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Mr. Phan Duc Hieu, Deputy Director of CIEM, said that in the coming time, to support M&A activities in particular and investment, there will be three important laws such as Securities Law, Investment Law and Enterprise Law. They will take effect on January 1, 2021.
During the discussion session I of the 12th annual Vietnam Business Merger and Acquisition (M&A) Forum in 2020, talking about the impacts encountered on the implementation of M&A deals in recent years, Mr. Warrick Cleine, President and General Director of KPMG Vietnam and Cambodia, said that there are three factors that make us not confident to conduct M&A. The first factor is the presidential election in the US and trade tensions. The second factor is the effect of the COVID-19 epidemic on many countries around the world. The third factor is the domestic market.
The valuation of M&A deals is not reasonable
According to Mr. Warrick Cleine, in the COVID-19 epidemic, Vietnam can control the disease. There are many different directions that experts follow in Vietnam. There will be many investors to come back to this market for M&A deals.
“However, what affects investors’ sentiment, as I see there is a clear shift from the M&A agreement. The big obstacle is that Vietnamese businesses often offer very high prices. While investors always want to be realistic at market prices. Inadequate pricing is a huge hindrance. ” Said KPMG Chairman and General Director of KPMG Vietnam and Cambodia.
Analyzing more clearly on this issue, Mr. Warrick Cleine said that the price that Vietnam offers sometimes seems to be too expensive. It can create a big barrier from the start. The seller needs to understand the investor and the consultant’s perspective. These are the issues to focus on and the seller needs to pay attention to the pricing issue to have an effective discussion.
“If the price is too high, it immediately makes investors do not want to accept negotiations, thereby ignoring the opportunity to better support the company. There are many different companies and we need the consultant’s help to make this deal happen and achieve better value. Meanwhile, for the whole M&A cycle, everything is much longer. Not only closing the deal but also satisfy both sides and maintain this new business”, Mr. Warrick Cleine said.
Three laws take effect in one year
Meanwhile, sharing new points in Vietnam’s having new laws enacted for the period 2020-2021, Mr. Phan Duc Hieu, Deputy Director of the Central Institute for Economic Management (CIEM) said that it is known that the new support for M&A activities in particular and investment includes three important laws such as Securities Law, Investment Law and Enterprise Law. For the first time in 1 year, three laws come into effect on the same day.
In which, there are three most important points that positively affect M&A in Vietnam. Specifically, the Law on Enterprises enhances the protection of buyers, the safety of buyers, and the language of the law is to increase the level of protection of “shareholders” who are buyers in M&A deals.
“For example, the rights of shareholders/groups of shareholders such as nominating to the Board of Directors, convening the General Meeting of Shareholders, according to the current regulations, they must own 10% or more shares and continuously for 6 months. This regulation prevents M&A activities because as soon as they buy shares, it will be until 6 months to restructure and improve company efficiency. This is a long time, these unreasonable things will be abolished in the new Law such as reducing the 10% ownership rate to 5% and abolishing the 6-month period ”, Mr. Hieu said.
How these three laws positively affect M&A and investment in Vietnam
As for the Law on Investment and the Securities Law, during many years at the M&A forum, there has been much discussion about investment conditions in general and the restriction on foreign ownership in particular.
According to the Law on Investment, the Government commits to strictly comply with the promulgation of the list according to the principle of exclusion. Industries that foreign investors are not allowed to invest in and restrict investment, form, rights, ownership…).
“To support that, the decree guiding the implementation of the Securities Law to have clear provisions on foreign ownership limits. Although not new, it is much clearer. According to international treaties, things will comply with the treaties, with the regulations of Vietnam things will comply with the Vietnamese regulations. The enterprises wait for a clear list. The above-mentioned things will not limit foreign ownership.” Said Mr. Phan Duc Hieu.
Besides, Mr. Hieu said that the new Investment Law is also an opportunity for M&A activities in particular. There are two main changes, the new law adds a field of investment incentives, including the production of goods to provide services to join the value chain for the education industry or industry, supplement university education, health care, medical equipment .etc.
In particular, it is important that for the first time, there is a concept of special incentive packages for each type of project and each investor. In which, there are three areas of innovation, research and development, and industries with large-scale incentives for capital investment. Especially, the Government can decide on a better preferential rate than usual. The policy changes and comes into effect 1/1/202, which will positively affect M&A activities and protect buyers.
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