M&a Trends in the World and Vietnam

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REPORT OF INTERNATIONAL INVESTMENT

RESEARCH TOPIC:

M&A TRENDS IN THE WORLD AND VIETNAM

Lecturer: Mrs. Pham Thi Mai Khanh

Class: K54CLC4

                                           Group members:

Nguyen Mi Ni – 1501015412

Huyen Ton Nu Kim Oanh –1501015415

Nguyen Ngoc Phat– 1501015417    

Ma Tuan Phong – 1501015419

Nguyen Thi Hong Phuc – 1501015427

Le Vu Quynh Phuong – 1501015433

Ho Chi Minh City, March 26th, 2017

CONTENTS

1. Introduction        1

2.3.1. The general process        4

2.3.2. Technical guide        5

2.3.2.1. Pre-deal planning        5

2.3.2.2. Delivering success in the first 100 days        7

3.1. Scope        9

3.1.1. In the world        9

3.1.1.1. Overview        9

3.1.1.2. The majority investors        11

3.1.2. In Vietnam        15

3.1.2.1. Overview        15

3.1.2.2. The majority investors        16

3.1.2.4. Some of the largest deals in Vietnam in 2016        18

3.2.1. Driving factors        20

3.2.2. Impeding factors        22

4. Conclusion        27

REFERENCES        a

1. Introduction

As globalization becomes a totally international trend, enterprises enjoy more opportunities as well as encounter more challenges at the same time. In order to succeed, they have to keep track of their relative position among competitors. One of the ways for this goal to be completed is through mergers and acquisitions (M&A), which has been considered as the second most popular mode of entry to foreign market in the recent years. An example for this mode of entry, therefore, can be indicated to the deal between Amazon Inc. and Zappos.com Inc in 2009, in which Amazon reached an agreement with Zappos.com’s shareholders at a total number of 10 million shares of Amazon stock (valued at $807 million at the time of the deal’s announcement) and $40 million in cash. Another case worth mentioning is the acquisition between two famous corporations – Apple Inc. and Beats Electronics LLC. In August, 2014, Apple acquired Beats for $3 billion in cash and stocks.

So, what exactly is M&A? What do investors have to face in the process? How much can they gain from the deals? Why do companies decide to merge with or acquire or to be acquired by another company? This material should give you a better look into the current trend of M&A across the globe.

2. M&A

2.1. What is M&A?

Mergers and Acquisitions (M&A) is a form of wholly owned subsidiary in which the firm “acquire an established firm … and use that firm to promote its products” (International business, Hill, p.498)

Cross-border Mergers and Acquisitions (M&A) is a mode of FDI entry, in which an investing firm is possible to merge with or acquire an existing local firm in the host country.

“In a cross-border merger, the assets and operations of two firms belonging to two different countries are combined to establish a new legal entity.

In a cross-border acquisitions, the control of assets and operations is transferred from a local to a foreign company, the former becoming an affiliate of the later.”

(Virtual Institute Teaching Material on Economic and Legal Aspects of Foreign Direct Investment 2010)

2.2. Types of M&A

Horizontal Mergers

Horizontal mergers is done with an aim to combine two companies that produce the same or similar products and service to the same customers.

For example, if a company producing computers merges with another company in the industry that produces computers, this would be termed as horizontal merger.

The benefit of this kind of merger is that it removes competition, which helps the company to expand its market share, increase revenues and profits. Moreover horizontal mergers offer "economies of scale," meaning that average costs decline as the company does a greater volume of business.  This merger also encourage cost efficiency, because advertising, purchasing and marketing cost would be removed from the operations.

Vertical Mergers

A vertical merger happen when a company merges or takes over another company that are producing the same good and service, but the only difference is the stage of production at which they are operating.

For example, if a manufacturing company making items out of plastic mergers with a company that makes raw plastic, this would be termed as vertical merger.

These kinds of merger are usually done to secure supply of vital goods, and avoid disruption in supply. It is also undertaken to restrict supply to competitors. Because manufacturer’s share is eliminated, vertical mergers could help the company to save cost, increase margin of profit and revenue.

Concentric Mergers

Concentric mergers are undertaken between firms that serve the same customers in a particular industry, but they don’t produce the same products and services. Their products may be complements.

For example, if a company that produces pencils mergers with a company that produces erasers, this would be termed as concentric merger.

These are usually took place to facilitate consumers, because it would be more convenient and easier to sell these products together. It also help the company reduce risk and provide approach to resources and markets unavailable previously. Moreover concentric mergers offer opportunities for businesses to venture into other areas of the industry.