Banking and real estate will continue to be potential fields for M&A in the next few years. — Photo dananglaw.com

HA NOI (Biz Hub) — The total value of mergers and acquisitions (M&A) in the domestic market could reach US$4 billion in this year, general director of investment service provider AVM Vietnam, Dang Xuan Minh, said at a meeting in Ha Noi on Tuesday.

A research group for the Vietnam M&A Forum 2013 reported that M&A activities were expected to maintain an annual growth rate of 25-30 per cent over the next five years.

The majority of M&A affairs were small scale and worth less than $5 million each, but the market was expected to see greater transactions in the future when a larger number of major privatised State-owned enterprises and foreign investors were involved in these deals.

The total M&A value in Viet Nam has reached around $14.8 billion since 2009, with an average growth rate of 65 per cent per year. The value recorded in 2012 reached a record high of $5.1 billion, five times that of 2009, according to researchers.

Domestic companies accounted for 77 per cent of the number of transactions, although few of them were involved in $10-30 million deals. Foreign investors represented 66 per cent of all transaction values and they took part in most large deals.

Activities were mostly concentrated in the consumer goods sector, which had seen a total transaction value of $1 billion, or one quarter of the total M&A value in Viet Nam.

Other areas that interested foreign investors were banking-finance and property, although researchers said many M&A deals involved in real estate were not publicised for certain reasons.

Japanese firms led the domestic M&A market, having a total transaction value amounting to $1.5 billion in the 2011-12 period.

Major developments included Mizuho becoming a strategic partner of Vietcombank, Sumitomo purchasing stakes in Bao Viet, Mitsubishi acquiring Vietinbank shares and Unicham buying 95 per cent of Diana.

"We believe that businesses from Japan and ASEAN using mergers and acquisitions to enter the [domestic] market will continue to be a major trend in the future," researchers noted.

Minh said banking and real estate would continue to be potential fields for M&A in the next few years as the banking restructuring process was being stepped up in Viet Nam and many property investors were facing financial difficulties.

According to Minh, public acquisition through the domestic stock market had become more popular since 2010, with cases such as Hung Vuong Seafood buying stakes in An Giang Seafood, or Vien Dong Pharmaceutical acquiring shares of Ha Tay Pharmaceutical.

"This shows that the domestic M&A market has developed to a higher level, but it also puts public companies at a risk that they can be taken over at any time," he said.

Foreign Investment Agency official Do Van Su said that increasing foreign investors' acquisition of domestic firms in recent years was a positive sign as the move was helping improve operation efficiency of domestic companies and economically benefitting both stake buyers and sellers.

Forum chief organiser Nguyen Anh Tuan said the risk of domestic firms being taken over "wasn't yet worrying" since some key areas, including banking-finance and insurance, were still being gradually opened following international integration road maps, and incomplete domestic legal frameworks remained an obstacle for M&A.

"Unfortunately, sometimes the laws lack clarity," said Laywer Simon Taylor from Baker & Mckenzie. "This even causes domestic companies to be devalued in acquisitions by foreign firms."

The Vietnam M&A Forum will take place on August 8 in HCM City. It is co-organised by the Dau tu newspaper and AVM Vietnam, with the sponsorship of the Ministry of Planning and Investment. — VNS