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ONE-VALUE Enhances M&A Support in Vietnam

ONE-VALUE Corporation, based in Koto-ku, Tokyo and led by CEO Phi Hoa, is taking significant steps to bolster its M&A advisory services for Japanese companies looking to expand their operations in the Vietnam market. This new focus specifically aims at supporting investments and acquisitions of state-owned enterprises (SOEs), which have historically played a crucial role in the country’s economy.

As it stands, state-owned enterprises in Vietnam occupy pivotal positions across vital industries such as energy, telecommunications, finance, infrastructure, natural resources, and real estate. In recent years, however, significant shifts have been occurring as the government actively restructures state-owned capital. There is a concerted effort to divest from non-core sectors and a noticeable move towards selling assets through the State Capital Investment Corporation (SCIC). This evolution has opened up a range of market entry opportunities for Japanese firms through investment in, acquisition of, or joint ventures with these SOEs.

ONE-VALUE prides itself on its established expertise in supporting M&A transactions in Vietnam, leveraging its local networks, government relations, and extensive market research. The enhanced services will provide comprehensive support for Japanese companies, guiding them from initial investigations and deal sourcing through to due diligence, negotiations, and post-merger integration (PMI).

The Background of Service Enhancement

State-owned enterprises in Vietnam remain highly influential actors within the country's economic landscape. The major corporations in Vietnam’s industry ranking are predominantly SOEs, with many commanding lead positions in key sectors such as energy, oil, telecommunications, finance, and mining, thus acting as foundational pillars of the nation's economy.

These SOEs are not merely large corporations; they often hold strategic assets that private companies find challenging to acquire. They manage substantial infrastructural assets including ports, airports, power grids, rail systems, mines, forests, and prime urban real estate. Moreover, many of these corporations have access to public projects and networks that present significant business opportunities for Japanese firms wishing to establish a foothold in Vietnam.

However, investing in or acquiring state-owned enterprises comes with its unique set of challenges that differ from standard private sector M&A processes. Issues such as SCIC-led asset sales, bidding procedures, state-assessed valuations, minimum auction prices, foreign investment regulations, permitting, ownership ratios, and management rights all require careful consideration.

Specifically, it can prove difficult to glean an accurate picture of an SOE's reality solely from publicly available information. Factors include understanding the value of their assets, operational conditions, competitive dynamics, and the nuances of local administrative practices. To navigate these complexities successfully, Japanese companies need expert guidance that truly understands local market conditions and regulatory frameworks.

Recognizing these dynamics, ONE-VALUE is committed to enhancing its support for potential acquisitions of Vietnam’s state-owned enterprises.

Three Advantages of Vietnamese State-Owned Enterprises

For Japanese companies, Vietnamese SOEs represent more than just acquisition targets; they constitute crucial avenues to secure competitive advantages in the Vietnamese market.

1. Strategic Asset Ownership: SOEs often possess assets which are challenging for private entities to acquire, such as strategically important infrastructure and resources essential for business expansion.

2. Unique Licenses and Permits: In some sectors, SOEs are the primary operators of significant business activities. This makes cooperation or acquisition possible for private companies to enter fields where foreign firms may struggle to penetrate independently.

3. Public Project and Customer Networks: SOEs often have established relationships with government bodies, local governments, and other public entities, facilitating access to projects that are otherwise difficult for foreign investors to tap into.

Emerging M&A Opportunities from State Capital Restructuring

The Vietnamese government has indicated a renewed definition of the role of state-owned enterprises, shifting state capital towards critical strategic areas and focusing on sectors where private industry cannot provide sufficient coverage. This evolving policy landscape suggests a potential withdrawal of state capital from non-core and competitive domains. For Japanese firms, this means expanding opportunities for investment, acquisition, joint ventures, and strategic partnerships with state-owned enterprises.

Key industries such as transportation, logistics, energy, water, environmental infrastructure, telecommunications, medical, education, real estate, manufacturing, and food processing stand to benefit. Establishing a foothold quickly within the Vietnamese market leverages the existing assets and business foundations of SOEs.

