M&A activity increases, but hard to gauge

State agencies lack statistics on mergers and acquisition activities in the domestic business market, according to senior officials from the Ministry of Trade’s Competition Administration Department.

Dinh Thi My Loan, head of the department, said the department was rarely informed of M&A deals, becoming informed of them only when the parties would consult with the department on legal issues involved in the transactions.

Tran Phuong Lan, a supervisor in the competition department, said her office lacked detailed or exact statistics on M&A activity in Viet Nam because enterprises were not required to report them to administrative agencies.

Lan noted that M&A transactions were becoming increasingly popular in Viet Nam, especially following the nation’s WTO membership. However, before the Competition Law took effect in 1995, there was no state agency to officially administer this activity.

The Competition Law currently regulates that mergers that result in a combined market share of 30-50 per cent of a particular market must be reported.

Many enterprises simply weren’t taking these regulations into account, Lan said.
"Maybe it’s because enterprises are not aware that their market share accounts for 30 per cent of the total market. Or perhaps they are not interested in the Competition Law and mistakenly believe that mergers are not regulated by this law," she commented.

To define combined market share is difficult, Lan admitted. "In many cases, we have to hire specialists to obtain reliable market share information."

M&A consultants themselves complain of the lack of specific and comprehensive regulations.
"With the current regulations, in some cases, we cannot give adequate advice to our clients," said lawyer Le Thanh Son, head of AIC Lawyers and Consultants.

This year is likely to see a soaring number of M&As on the domestic market, said Tran Duy Hung, director of First Asia Ltd, a major brokerage firm.

More than 50 per cent of Vietnamese small and medium-sized enterprises (SMEs) are likely to close or merge with other enterprises within six years, according to First Asia Ltd, due to heightened competition.

The demand of larger enterprises to buy up existing companies was also increasing, along with the number of investors, many of whom would be hard-pressed to start up new enterprises from scratch.

For the time being, however, M&A activity remained modest in Viet Nam, according to Hung, mostly because neither sellers nor buyers knew enough about the legal procedures required while the market still lacked a sufficient number of lawyers and consultants with knowledge and skills in M&A.

Source: VNN