Vietnam's ongoing efforts to reform the public sector and the financial system as well as deepen global economic integration turn the country into an attractive merger and acquisition (M&A) market for investors, according to Deputy PM Vuong Dinh Hue.
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According to Hue, M&A plays an important role in supporting the government's effort of economic restructuring. Concurrently, opportunities for M&A are created throughout the restructuring process for both local and foreign companies.
M&A activities currently focus on priority sectors, including finance - banking, state-owned enterprises (SOEs), and public sector reform, among others, Hue informed.
In the finance-banking sector, bad debt on banks' balance sheets is on the declining trend, reaching 2.18% of total outstanding loans, below the 3% target set by the National Assembly, Hue said.
In recent years, the restructuring of credit institutions was one of the government's top agenda. For commercial banks, small-scaled banks are encouraged to merge into a larger ones. Besides, the government does not plan to issue license for establishing foreign-wholly owned banks, but is inviting foreign banks to purchase weak local commercial banks, he added.
Hue also said that the government is stepping up effort in equitizing and divesting state capital from state-run commercial banks. Among the list, Agribank is scheduled to launch its initial public offering in 2019, while BIDV plans to sell its stake to foreign investors.
Additionally, the government intends to restructure nearly 40 financial companies under state-owned enterprises (SOEs)' management, including stake sales to domestic and foreign investors. At present, the State Bank of Vietnam (SBV) is drafting a plan to submit to the prime minister for approval, Hue informed.
With regard to SOEs equitization, the government remains steadfast in cut down the number of wholly state-owned enterprises and divesting in equitized SOEs. Moreover, Hue urged ministries and provinces to speed up the process of going public for post-equitization SOEs.
With regard to enterprises operating in agriculture and forestry, the deputy PM said the government has issued regulation on equitization, granting the establishment of multi-member limited liability company. "This ia a potential M&A market," Hue added.
In public services, except schools and hospitals, the government has allowed public services companies to equitize if possible. "This is a new field that may attract investors, as all provinces need public services," according to Hue.
Favorable conditions for M&A
The government is determined to ensure the lawful rights of investors through legal frameworks and stabilizing macro-economic conditions, Hue stressed.
According to Hue, this could be done by removing bottlenecks in five markets, including labor market, science-technology market, capital market, real estate market and goods-services market, along with narrowing down business conditions.
Recently, the government has approved the list of SOEs marked for divestment during 2017 - 2020 and the list of SOEs to be equitized during the course of 2017 - 2020. This would be useful information for investors in buying shares and capital at Vietnamese SOEs, Hue added.
Moreover, over 10 free trade agreements between Vietnam and countries/regions around the world are expected to create an investment wave. In particular, the World Economic Forum on ASEAN to be held in September in Hanoi is a promising opportunity for investors in M&A activities.
In the last 10 years, Vietnam's M&A market witnessed nearly 4,000 M&A deals with total value of US$48.8 billion.
Last year, Vietnam posted a record of US$10.2 billion in deal value, of which the US$4.8-billion Thai Beverage's purchase of 53.6% of the largest domestic brewer Saigon Beer Alcohol Beverage (Sabeco) stood out as the country's largest ever deal.
M&A deal value in the first six months of 2018 climbed 39% year-on-year to US$3.35 billion, which is projected to go up to US$6.5 billion for this year, down from a record US$10.2 billion in 2017, according to the Ministry of Planning and Investment.