Nonetheless, buying state-owned capital does not necessarily proceed like conventional M&A deals. Stringent institutional procedures such as public auctions, required deposits, minimum prices, investor qualifications, deadlines, and share transfer processes can complicate negotiations considerably.

Thus, to effectively evaluate these investment opportunities and design implementable frameworks, an understanding of Vietnam's regulations and business practices is imperative, requiring thorough scrutiny of each unique deal.

Addressing Key Challenges in Acquiring State-Owned Enterprises

Entering the realm of SOE investment and acquisition presents distinctive hurdles distinct from standard private sector mergers. Major challenges include:

• - Information Asymmetry: Public documentation may not adequately illuminate the true state of an SOE’s assets, land rights, permits, existing contracts, financial status, operational worries, and management structure.
• - Valuation Difficulties: Minimum price points dictated by national valuation standards may not reflect true market conditions. This misalignment can lead to either inflated auction prices or undervalued assets based on perceived risks.
• - Management Rights: Limitations imposed by existing shareholder structures, foreign ownership ratios, and other regulations can restrict an investor's influence. Understanding whether the aim is financial return, operational synergy, or control is crucial in determining the right approach and framework.
• - Post-Merger Integration (PMI) Considerations: The legacy cultures and decision-making processes of SOEs necessitate a nuanced approach during integration. Careful handling is essential to avoid disruptions and maximize synergies post-acquisition.

ONE-VALUE's Commitment to Support

ONE-VALUE remains dedicated to backing Japanese firms with their investment or acquisition efforts regarding Vietnamese state-owned enterprises by focusing on several key areas:

1. Initial Research and Market Studies: Investigating market sizes, growth prospects, competitive landscapes, policy trends, foreign investment constraints, and the positioning of SOEs.
2. Exploration of SOEs and Sale Projects: Identifying capital sale projects facilitated by SCIC, potential partners for capital alliances, joint ventures, and successors in management.
3. Company Research and Preliminary Due Diligence: Evaluating company finances, operational status, assets, permits, shareholder structures, and governance frameworks.
4. Investment and Acquisition Framework Design: Developing feasible structures based on regulatory aspects, bidding conditions, and potential for acquiring managerial rights.
5. Support in Bidding and Negotiations: Offering assistance with public bidding projects or individualized negotiations with stakeholders.
6. Due Diligence and Valuation Assistance: Supporting tailored due diligence processes for each investment case with an emphasis on firm-specific circumstances and market strategies.
7. Closing and PMI Assistance: Overseeing final transactions, integrating human resources, and establishing governance structures, while collaborating closely with local management.

ONE-VALUE's Unique Strengths

As a consulting firm focused on resolving business challenges in Vietnam, ONE-VALUE uniquely offers a comprehensive suite of services including market research, strategy development, M&A advisory, sales support, and post-merger integration. Our in-depth knowledge of the Vietnamese market and our local networks enable us to gather essential firsthand information critical for informed decision-making.

As more than just an intermediary, we assist in all phases of M&A processes, from conceptualization to execution – supporting Japanese companies maximize their growth strategies in Vietnam through thorough research, project development, assessment, and negotiations.

For any Japanese firm considering investments, acquisitions, joint ventures, or strategic collaborations in Vietnam’s state-owned enterprises, or looking to engage in capital sales via SCIC, we invite you to reach out to ONE-VALUE for further consultation.

Contact ONE-VALUE

For inquiries, please reach out to:

• - Email: [email protected]

About ONE-VALUE

Since our inception, ONE-VALUE has specialized as a management consulting firm focused on Vietnam, providing deep expertise and practical experience to clients across diverse industries. We strive continually to offer the most effective solutions tailored to our clients' specific needs, capitalizing on our extensive networks and profound knowledge of the Vietnamese landscape in order to ensure successful engagements.