squared resid
R-squared
F(1, 5)
Log-likelihood
Schwarz criterion
rho

std. error
222534
49760.0

562354.7
3.47e+11
0.118942
0.674993
-96.12240
196.1366
0.126603

t-ratio
3.262
-0.8216

p-value
0.0224 **
0.4487

S.D. dependent var
S.E. of regression
Adjusted R-squared
P-value(F)
Akaike criterion
Hannan-Quinn
Durbin-Watson

256074.7
263305.3
-0.057270
0.448704
196.2448
194.9077
1.587665

From Gretl with OLS method, we have the followings estimation model:
= 725882 – 40881.8X
 The regression for trend is : t = 725882 – 40881,8X
t (est - 2012) = 725882 – 40881.8*8 = 398827.6

FIGURE 8: Cross – border M&As trend by using regression model (2005 – 2011)

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M&A Trends in the World and in Vietnam

We have used “time series analysis” to forecast the trend in cross – border M&As in the world in
2012. As we can see from this table, after reaching the peak of above US$1 trillion in 2007, the
total cross – border M&As dropped dramatically. This is due to the world’s financial crisis in
2007, which has affected to the world’s economy up to now. In this working paper, we saw some
slight recovery of cross – border M&As trend in recent year. However, the trend of the overall
picture of cross – border M&As seems to continue decline in the next years.

The trend of cross-border M&As in Vietnam
1.10.

Overview

M & A activity in Vietnam only the rapid increase in the number and value of transactions from a
few years back, especially since our country participate Organization World Trade (WTO), with
multiple barriers lifted investors and multinational companies participating business in Vietnam.
Prior to 2007, in Vietnam each year not more than 50 M & A deals, with the highest value traded
in U.S. $ 300 million.
But since 2007 the number of M & A cases increased dramatically. Specifically, in 2007 there
were 108 cases with a total value of $ 1.72 billion; 2008 there were 167 cases with more than $
1.1 billion; 2009 there were 295 M & A deals with a total value of nearly 1.138 billion; 2010 345
M & A activity with values up to $ 1.75 billion. In 2011, the continuous development marks a
step up to the value of the deal has completed $ 2.67 billion, 1.5 times in 2010. Beginning in
2011, the M & A activity involving foreign elements accounted for 81.3%. In which the main
cash flow comes from Japanese corporations. Place the field of M & A is active in finance, real
estate and consumer goods.

FIGURE 9: M&As Situation in Vietnam (2003-2011)

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M&A Trends in the World and in Vietnam

FIGURE 10: M&As Growth in Vietnam and Asia-Pacific (2002-2011)

M&A Ratio
In 2008, 1.1 / 11.5 = 9.57 %
In 2009, 1.138 / 10 = 11.38 %
In 2010, 1.75 / 11 = 15.9 %
In 2011, 2.67 / 11 = 24.27 %
It is easily seen that the ratio of M&A in FDI in the period of 2008-2011 kept increasing. After 4
years, the disbursed money from FDI which was M&A deals’ value has increased 2.54 times that
shows the development of M&A trend in Vietnam in 2008-2011. It also means that the ratio of
Greenfield investment in FDI has decreased and M&A has become more and more popular.

1.11.

Trend in region/economy of purchaser

Over 60% of M&A activity in Vietnam has foreign elements.

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FIGURE 11: Proportion of M&As in Vietnam

The purchasers who are investors in M&A investment in Vietnam almost are Asian Pacific
countries and some from Europe such as The UK, German, etc.
In the 2008, the 5 leading investors are: Malaysia, Taiwan, Japan, Singapore and Brunei. It is
worth noting that no less than 10 projects at over US$ 1 billion were granted investment
certificates compared to only 1 in 2007.
In 2009, 43 countries and territories investing in Vietnam, the biggest investor in turn is the
United States with a total registered capital of $ 9.8 billion accounted for 45.6% of total capital
investment in Vietnam, Cayman Islands ranked second with a total registered capital of 2.02
billion accounted for 9.4%.
Samoa is ranked third with a total registered capital of $ 1.7 billion, accounting for 7.9%; South
Korea ranked fourth with $ 1.66 billion registered capital, accounting for 7.7% of the total
registered capital.
For 2011, China took the lead with 22.7% in cash flow of M&A for the Vietnamese market,
followed by the USA. Japanese investors tend to invest heavily in both the consumer goods
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industry and finance. These are two areas of rapid growth in recent years and the investment
objectives of many foreign financial institutions.
Purchasers

