Merger and Acquisition between Eximbank and Sacombank

Merger and Acquisition between Eximbank and Sacombank

Thanks to all the member of our group for the contribution of the idea of this project; especially thanks to Ms Trần Thuý Anh in giving advice of choosing company, and thanks to all the corporation of the member of group;

Thanks to all the help, before and during the time of doing this project, that were given to make our project completed, so it could be done successfully

In this project, we was searching, and studying the information related to the performance of Sacombank and Eximbank – the two large banks in Viet Nam that have stock listed on the market to make use of their figures to valuate their M&A transaction, and also reviewing the knowledge that had been received from lecturer to serve the demand of doing it

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CONTENT

ACKNOWLEDGMENT ERROR! BOOKMARK NOT DEFINED ABSTRACT III CONTENT IV TABLE & CHART CONTENT VI

INTRODUCTION 1

1.OVERVIEW OF MERGER AND ACQUISITION (M&A) 2

1.1 DEFINITION 2

1.2 CLASSIFICATION 3

2 ISSUE IN MERGER & ACQUISITION 3

2.1 BUSINESS VALUATION 3

2.2 BUSINESS VALUATION IN MERGERS AND ACQUISITIONS 4

2.3 STEPS IN VALUATION 5

2.4 VALUATION METHODS 6

2.4.1 Accounting/Financial Ratios 6

2.4.2 Discounted Cash Flow (DCF) 7

2.5 LEGAL ISSUE 8

3 MERGER AND ACQUISITION IN THE WORLD .10

3.1 OVERVIEW OF M&A IN THE WORLD 10

3.2 SOME TYPICAL M&A TRANSACTION IN RECENT YEARS 16

4 MERGER AND ACQUISITION IN VIET NAM 18

4.1 THE OUTBREAK OF M&A 18

4.2 M&A IN VIETNAM: LOCAL BUYERS MORE THAN FOREIGN BUYERS 20

4.3 THE RISKS AND DIFFICULTIES OF M&A IN VIETNAM 21

4.3.1 Risks in M&A 21

4.3.2 Negative impacts on the development of the economy 21

4.3.3 Negative impacts on the operation of the business 22

4.4 DIFFICULTIES OF M&A IN VIETNAM 22

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5 SPECIFIC CASE: M&A BETWEEN EXIMBANK AND SACOMBANK 23

5.1 OVERVIEW OF VIETNAM BANKING SECTOR IN 2012 23

5.2 VIETNAM EXPORT AND IMPORT COMMERCIAL JOINT STOCK BANK (EXIMBANK) 27

5.2.1 Eximbank – position in banking sector 28

5.2.2 Eximbank – SWOT analysis 28

5.3 SAI GON THUONG TIN COMMERCIAL BANK (SACOMBANK) 29

5.3.1 Establishment and development 29

5.3.2 Core values 30

5.3.3 Sacombank SWOT analysis 31

5.4.1 Circumstand of Sacombank in recent years 32

5.4.2 Context and causes of M&A and the performance 37

5.5 RESULT FROM M&A – STB-EIB AFTER THE TRANSACTION 42

5.5.1 Strategic cooperation 42

5.5.2 Changes in the new firm STB-EIB 43

6 CONCLUSION 45

SOURCE 47

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TABLE & CHART CONTENT

Chart Content

Chart 1: M&A in Viet Nam 18

Chart 2: Sacombank – shareholders structure before M&A 39

Chart 3: Shareholder structure after M&A 41

Chart 4: STB - EIB in the third quarter 2012 43

Chart 5: STB - EIB's Equity 44

Chart 6: STB - EIB Change in capitalization 45

Table Content Table 1: M&A ranking - Worldwide 11

Table 2: M&A ranking - Europe 11

Table 3: M&A ranking - Asia-Pacific 12

Table 4: M&A ranking - South East Asia 12

Table 5: M&A ranking - North America 13

Table 6: M&A ranking - South America 13

Table 7: M&A ranking – Australia 14

Table 8: M&A ranking - Germany 15

Table 9: M&A ranking – Switzerland 15

Table 10: Top 10 M&A deals in 2011 (Source: Capital IQ) 19

Table 11: The M&A deals in quarter I/2012 19

Table 12: EIB Shareholders and Ownership 27

Table 13: Scombank - Shareholders and Ownership 31

Table 14: STB's Financial Statement 32

1

INTRODUCTION

The year of 2011 was such a difficult one to the economy in Vietnam as there were hardly the convenient channels to invest in, so that investors seem to be much more careful and cautious in choosing one to put their money in 2011 was also a year

of restructuring the economy and preparing to the stability development in the next few years, so that companies, firms, corporations would prefer to merge with or to acquire each other for reducing the risk of cost and investment, and make use of the cooperation

