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M&A: Which Are Big Fish And Little Fish In Vietnam?

In recent years, the slang term "big fish eats little fish" is commonly used among the Vietnamese business community and media.

The big fish mostly referred to are foreign companies while the little fish denotes a domestic enterprise. However, that is not everything. In that seemingly unequal battle for market share, there are still Vietnamese enterprises capable and confident enough to take over foreign companies. This is catching the interest of domestic businesses.

Advantages on foreign side

Amidst gloomy global and domestic economic outlooks, many businesses have to end operations. Even, very giant firms cannot shield economic crisis. Over the past time, the market was shocked by changed ownerships of big names. Pho 24 acquired by Highlands Coffee, Bibica taken over by Lotte, Tribeco Saigon acquired by Uni-President Group, Shell Gas Vietnam bought by Thailand’s Siam Gas, and P/S purchased by Unilever. Even, Trung Nguyen, a very big name on the domestic and international coffee market, lost its Legend Coffee brand to a competitor.

Worryingly, M&A information is only made public when things have been done. At that time, this usually causes surprise and regrets to the public. This shows that there have been raging undercurrents in acquired enterprises. On the one hand, they keep a calm attitude and smile before the media. On the other hand, they feel worried and tense about operating capital and shares. So, it is very easy to understand why although Tan Hiep Phat Trade - Services Co., Ltd - the producer of well-established Khong Do Green Tea, Dr Thanh Herbal Tea, Number One Drink, denied all rumours about its offer to foreign companies, many still expressed their fears for the farewell of another well-established brand name of Vietnam.

While Vietnam is trying to build its image and position on the international arena, the above takeovers are unmatchable losses because everyone knows that it requires a long time and admirable effort of devoted and talented leaders and employees, to build up such brand names as Pho 24, Bibica and Tribeco Saigon.

Against the wind

While foreign-led takeovers are stirring up the market and many brand names are living with fears of being acquired, some Vietnamese businesses are outstandingly bought into foreign-led firms.

In February 2011, Victoria hotel chain in Vietnam owned EEM Victoria Hong Kong Company fell into the hands of Thien Minh Tourism Joint Stock Company. After this nearly one-year acquisition, Thien Minh became the legal owner of six Victoria hotels and resorts in Vietnam.

Early in 2012, BRG Group acquired all the stakes from German and Austrian owners to take control of 5-star Hilton Opera Hanoi Hotel located on a prime location in the heart of Hanoi. This was one of quietest deals, but it was also the most shocking and admiring case to many people.

In March 2012, it came as surprise to the public when Hanoi Electronic Company (Hanel) bought the entire 70 per cent stake from its South Korean partner in Daewoo - Hanel Joint Venture to get total hold of 5-star Deawoo Hanoi Hotel. Proudly, Hanel passed direct strong competitors like Lotte in the deal.

Sovico Group bought one of the first, world-known 5-star resorts in Vietnam, Furama Resort Danang. Saigon Bright Star Corporation won the right to possess Peninsula project from its partner JSM Indochina Ltd.

Creating a point of balance?

While most M&A deals are wrapped up with foreign companies’ purchases of Vietnamese businesses, acquisitions by Vietnamese firms are bright spots, helping maintain the balance for Vietnamese companies on the domestic market.

However, most Vietnamese companies’ M&A deals are involved in property, hotel and resort sectors which have little content of science and technology while technology is considered a breakthrough factor for future economic development. Moreover, in these fields, important management positions are still undertaken by foreigners. For example, after Hanel acquired Daewoo Hanoi Hotel, it still has to employ the entire management apparatus of the hotel.

Meanwhile, foreign firms aim at Vietnamese enterprises involved in food, cosmetic and other fields. These sectors require a strong scientific and technical foundation and continuous technological innovations, which are currently the strength of foreign enterprises. Moreover, these sectors have long-term, sustainable growth prospects while real estate, hotel and resort sectors, will reach a saturation point because of the government’s interventions or changes in customer demand. Perhaps, foreign companies base on more long-term outlook when they perform M&A deals.

Source VCCI


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