US $ (million) %

China

609.0

22.7

The USA

572.8

21.4

Japan

236.4

8.8

Russia

196.0

7.3

Vietnam

424.2

18.4

Others

570.9

21.4

Contribution in M&A deals value in 2011

1.12.

Trend in sector

Top 5 M&A invested sectors in the period 2008-2011:
2008: Financials, Industrials, Materials, Media and Entertainment, Consumer Staples
2009: Industrials, Energy and Power, Financials, Materials, Consumer Staples.
2010: Industrials, Energy and Power, Petroleum and Clothes
2011: Consumer goods, Financials, Real Estate, Leisure, Travel
The investors of M&As kept focusing on industrial, consumer goods, banking and finance. A
significant number of other potential areas in M & A activity are telecommunications, mining,
pharmaceutical, entertainment and communication. The transfer of real estate projects will also
continue to be interested.
Specifically, in the area of banking and financial services, with the restructuring plan, this is still
a potential field of M & A and investment. As announced by the State Bank and the bank's plans,
is expected to have 3 - 5 business merged bank will continue to take place. Trade related to
selected strategic partners Vietinbank next after not agree with Nova Scotia will contribute a
great value in the private placement transaction.
In the consumer goods industry, with a market of nearly 90 million people, young people, the
business in the field of consumer goods is also very interesting. The deal could include the

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transfer of the company owning the brand long-standing local or emerging, together with a

market share for some types of goods.
The producers in the industry always have a high weight in the statistics of M & A in the past, as
well as in the near future in Vietnam. Businesses in this area, more or less owns the assets of the
project value, land, buildings, systems and objects suitable for the acquired companies in the
same industry or links.
With real estate, the growth momentum of the economy, the real estate market in Vietnam as a
potential market, so the last two years, which is the field of attraction of foreign capital. This is
understandable. However, the after hot growth stage, some segments of the market becomes
saturated. Meanwhile, the capital of the region is difficult. Can forecast demand for transfer of
real estate projects will continue to take place in the next few years.
Pharmaceutical, medical and healthcare sector is a lot of potential. In 2011, business acquisition
CFR large stake of Domesco, business acquisition Fortis Hoan My Hospital is a signal that,
foreign investors are interested in Vietnamese enterprises in this field. Production of
pharmaceutical, medical and health care industry has huge growth potential in the coming years.
However, the production capacity of the pharmaceutical companies is weak. Many
pharmaceutical companies just stop at the distribution activities.
Another field of interest is mining. This industry also many hidden opportunities yet to be fully
exploited, and strategic collaboration between the local mining company relations, permits the
mines, with international companies likely capital and technology to focus intensive processing.

Opportunities and Challenges for Vietnam
1.13.

Opportunities

1.13.1. Vietnam is considered as an attractive destination of M&A
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With the globalization of economic activities, the speed of economic growth is faster,
estimated at more than 7% from 2001 up to now, which is considered as a big motivation
Becoming a member of WTO means many tariffs and barriers are removed
The Investment Law and Enterprise Law coming into effect have created a much more
equal environment for both domestic investors and foreign investors
Potential market for investment: rather stable economy

For all reasons mentioned above, investors as well as multinational enterprises found it attractive
to increase their M&Aactivities in Vietnam.
1.13.2. On the investors’ side
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M & A is the shortest way to reach the market for the foreign investors