Merger and Acquisition are not innovative in the world, it has happened since very long time and still remain now, it has implemented in every areas, in banking sectors as ABN Amro and Barclays PLC of England, Mitsubishi Tokyo Financial Group and UFJ Holding, or in Technical System as Antel of U.S and TPG Capital and Goldman Sachs, or Car manufacturing as Chrysler and Fiat, Volkswagen and Porsche in Europe… The outcome can be successful, or failure, but even then, it still creates a lesson

The importance of the Banking system to a Country is that it would impulse or slows down the whole economy by its movement Merger or Acquisition of two or more banks will generate positive and even negative impacts to the society, but no matter what it will bring, each M&A has its own reasons, but its results and consequences can be predicted In this project, we present that of the M&A transaction between Sacombank and Eximbank, included the reasons, performance, and expected results

& A activity is not only changing the ownership of a business for the shares or assets, but also changing activities management and administration of the business However, the level of changing depends on the provisions of the laws, regulations and enterprise agreements between the parties

The main difference between a merger and an acquisition lies in the way

in which the combination of the two companies is brought about In a merger, there is usually a process of negotiation involved between the two companies prior to the combination-taking place But in an acquisition, the negotiation process does not necessarily take place

Some cases which M&A happened

- The basic principle: to acquire and merge, the new company must

create new value for the shareholders

- About value: the company after conducting M & A must be greater

than the present value of both as a stand-alone company

- About Competitiveness: Strong companies buy other companies to

create a new company with high competitiveness, decrease cost, enlarge market shares

- Agreement: To conduct M&A effectively, most of shareholders must

agree to do

 Vertical Mergers:

Take place in the supply chain of enterprises, for example between a company and its customer or supplier Vertical Mergers are divided into two groups:

 Forward: when a company acquired its client‘s company

 Backward: when a company buys back its suppliers

 Market - Expansion Mergers: taking place between two companies that sell

the same products in different locations

 Product – Expansion Mergers: taking place between two companies that sell

different products in the same market

 Group Mergers: taking place between two companies that is in different fields

but want to diversify their business

2 Issue in Merger & Acquisition

 Financial Analysis

The financial statement analysis generally involves:

 Common size analysis,

 Ratio analysis (liquidity, turnover, profitability, etc.),

 Trend analysis

 Industry comparative analysis

This permits the valuation analyst to compare the subject company

to other businesses in the same or similar industry, and to discover trends affecting the company and/or the industry over time By comparing a company’s financial statements in different time periods, the valuation expert can view the growth or decline in revenues or expenses, changes in capital structure, or other financial trends How the subject company compares to the industry will help with the risk assessment and ultimately help determine the discount rate and the selection of market multiples

2.2 Business valuation in mergers and acquisitions

The increasing wave in business amalgamations started in the year

2008 Most of the recent mergers and acquisitions are in such areas like:

- The oil and gas,

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It is trite knowledge today that the world economy continues to be shaped by the forces of globalization, deregulation, and advancement in technology All these forces combined tend to break barriers of trade and control and thus, expose the economy to change and competition M&A may help to reduce this completion Then the property must be valued so the conditions of the transfer of the property can be determined

