Hidden cost inhibits merger and acquisition deals just tallying at US$5 billion a year

According to economist Tran Sy Chuong, the profound significance of M&A is the inheritance, which does not mean passing things to the descendants but sharing the investment profits with others to increase wealth. This allows for sustainable business success.

In his view, Vietnam must reform corporate governance system in the light of international standards, so that our M&A would attract a lot of investors with the highest price, Chuong said.

Former Chief Executive Officer of Ho Chi Minh Stock Exchange Tran Dac Sinh forecasts, in 2017 - 2018, M&A in Vietnam would grow but not really quickly. "Only if the debt is high will the firm resort to being sold. Generally speaking, Vietnamese enterprises still do not want foreign firms to enter. But a country with a low M&A ratio will affect the size of the business and make it difficult for the brand to reach the world," Sinh said.

Sinh noted that Vinamilk had sold its stake in small portions. Meanwhile, FPT has focused on software, so it was not sold with the best price. Looking at the case of Hoan My Medical Corporation, we can see foreign investors always keep the brand, but different management methods result in a higher brand value.

"Having an M&A strategy for sustainable development is the goal of both government and enterprises," Sinh said.

Lawyer Bui Ngoc Hong, Managing Partner of LNT & Partners, noted concerns about extra expenses.

"Foreigners are terrified of corruption. If the Vietnamese company is involved in corruption, the buyers can be subject to a 10-year prison sentence. We should be intensely aware of this," Hong said.

According to Tran Dac Sinh, overall, the M&A scale in Vietnam is tiny, only about US$5 billion a year on average, which is the worst among ASEAN countries.

There are many reasons. First, most Vietnamese enterprises are small; the State owns the large ones. This inhibits M&A because foreign investors usually pay attention to large private sector companies. Second, the transparency of Vietnamese enterprises is not high, and only a few state-owned enterprises have been equitized.