For mergers and acquisitions (M&A) market to become active, banks needed to improve their participation in this process.
Statistics showed that the M&A market in the past 10 years was apparent. In 2009, the total value of M&A deals was only $1.1 billion. By the end of 2018, this figure had reached a milestone of $10.2 billion, bringing the total value of the 10-year deal to about $55 billion.
Not only had the record of the total value, the number of deals also increased very fast, taking place in all business sectors, such as private, foreign investment, enterprises with state capital. M&A deals attracted not only domestic and international professional financial investors but also active participation of production, business, and technology enterprises.
According to the prediction of the Vietnam M&A Forum Research Group (MAF Research) and the Investment and M&A Research centre (CMAC), the value of M&A in 2019 would be in the range of $6.7 billion to $6.8 billion, equivalent to 88 percent to 90 percent of M&A value in 2018. This result, despite a decrease, but for three consecutive years, 2017 to 2019, the average market size per year had been at $7 billion, higher than the period from 2014 to 2017 with a scale of $5 billion.
Jarrard Harford, Head of the Department of Finance and Business, University of Washington (USA) said that Vietnam’s M&A market was attractive in the region for investors thanks to its scale and market dynamics.
To promote this market, Pham Xuan Hoe, deputy director of the Banking Strategy Institute, said that banks needed to promote their participation in this market actively.
Accordingly, banks also master finance, so the ability to analyse financial indicators of the business, such as debt ratio, financial leverage of the business, was excellent. Therefore, banks would help the acquired company operate better thanks to better financial management.
Banks could advise businesses in the process of issuing shares to the outside, maybe even underwriting the transactions. In Vietnam, banks cooperated with securities companies which should be further promoted in the future.
Moreover, according to Hoe, the process of dealing with bad debts of banks was also the process of making M&A if the bank had advised well to help businesses overcome difficulties. Accordingly, banks might initially hold a management role, consolidate the business and then sell it to other partners. Thus, banks could transfer debt to investors better.
Even if the M&A process was excellent, banks could consider allowing other partners to buy their businesses. That was how the recent Thai investor acquired Sabeco.
At first, Thai investors were thought to have bought shares by their own money. However actually, that capital was borrowed from the bank. The world did, Vietnam could consider, Hoe said.
However, according to this expert, currently, the bank’s participation in the M&A process was still limited. Because according to the Law on Credit Institutions, banks cannot hold more than 10 percent of the voting stock of an enterprise. The reason was that the regulator worried about the taking over of banks, and businesses would gradually move away from their fields, creating financial capital and manipulating the market.
Accordingly, this expert suggested, in the near future, banks need to improve the cooperation with securities consulting companies to support the M&A process, so that Vietnam’s M&A market would soon explode, especially when Vietnam owned many factors to support growth.
The government was completing the laws related to investment and business such as Investment Law, Enterprise Law, Securities Law, Construction Law, and so on. These laws would be amended soon to remove obstacles, then eliminate duplication and reduce the cost of procedures for market participation and business costs of enterprises.
Several new laws would be developed and enacted, such as the Law on Supporting Small and Medium-sized Enterprises, the Law on Investment in the form of Public-Private Partner (PPP), etc. That would create a more robust legal framework for private sector participation in the fields of business investment.
