The consumer sector, with its high growth rate, is expected to be the target for merger and acquisition (M&A) deals in the coming years.
Illustrative photo - Source: VOVNews
M&A trend in Vietnam
According to the Vietnam M&A Research Report for 2011-2012 by the Stoxplus Corporation, from January 2011 to March 2012, Japanese businesses were involved in 30 M&A deals worth more than US$1 billion in Vietnam.
The report predicts that Japanese businesses will ramp up their investments in Vietnam, as well as in other Southeast Asian countries and China, in order to deal with economic risks.
In addition to the financial sector, M&A deals in the consumer sector are the most valuable, including C.P. Pokphand Company Ltd acquiring a 70.8 percent stake of C.P Vietnam Corporation worth US$609 million and Japan-based Unicharm Corporation purchasing 95 percent of Diana Vietnam Joint Stock Company, worth US$128 million.
Another major deal involved Marico, India's leading consumer products and services company, buying an 85 percent stake worth US$60 million in International Consumer Products (ICP Vietnam), which is known for its X-Men men’s personal care product line, and premium cosmetics L’OVITE.
Dang Thi Minh Loan, Deputy Managing Director of Vinacapital, puts this down to Vietnam’s growing consumer market and a young population with increasing incomes.
Businesses are now finding it necessary to build their core value and invest in human resources, she says, adding that the shortages of capital and experience, in addition to high interest rates, are the main problems facing Vietnamese businesses.
In the meantime, major businesses from countries such as Japan and India, which have encountered difficulties caused by natural disasters, tend to invest in foreign countries to expand their markets.
Which businesses will enter the fray?
Domestic consumer businesses have mixed feelings about the M&A trend in Vietnam. Businesses that are seeking partners feel positive about the trend, while those who are just interested in developing themselves are not sure if they will get involved in M&As.
However, analysts say that there are some indicators that can help enterprises decide if an M&A is a viable option for them.
They say it is a good idea for businesses with a low level of capitalization, especially those that cannot take full advantage of their biggest assets, to invite partners to get involved in their development, or become a target for acquisition.
Enterprises scoring small debts or large net balances, and those suffering from a brain-drain or a reduction in their market share are also targets for investors.
Enterprises without major stakeholders are very likely to be acquired by investors.
However, most Vietnamese businesses are still not sure if M&A deals will bring them opportunities or risks.
Judging from the successful results of most deals in 2011, Stoxplus CEO Nguyen Quang Thuan affirms this as part of a market-oriented strategy for businesses to develop in the long run./.