With the present economic situation, some companies are now experiencing serious cash flow problems, and these have made it difficult for them to meet debt obligations to their bankers Consequently, an increasing number of companies are now faced with receivership and foreclosure threats from their bankers

2.3 Steps in valuation

 First step - Analyzing Historical Performance and Forecast Performance

 Evaluate the company’s strategic position, company’s competitive advantages and disadvantages in the industry This will help to understand the growth potential and ability to earn returns over WACC

 Develop performance scenarios for the company and the industry and critical events that are likely to impact the performance

 Forecast income statement and balance sheet line items based on the scenarios

 Check the forecast for reasonableness

 Estimating The Cost Of Capital

 Second step - Estimating The Cost Of Equity Financing

 CAPM

 The Arbitrage Pricing Model (APM)

 Estimating The Continuing Value

 Last step - Calculating and Interpreting Results

 Calculating And Testing The Results

 Interpreting The Results Within The Decision Context

 Profitability Ratios used in analyzing the profitability or return that an enterprise earns on its investments For example, trading profit

as a percentage of turnover, dividend per share, payout ratio which is dividends/earnings, profit before interest and tax as a percentage of average capital employed and, assets per share to assess the asset backing of shares based on the value of the net assets divided by the number of shares

 Market Value Ratios, which indicate how highly the firm is valued by investors This consists of the following:

 Price-earnings ratio (PFE) equal Stock Price over Earnings Per Share

 Dividend yield is given by Dividend Per Share divided by Stock Price

 Market to book ratio is expressed as Stock Price over Book Value Per Share

 Leverage ratio is also used to determine how heavily a company is in debt And, it is done through debt ratios and times interest earned,

 Efficiency ratio measures how productively a company is using its assets by comparing sales (revenue) to assets value

 Liquidity ratio assesses how easily a company can lay its hand

on cash by examining the current ratio (assets)

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2.4.2 Discounted Cash Flow (DCF)

In a merger or acquisition, the acquiring firm is buying the business of the target firm, rather than a specific asset Thus, merger is

a special type of capital budgeting technique What is the value of the target firm to the acquiring firm after merger? This value should include the effect of operating efficiencies and synergy The acquiring firm should appraise merger as a capital budgeting decision, following the DCF approach The acquiring firm incurs a cost (in buying the business of the target firm) in the expectation of a stream of benefits (in the form of cash flows) in future The cash flows can be determined through profit stream of the affected concern Thus, merger will be advantageous to the acquiring company if the present value, that is, the fair value, is greater than the cost of acquisition

The adoption of profit method in determining the cash inflows is regarded as being specialist, with most values receiving only nominal training in the method during their formal training

In other words, the discounted-cash-flow approach in an M&A setting attempts to determine the value of the company (or “enterprise value”) by computing the present value of cash flows over the life of the company Since a corporation is assumed to have infinite life, the analysis is broken into two parts:

 A forecast period: In the forecast period, explicit

forecasts of free cash flow must be developed that incorporate the economic costs and benefits of the transaction Ideally, the forecast period should equate with the interval over which the firm enjoys a competitive advantage (i.e., the circumstances where expected returns exceed required returns) In most circumstances, a forecast period of five or ten years is used

 A terminal value: A terminal value in the final year of the

forecast period is added to reflect the present value of all cash

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flows occurring thereafter Since it capitalizes all future cash flows beyond the final year, the terminal value can be a large component of the value of a company, and therefore deserves careful attention This can be of particular importance when cash flows over the forecast period are close to zero (or even negative)

as the result of aggressive investment for growth

2.5 Legal issue

The current regulations on corporate restructuring and mergers are

expressed in LAW ON ENTERPRISES 2005: CHAPTER VIII - Re-organization,

Dissolution and Bankruptcy of Enterprises) In particular, business organization are conducted by one of the following forms, depending upon owners decision:

