At the online meeting between the Prime Minister and businesses on May 9, Minister of Planning and Investment Nguyen Chi Dung said that the disruption in supply chain and value chain has not yet been minimized, which continues to greatly affect many businesses. Mergers and acquisitions (M&A) in the coming time will take place more strongly, and there is a risk that many Vietnamese businesses may be acquired at low prices.
Before the conference, the Vietnam Chamber of Commerce and Industry (VCCI) had sent recommendations and proposed solutions to the Government with the desire to remove difficulties for businesses, proposing the Government to temporarily suspend M&A activities.
Specifically, according to VCCI, in the context that Vietnamese businesses are facing difficulties and at risk of bankruptcy, some foreign investors and funds are considering acquiring business in real estate and retail sectors.
In fact, figures from the Foreign Investment Agency under the Ministry of Planning and Investment show that in the first four months of this year, there were 3,210 times of capital contribution and share purchase by foreign investors, up 32.9% over the same period in 2019. Notably, investors from China alone carried out transactions of pouring investment capital through M&A of Vietnamese enterprises increased 557 times, which is 38% higher than the same period last year.
Capital contribution, share purchase by foreign investors and the number of FDI projects licensed in the first four months 2018, 2019 and 2020.
Therefore, such worries and warnings of leaders of the Ministry of Planning and Investment as well as of VCCI are well-founded. So, can suspension of M&A activities be possible?
Regarding this issue, economist Pham Chi Lan said that the world is now very cautious with foreign investment, and in fact, many countries have been very carefully monitoring the investment from foreign. Even the United States has made laws that the government has the right to consider foreign investment. Therefore, according to expert Pham Chi Lan, Vietnam needs to refer to this issue.
At the present time, according to Ms. Lan, Vietnam needs to strengthen the supervision or even conduct the verification of foreign investment projects, especially for cases of suspicion that there is anonymous investment, using a few different investors to acquire domestic businesses.
"It is necessary to have a filter to verify the quality of foreign enterprises." said Ms. Lan. The Government also needs implement policies to encourage domestic investors to buy key projects of domestic enterprises to protect some "sensitive" industries, as well as to protect the market.
Meanwhile, Mr. Phan Huu Thang, former Director of Foreign Investment Department, said that although capital contribution and share purchase of domestic enterprises by foreign investors in the past four months has increased sharply over the same period last year, total contributed capital was only equal to 34.7% of the value of contributed capital compared to the same period in 2019. Specifically, in the first four months of this year, the average capital was only USD 0.77 million / capital contribution, which is, according to Mr. Thang, much smaller than the average size in the same period last year.
On the other hand, through Mr. Thang's observation, there has not been massive acquisition of domestic enterprises by foreign investors. "During this epidemic, even foreign investors are facing difficulties and have to suspend the implementation of their investment projects. I have not seen foreign investors rushing to buy domestic businesses." said Mr. Thang.
Therefore, it is not necessary to suspend M&A activities in this epidemic situation. However, like Ms. Pham Chi Lan's opinion, Mr. Thang said that it is crucial to select investors and partners for this form of investment.
According to Mr. Thang, there should be specific regulations on which industries and fields need and do not need to encourage M&A activities. "Sensitive" fields or those that can be carried out by domestic enterprises should not encourage foreign investors so as not to weaken the economic resilience and national security.
As a lawyer, Mr. Truong Thanh Duc, Basico Law Firm, said that there would be a lack of legal basis to suspend M&A activities. On the other hand, according to Mr. Duc, in the difficult situation due to the Covid-19 pandemic, many businesses negatively affected will need to call for investment capital or external support to save themselves. Therefore, it is impossible to deprive their trading rights in this difficult time.
Mr. Duc believed that M&A is the action of businesses, and moreover saves the company from falling into “boiling oil". "If M&A transaction is stopped, the benefits are unknown, while the struggling enterprises will not know where to raise capital, leading to suspension of operation and even bankruptcy." Duc said.
Some countries in the world also worry that foreign investors take advantage of plunging stocks and volatile market due to Covid-19 to acquire businesses at low prices. However, in fact, in countries like Germany and Japan, the government's introduction of measures to prevent the risk of acquiring businesses during economic crisis is to protect important economic sectors and key businesses, or to protect national security rather than apply to all businesses and business sectors.
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