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Mr. Dang Xuan Minh Deputy Head of the Organizing Board of Vietnam M&A Forum

There are opportunities for M&As in 2019 but also challenges. It is forecast that this year’s M&A deal value will be lower than 2018’s due to the impact of difficulties. What are the biggest obstacles for M&As this year?

According to a report, the total value of Vietnam’s M&A 2018 reached USD 7.64 billion, equivalent to 74.9 percent compared to 2017. However, if excluding the contribution of the Sabeco deal, Vietnam’s M&A 2018 value increased by 41.4 percent. In the first half of 2019, the total value of M&A deals in Vietnam only reached USD 1.9 billion (equivalent to 53 percent compared to 2018 of USD 3.55 billion). According to statistics from the Foreign Investment Agency, the value of foreign investors acquiring domestic shares reached USD 2.64 billion. However, in the last two months, there have been more M&A deals and investments newly announced such as KEB Hana Bank investing in BIDV with nearly USD 900 million. MAF and CMAC's forecast for M&A 2019 (at USD 6.7 billion) is a cautious forecast, however, we hope that with big deals, the value of Vietnam’s M&A in 2019 will surpass this forecast.

The M&A market in 2017 achieved strong growth. If excluding the change in the value of ThaiBev - Sabeco deal, the market was still in a growth phase, however, efforts are key to achieve breakthrough. There are many opportunities in Vietnam, but the country faces difficulties and challenges. In addition to objective reasons such as complicated economic, political, and commercial developments of the region and the world, subjective causes are still major problems.

According to the survey results of MAF Research Group and CMAC Center, the biggest obstacles are large State share ownership ratios (85 percent), translucent financial statements and information disclosure (80 percent), the high price assessment (76 percent) and the long time for implementing deals (75 percent). Other factors are cultural factors and change, rare quality opportunities, difficulties in accessing businesses and foreign language.

Notably, of the eight factors related to the State and SOEs, six related to the private sector. This also requires Vietnam’s policy makers and planners, managers and business owners study and find solutions to remove these barriers.

In 2019, what fields will attract investors? What are incentives for M&A transactions in fields such as high-tech technology, high-tech agriculture, renewable energy and intelligent infrastructure?

In 2019 and beyond, we believe that M&A deals will focus on consumer goods, retail and real estate. In addition, telecommunications, energy, infrastructure, pharmaceuticals and education are expected to contribute significantly to M&A activities in Vietnam. By surveying investors, in M&A activities, investors do not need incentives, they only need good investment opportunities, facilitation to the procedures for buying, selling, transferring and receiving businesses after M&A deals.

For high-tech industries, high-tech agriculture, renewable energy, smart infrastructure, the Vietnamese Government has issued incentive policies and many businesses have focused on investing or calling for the investment. M&A activities often follow direct investment activities, so we can believe that these are potential sectors for M&A deals.

The acquisitions and divestment in 2018 and the first half of 2019 has signs of slow development. How should the barriers be removed to achieve the goals of the Government and investors?

According to reports, in 2017, 69 enterprises were equitised with total value of VND 365,953 billion, of which the State capital value was VND 160,156 billion. When selling shares for the first time, some enterprises sold at a very low rate compared to the approved plans, such as the Machines and Industrial Equipment Corporation (reaching only 0.1 percent); Vinafood 1 Flour One Member Company Limited (only 4 percent); Power Generation Joint Stock Corporation 3 (reaching only 3 percent); Song Da Corporation (reaching only 0.8 percent). In the first 11 months of 2018, 12 enterprises were equitised with a total value of VND 29,747 billion, of which the State capital value was VND 15,413 billion. Regarding divestment, in 2017, we divested VND 9,046 billion and collected VND 138,327 billion (including state divestment in Sabeco and Vinamilk). In the first 11 months of 2018, we divested VND 5,067 billion and collected VND 10,499 billion.

Equitisation and divestment has signs of slowing down which is the reason the Government has requested to drastically equitise and divest. However, there are barriers such as business quality, assessment on business valuation. Investors believe if the Government directs strongly, Vietnam can promote equitisation and divestments, contributing to increasing the value of the M&A market.

The theme of the Vietnam M&A forum 2019 is ’Going for Breakthrough‘. In your opinion, how do the Government and businesses need to change for M&As in 2019 as well as in the following years to make a breakthrough?

The Vietnam M&A Forum 2018 with the theme ’Going for Breakthrough‘ is to focus on the context of Vietnam’s M&A market, the determination of the Government and investors to achieve breakthrough targets. Whether the M&A market may exceed USD 10 billion and be ranked among the top South East Asian countries to attract investment, the Government can achieve the goal of divestment and equitisation, enterprises can take advantage of opportunities to raise their positions or not, it depends on the changes of investors, the Government and businesses.

According to a survey of MAF and CMAC, three important factors should be implemented, with divestment implemented drastically, private corporations promoted and enterprises should announce information transparently. In addition, there are other important factors such as: actively accessing to international investors, promoting listing of equitised State-owned enterprises and improving the legal system and polices.

I think that Vietnam’s M&A market needs more opportunities for foreign investors. Recently, a series of State-owned corporations and groups have been equitised but the State's share rate is still too high and they have not selected strategic investors for many years. I propose that the State needs to set a goal of divesting from 1-2 big companies per year, which lead the market. The legal framework and enforcement system related to investment and M&A deals needs to be improved and barriers need to be removed such as issues of ownership limits for investors, planning and tax for M&A transactions.

Vietnamese enterprises including equitised SOEs and private enterprises need to be more transparent about business information and financial information so investors can access information to make investment decisions.