Merger of enterprises was stipulated in article 153 of this Law

 According to Clause 1 of this Article of this Law – “One or more

companies of the same type (hereinafter referred to as merging companies) may be merged into another company (hereinafter referred

to as the merged company) by way of transfer of all lawful assets, rights, obligations and interests to the merged company and, at the same time, termination of the existence of the merging companies”

 According to Clause 2 of this Article of this Law – “Procedures for merger

of companies shall be stipulated as follows:

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Sub-clause (a) Merging companies shall prepare a merger contract and

charter of the merged company The merger contract must have the following main particulars: the name and address of the head office

of the merged company; the name(s) and addresses of the head office(s) of the merging companies; the procedures and conditions for the merger; the plan for employment of employees; the procedures, time-limit and conditions for conversion of assets; for conversion of shares of share capital, shares and bonds of the merging companies to shares of capital, shares and bonds of the merged company; and the time-limit for implementing the merger;

Sub-clause (b) Members, company owners or shareholders of related

companies shall approve the merger contract and the charter of the merged company and register the business of the merged company

in accordance with this Law In this case, the business registration document shall include the merger contract The merger contract shall be sent to all creditors and notified to employees within fifteen (15) days from the date of its approval;

Sub-clause (c) After business registration, the merging companies shall

cease to exist; the merged company shall assume the lawful rights and interest and be liable for unpaid debts, labor contracts and other property obligations of the merging companies”

 According to Clause 3 of this Article of this Law – “In the case of merger whereby the merged company holds a market share of between thirty (30) per cent and fifty (50) per cent of the relevant market, the legal representative of the company notifies the competition managing body before carrying out the merger, unless otherwise stipulated by the law

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3 Merger and Acquisition in the world

3.1 Overview of M&A in the world

The definition of Merger and Acquisition is now popular in the world’s economy; from the thousands of years of development of the humanity, M&A have proven its position in restructuring and balancing the economy Lacking of potential markets for thousand, maybe million companies to develop, M&A is now seen of the way to the successful due to the cooperation and strong development due to consolidation of the powerful corporations brand

Worldwide M&A in the first quarter 2012

According to Thomson Reuters, “WORLDWIDE M&A DOWN 22%, and QUARTERLY ACTIVITY UP 18% - The total value of worldwide M&A US 1.1 trillion during the first half of 2012, a 22% decrease from comparable 2011 levels By number of deals, M&A activity fell 17% compared to last year with fewer than 18,000 announced deals Compared to the first quarter of 2012, the value of announced mergers & acquisitions rose 18% during the second quarter of 2012, but decreased 12% compared to the second quarter of last year.”

In the United Kingdom

 Mergers and Acquisitions (M&A) activity involving UK companies continues to remain low in the second quarter of 2012 This may be

an indication that the confidence of companies to undertake transactions remains tempered due to continued economic uncertainty

 The volume of UK M&A deals is down 39 per cent in quarter two 2012 compared with quarter two 2011

 The value of outward acquisitions (acquisitions abroad by UK companies) increased in the second quarter of 2012 compared with the first quarter of 2012, whilst the value of inward acquisitions (acquisitions in the UK by foreign companies) decreased

 The net difference between inward and outward cross border

M&A worldwide ranking and M&A ranking in some Country all over the world

Table 1: M&A ranking - Worldwide

Transaction Value (in bil

USD)

(in bil EUR)

1 1999 Vodafone AirTouch

PLC

2 2000 America Online Inc Time Warner 164.7 160.7

3 2007 Shareholders Philip Morris Intl Inc 107.6 68.1

4 2007 RFS Holdings BV ABN-AMRO Holding

NV

98.2 71.3

7 2000 Glaxo Wellcome PLC SmithKline Beecham

Table 2: M&A ranking - Europe

Transaction Value (in bil

USD)

