M&A have lasted for 50 years over the world and have been vivid, especially in developed market economies such as UK, US, Japan, Australia. First M&A was transacted in the US in early 20 century and bloomed in 1980s and 1990s. There are approx. 1,301 companies having M&A transactions in UK every year.

Advantages

Those who have M&A transactions often plan to obtain:

Market expansion: M&A is an effective way to expand market. Purchased companies have their market shares (big or small). So purchasers will automatically obtain these shares through M&A.

Competitive price: some companies do M&A for market expansion. Their larger market shares make demand higher than supply. They will get more goods orders and produce more so their production cost will be lower, which enable them to offer more competitive prices.

Product, service diversification: some companies purchase other companies which have additional services and products in order to diversify their products and services. By providing more options for their customers, these companies will make more turnovers.

Staff cut-down: when doing mergers, enterprises will have to cut down their staff, especially those who are doing administrative work such as office clerks, accountants, marketing staff. Staff cut-down go in line with production productivity increase.

Advantages gained from bigger production and business scale: it must be said that bigger enterprises will have more advantages than smaller ones in their transactions or negotiations with their partners. Moreover, big scale enables enterprises to reduce some unnecessary arisen costs

Increased market shares and reputation in their industry: M&A will help enterprises expand their market and facilities in a time and money saving way (less time for construction, marketing, staff training).

Limitations
Apart from advantages, M&A have limitations such as reducing market competitiveness due to the domination of some enterprises after M&A, leading to monopoly from which the customers have to suffer.

Besides, M&A often cause social issues such as labour abundance leading to unemployment which takes time to be thoroughly solved.

In fact, some M&A have side effects because consequences of M&A had not been well estimated before the transaction. This should be avoided.

Limitations found in Vietnam

Despite various regulations, M&A in Vietnam still contained limitations due to both subjective and objective reasons.

Firstly, Most of Vietnamese enterprises are small and medium scaled. They do not know much about conditions and procedures of M&A. Besides Vietnam is a new market containing potential risks for M&A transactions.

Secondly, investors have confusions in doing M&A which are whether their shares, capitals are sufficient enough for them to be involved in enterprises’ important decisions; how the enterprises are valued (price fixing)? How to define benefits when doing M&A? Investors still hesitate in doing M&A when they do not have answers to these questions.

Thirdly,

Vietnamese people like other Asian consider their enterprises as their “children” so they do not want to sell them.

Fourthly, M&A are complicated activities whereas Vietnamese human resources are not able to meed demands in this area.

Fifthly, there is no transparency in enterprises’ structure and activities. In Vietnam like many other counties, enterprises often have 2 types of accounting books, causing difficulties for fixing value of the enterprises in M&A transactions.

Solutions

Firstly, it is necessary to enhance the market economy to promote competitiveness among enterprises. there will be then demands for M&A.

After that, it is also necessary to have communication control, transparency in business in general and in M&A in particular.

Besides, it is necessary to enhance legal system on M&A. Currently, new regulations just focus on defining forms of M&A not the contents such as fixing enterprises’ value/price, solving matters related to finance, labour, tax.
It is better to have good consultants and brokers who are knowledgeable and able to assist involved parties obtain their reasonal benefits in M&A transactions. Therefore the market will operate well and be professional.

(Source: ??u t? N??c ngoài)

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