M&A activities are on an upsurge in Vietnam across most industries, according to the Vietnam Competition Authority’s 2014 Annual Report.
In 2009-11 there were around 750 M&A transactions totally worth $6.89 billion. This increased to $11.13 billion in the 2012-14 period, with the mean transaction value rising concurrently, increasing from $10 million in 2012 to $15 million in 2013.
Significantly, mergers and acquisitions have been occurring across a broad range of industries, with finance and banking, consumer goods, retail, and energy leading in deal volume.
Domestic businesses accounted for 74 per cent of all transactions last year, with 2014 seeing the retail sector leading, with over a third of the value of transactions.
This was followed by consumer goods, accounting for 21 per cent, followed by the energy industry with 18 per cent. Analysts are attributing this M&A boom to a strong push by the Vietnamese government to restructure existing business in recent years, especially in the financial sector. This is especially crucial, as Vietnam increasingly trades in the international market.
International trade has played a significant role in Vietnam’s present economy, as it transitions into a modern market economy, with deeper and wider integration into the global economy. Exports were instrumental in its economic recovery and resilience, especially given the global financial collapse of 2008.
Many transactions in the finance and banking industries have been completed at accelerated rate, in order to eliminate small and weak banks and consolidate the Vietnamese baking sector’s resources. This is in alignment with regulatory aims of having only 15 to 17 lenders, rather than the current 40.
A prolonged slump in Vietnam’s housing market has also encouraged a number of housing-related transactions and additional investors entering the residential segment of the property market.
The the rapid increase in transaction volume creates the possibility of some firms abusing a dominant market position to create unhealthy competition. To prevent this, the Vietnamese government recently issued Decree No 71 in 2014 to prevent the violation of anti-trust regulations. It provides for penalties of up to 10 percent of turnover for any enterprise violating anti-trust regulations, an increase from the earlier 5 per cent.
Vietnam has been in the factor-driven stage of development for a some time. Currently, it is in a slow transformation into an efficient and innovation-driven market economy. So far, this transformation is incomplete.
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This is due to the leading role state-owned enterprises play, with minimal accountability and transparency, coupled with the strong influence of interest groups in policy formulation and serious corruption.
Administrative procedures in the fields of tax, customs clearances, business registration and other regulatory processes also remain complicated and unclear, along with deficient infrastructure and a low quality of human resources available for businesses. This has negatively impacted Vietnam’s economic and export growth.