(in bil EUR)

7 1999 Vodafone Group PLC AirTouch

Table 3: M&A ranking - Asia-Pacific

Transaction Value (in bil

USD)

(in bil EUR)

1 2000 Pacific Century

CyberWorks Ltd

Cable & Wireless HKT 37.4 38.4

2 2000 China Telecom Hong

Kong Ltd

Beijing Mobile,6 others

17.0 12.4

8 2006 Kemble Water Ltd Thames Water PLC 14.9 11.9

9 2008 Shining Prospect Pte

Ltd

10 2006 Cemex SAB de CV Rinker Group Ltd 14.2 10.6

Table 4: M&A ranking - South East Asia

Value

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(in bil

USD)

(in bil EUR)

1 2008 Shining Prospect Pte

6 2010 Investor Group Plus Expressways Bhd 7.5 5.3

7 2008 Singapore Investment

Authority

8 2001 DBS Group Holdings Ltd Dao Heng Bank Group 5.7 6.4

10 2005 Shareholders Sterling Energy-Philippine

Ast

5.4 4.4

Table 5: M&A ranking - North America

Transaction Value (in bil

USD)

(in bil EUR)

1 2000 America Online Inc Time Warner 164.7 160.7

6 2001 Comcast Corp AT&T Broadband &

Table 6: M&A ranking - South America

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Value (in bil

USD)

(in bil EUR)

1 2006 Cia Vale do Rio Doce

8 2010 Sinopec Group Repsol YPF Brasil SA 7.1 5.2

9 2010 Bridas Corp Pan American Energy

LLC

10 1997 Investor group Correo Argentino SA 6.2 5.7

Table 7: M&A ranking – Australia

Transaction Value (in bil

USD)

(in bil EUR)

1 2000 Bayerische Hypo- und

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Table 8: M&A ranking - Germany

Transaction Value (in bil

USD)

(in bil EUR)

Table 9: M&A ranking – Switzerland

Transaction Value (in bil

USD)

(in bil EUR)

1 2007 Shareholders Philip Morris Intl Inc 107.6 68.1

2 2008 Roche Holding AG Genentech Inc 46.7 29.3

5 1997 Union Bank of

Switzerland

Schweizerischer Bankverein

23.0 20.7

6 2011 Swiss Reinsurance Co

Ltd

Swiss Reinsurance Co Ltd

PLC-17.1 15.2

* since 01 January 1985 and as of 19 January 2012
 ** or merger partner

Debt Crisis in the Europe in recent months and the impacts from slow moves

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of the world’s economy are the opportunity for the bustle of M&A

3.2 Some typical M&A transaction in recent years

Some huge M&A transactions have been made in 2012:

 Mining firm Xstrata and the world's biggest commodity trader Glencore

Cost: 32 billion USD

Mining firm Xstrata and Glencore discussed about merger plan in 2006 and the new Corporation will have a total market value of $ 90 billion This is the largest merger ever; the success of this deal will help reshaping the exploitation industry of natural worldwide resources

 Japan’s Softbank and the 3rd biggest network Sprint in the U.S

Cost: 20.1 billion USD

15th October 2012, Japanese wireless service provider Softbank Corp has officially announced that it would spend $20 billion to acquire a 70% stake of the third largest Network in the U.S is Sprint This is a large-scale merger of Japanese business this year This acquisition will help Softbank in the desire of becoming one of three world's largest networks services

 Calgary-based oil and gas firm Nexen Inc and China National Offshore Oil Corp (CNOOC)

