M&A trend arouses monopoly fears

Economists are concerned that the growing number of merges and acquisitions (M&A) - the latest trend in the market as smaller companies learn to be lean and mean - will progress unabated, giving way to monopolies and anti-competitive behaviour.

According to First Asia Finance Group, a Hong Kong based financial advisor, more than half of the roughly 300,000 small and medium-sized enterprises (SMEs) currently in the market will either close or merge with other companies over the next six years due to stronger competition and the rich environment for M&A activity.

There have already been some major deals signed this year. The Dai-ichi Group acquired Bao Minh-CMG Life Insurance in a coup de main to quickly breach the Vietnamese market.
In addition, VinaCapital purchased a 70 per cent stake in both the Metropole Hotel and the Sai Gon Ommi earlier this year through its VinaLand fund. Executives say the fund is hunting for other high-end hotels to buy.

Don Lam, director of VinaCapital, said the recent wave of M&A in Viet Nam may be a necessary step to improve the efficiency of many poorly run companies and create better economies of scale.

M&A could also lead to improved brand recognition on a national and international scale, say experts, as companies use their combined strengths to reach more consumers.
"Mergers and acquisitions has also proven to be a new and important channel to attract foreign investment," said Nguyen Thi Bich Van, deputy director of the Ministry of Planning and Investment’s Foreign Investment Agency.

There are concerns, though, that if left unchecked M&A activity could lead to anti-competitive behaviour and the emergence of monopolies.
Legal regulations to ensure competition should, therefore, be streamlined, especially as Viet Nam opens its market under the WTO agreement to well-funded multinational corporations, says Nguyen Nhu Phat, deputy chairman of the State and Law Institute.

M&A activity is currently regulated under several laws - the Investment Law, Enterprise Law and Securities Law - which causes regulatory overlaps.

The Ministry of Trade’s Competition Administration Department will have to take a bigger role in preventing unwanted monopolies, says Phat. He also worries that regulators may be restricted given the department has three roles: administrator, investigator and executor.

Dinh Thi My Loan, director of the Competition Administration Department, says there are plans to streamline regulatory procedures for mergers and acquisitions. The department, though, will have to co-operate closely with the State Securities Commission, the Ministry of Planning and Investment.

Source: VNS