The flow of foreign investment into Vietnam continuously increases dramatically. One way for
foreign investors to penetrate deeper into Vietnam’s market is through M&A, which can help
them take advantage of the available distribution system, customer network, human resources to
reduce costs and shorten the time of entering the market and this acts as a momentum for M&A
activity’s development.
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Trends of equitization and privatization

The increase in capital flows of private investment funds as well as companies issuing securities

on the stock market, trends of equitization and privatization are becoming more popular. In
addition, the trend of lowering the interest rates of the main currencies in the world has
contributed much to the pouring money of investors into host companies in order to hold more
shares of them. This is another reason increasing the trend of M&A in Vietnam.
1.13.3. On the firms’ side
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Pressure of improving business performance

The pressure of improving business performance in competitive conditions is increasing stronger,
particularly when the whole economy is facing difficulty: One fact is that most Vietnamese
enterprises have smaller scales than foreign enterprises, less experience in economic market, are
weaker in financial capability, lack of human resources capable of corporate management.
Meanwhile, the demand for competition requires reducing costs in doing business, improving
company’s status in the market, reaching new markets, expanding globally, attracting more
potential customers, creating more value…In this unequal competition, cooperation in general
and through M&A in particular among Vietnamese enterprises plays a vital part in surviving.
And that is the way to motivate the domestic companies as well.
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A channel of capital mobilization

In the condition of economic difficulty, Vietnamese enterprises are facing many challenges.
According to recent statistics, there are about 350,000 active enterprises, of which more than
95% are small and medium enterprises. Things these enterprises have in common are small
capital scale, management level is not high, and access to technology is limited. They are the
factors restraining the development of enterprises in such a fierce integration environment.
Besides, mobilizing channels of enterprises are getting narrower due to the fact that high
inflation, net export breaks the record that forces the Government implements contractionary
monetary policy. This leads company into a hard way to access to bank credit or access with a

higher cost, Therefore, production and business activities face difficulty, many real estate
projects and infrastructure development projects are delayed, a large number of manufacturing
business activities are in moderation. In addition, the stock market continues to decline leading to
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M&A Trends in the World and in Vietnam

mobilization activities fall into deadlock. So the trend of looking for another effective channel
for capital mobilization aims to stabilize and expand the business is necessary. And M & A is a
form of raising capital to meet this demand.
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M & A is the access to technology transfer, skilled management, experience…

M&A brings to the firms chances to reach advanced management science as well as secrets of
modern technology of the foreign investors which can improve the value of the firm.
The increase of M & A in the recent two years is a positive sign illustrated that foreign investors
appreciate the opportunity to invest in Vietnam. Besides the factor of high speed economic
growth and the prioritized policies, the legal system relating to the M & A is an important factor
as well contributing to attract the interest of the foreign investors. The commitment of the
Government of Viet Nam in the process of implementation of WTO together with the Decree on
sale and merger of enterprises contains foreign elements composed by the Ministry of Planning
and Investment will create favorable conditions for the domestic firms and foreign firms to
repurchase shares. The legal procedures for conducting M & A and the percentage of ownership
of the foreign investment in acquisitions will also be specified in order to create a legal
framework to protect the rights of parties involved and to create a work environment of
transparency, fairness and efficiency. This will be an opportunity for investors to participate in
amore extensive of the M&A market for the time coming.

1.14.

Challenges

M & A is kind of a relatively complex activity with many hidden risks. Knowledge and
understandings of the oneswho involve in the M & A market as well as the formulation of a legal
framework for M & A activity will be important factors contributed to the success of this
activity. However, this is exactly the problem still existing in Vietnam market.
1.14.1. Some legal issues
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M&A is quite new in VN so we haven’t got a separate legal system to adjust for this
activity.
M & A activity is still under provisions scattered throughout many different acts, codes
and legal norms document, moreover, the acts are rather ambiguous, general, lack of
details and not match with others. This makes not only parties involved in M&A face
difficulties in following but also the authority finds it hard to control all the M&A
activities.
1.14.2. In general, Vietnamese (include the authority, enterprises, investors,
intermediaries, brokers...) still lack of information and understandings about
M&A which leads to
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