Cost: 15.1 billion USD

China National Offshore Oil Corp (CNOOC) have agreed to the offer of buying back Calgary-based oil and gas firm Nexen Inc of Canada by the cost of $15.1 billion This is the biggest merger in Chinese industry and also the biggest transaction of Canada since 2008 Along with the worldwide economic recovery efforts, this transaction reinforces investor’s confidence in the concerned sector However, according to a public opinion poll on 16/10, six over ten Canadians

do not support the idea of being takeover by CNOOC of Nexen Inc

 Eaton Corp and Cooper Industries

Cost: 13 billion USD

This is the greatest transaction of Eaton Company over the past 101 years After the merger, the new entity is named Eaton Corporation, and is

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headquartered in Ireland

Through the merger of systems, electrical equipment and with help of distribution systems and global influence of Cooper, a world leading company of power management is created, and the history of the worldwide power industry

is changed

Eaton is a global company of energy management and a manufacturer of efficient engines for energy

 Nestle and Pfizer Nutrition

Cost: 11.85 billion USD

23rd April 2012, giant Swiss food maker Nestle has agreed to pay $ 11.85 billion to buy baby food maker Pfizer Nutrition

This is the first large-scale merger in the nutrition industry since 2009 Right after the authority supervisory, Nestle has completed the deal of Merger on 30 November 2012

Because 85% of Pfizer's activities takes place in some new markets, hence with the acquisition of this baby food maker, Nestle will increase its market share

in children's nutritional products in those new markets, and strengthen its first position on the global market about food maker

 Intercontinental Exchange (ICE) and New York Stock Exchange (NYSE)

Cost: 8.2 billion USD

Intercontinental Exchange Inc (ICE) - 12 years old future trading floor of based energy and commodities - has reached an agreement to buy NYSE Euronext for $ 8.2 billion

Founded in 1782, the NYSE has become a symbol of the global stock market with shares of the very large-scale companies

This deal of merger will set up a global exchange system, including agricultural products, energy, credit, foreign exchange and securities

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4 Merger and Acquisition in Viet Nam

4.1 The outbreak of M&A

2011 was the year of booming sales - M & A, with the total value of the deals up to $4.7 billion, which was higher than that of the year 2010 ($1.7 billion) Particularly, there were lots of friendly M&A in this period

Participants of M&A in 2011 mainly were local firms However, the foreign investors accounted for 66% of the deal values, in which investors from Japan made up the largest proportion in terms of deal numbers and deal values M & A deals happened in two sectors, which are finance - banking and consumer goods They accounted for about 25% of the total value of M & A There were some great deals such as: Unicharm - Diana, Marico - ICP, Carlsberg – Hue Beer, Mizuho - Vietcombank, IFC - Vietinbank, PVI - Talant , etc

The positive point of 2011 M&A was the attitude of the managers when being the targets Instead of finding ways to prevent from being acquired, some firms were now actively looking for partners in order to survive Many managers have recognized that, M&A at the best price is also a good opportunity for existing shareholders

Chart 1: M&A in Viet Nam

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According tKPMG, among 10 M&A deals in 2011, there were about 9 firms relating to the foreign investment and focusing on the media, consumer goods, real estate, finance and health services, Several prominent deals which were VimpelCom disbursed $196 million into Beeline, Mizuho poured $567 million to buy 15% of Vietcombank shares, or IFC invested $182 million of equity into Vietinbank,

Table 10: Top 10 M&A deals in 2011 (Source: Capital IQ)

Fortis Healthcare - Hoan My Medical 64

Mount Kellett Capital - Masan resources 94

Table 11: The M&A deals in quarter I/2012

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In terms of number of deals, local firms’ deals accounted for 77% This figure showed that M&A activity and transferring in Vietnam is rather exciting though the value of the deal is not high

Such numerous deals showed that the enterprises were more active in M &

A activity and were restructuring their investment In terms of deal value, the big deals always had foreign elements Foreign investors accounted for 66% of the value of M&A

4.2 M&A in Vietnam: local buyers more than foreign buyers

The special point here was that there were many local buyers in M&A than before Domestic firms acquired the assets of the foreign enterprises From

2009, there were some M&A deals in which local firms acquired foreign enterprises but were not common Recently, Hanel Company acquired 70% of equity from Daewoo E&C in the Daewoo Hotel in Hanoi BRG Corporation acquired shares of Hilton Hotels; Thien Minh Corporation bought the hotel chain Victoria; Sao Sang Saigon Joint Stock Company acquired The Peninsula project of JSM Indochina, etc

Domestic firms getting involved in many M&A deals indicated that their performances were really good

M&A in real estates

The fact that buying less and selling more in real estate happened a lot in

2012 M&A activities offered mainly in the direction of real estate sales business associated with the project, but especially real estate projects In that difficult financial situation, the companies could not afford some activities such as: raising funds, low liquidity, construction and real estate projects Sale is the final solution, and is a result of clarification in the real estate market M&A in real estate sometimes showed the inability of investors in finding the investment sources and the outputs The project owners seek M&A as a solution to raise funds in order to pay back the bank loan and the credit borrowed to serve the project

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However, the purchase of M&A in real estate did not increase, even decline because the investors were not interested in this field anymore The demand of the real estate market was slow making the investors could not risk buying then building but could not sell

4.3 The risks and difficulties of M&A in Vietnam

4.3.1 Risks in M&A

The preparation of the terms of M&A contract is often difficult and prolonged, stakeholders feel tired and depressed so they withdraw from the negotiation process

The risks arise from weaknesses of leadership ability in mapping out strategies for the company and cutting costs that leading to loss talents These raise the cost of post-merger to find the places of the old ones left Security risks, information cannot be leaked to outside Buy and sell parties must not disclose confidential information to the outside

Risks in the management and outcomes treatment after M&A about media, human resources, production scale, organizational structure of the company after M&A is not effective In addition, overly optimistic attitude after M&A is also a risk The parties expect good prospects of the business, ignoring all risks can occur but results cannot to be as expected

The risks derived from wrong price fixing and higher paying Company acquisitions should refer to the organization pricing or valuation experts to give a reasonable bid price for the target company

4.3.2 Negative impacts on the development of the economy

Recent surveys of AVM Company found that 40% of business asked expressed concern about the risk of acquired Not every M&A also increases the production capacity and market value, the widespread M&A which is without contemplating carefully, no performance management strategic may lead to bankruptcy, cause confusion, the decline for the related industries Although M&A transnational is also a form of FDI, but

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M&A is not an investment in new construction, so do not create more jobs, careers, on the contrary, it could reduces the performance, sometimes also changes the structure or removes the mismatch labors, …

M&A can create an unfair environment for small businesses By M&A, large companies and multinational corporations can takeover easily any market, in order to increase exclusivity Especially, the form of acquisition

by stock will be an anxiety of business whose equity's low

4.3.3 Negative impacts on the operation of the business

In some cases, M&A may reduce competitiveness in the market when the business after the merger has dominant position on the market M&A often create social problems related to employees redundant due to restructuring business operations In addition, cultural differences in organization and operation will create inconsistencies leading to economic inefficiency

4.4 Difficulties of M&A in Vietnam

According to VinaCapital, there are two challenges affecting M&A activities

in Vietnam: cost of capital and inflation In particular, Vietnam's capital cost is relatively high in compared to other countries, the domestic M&A activity is restricted so much due to debts in USD In addition, if inflation is not controlled, there will be more risky because of the high capital costs and prolonged Resulting from two factors is only the rich firms can succeed in M&A

In addition, differences and contradictions in the culture and management style is one of the main causes of the transaction failure

M&A activity is still being scattered in the laws and regulations of different legal documents, and just general rules, there is no detail system This not only makes the participants in the M&A difficulty in the implementation but also makes the State management agencies difficulty in the M&A activity control The management of the State, enterprises, investors, intermediaries do not have much information, knowledge of M&A In fact, many companies want to buy and also have companies that want to sell, but most of them do not have a