VietNamNet Bridge – Investment consultants have reported the vigorous wave of Japanese investors coming to Vietnam to buy Vietnamese companies.
Twenty five percent of Nutifood’s stakes, 48 percent of the Saigon Paper Company, 57 percent of the International Food Company and 86 percent of Diana have been sold to Japanese partners. And experts believe that the list of the commercial deals would prolong.
| Le Minh Tam, General Director of Kim Eng Securities Company |
The information about the stake purchases of Japanese investors may surprise some people, who cannot understand why the investors buy the stakes of Vietnamese people when the economy has not recovered yet.
Explaining this, Le Minh Tam, General Director of Kim Eng Securities Company said that Japanese investors now have to face big difficulties on the domestic market which has become saturated for a long time. Meanwhile, they can see the great potentials of the Vietnamese market.
Meanwhile, most of the Vietnamese enterprises need capital, but they find it difficult to access capital sources. Therefore, they need to call for foreign investment. And it is the opportunity for Japanese investors, who believe that Vietnam deserves to make investment. The current difficulties, in the eyes of Japanese investors, are just temporary, while the good investment environment, the political certainties still can make Vietnam attractive for making investments.
According to Tam, the fields at which Japanese investors would aim are consumer product, distribution, logistics and health care.
Tam said that Japanese investors decide to buy parts of Vietnam enterprises instead of setting up their own market because this is the optimal way to decrease the expenditure and time to exploit the emergent market with the population of nearly 90 million people of Vietnam. M&A is the shortest way to bring the best benefit and efficiency for foreign companies to penetrate Vietnam.
This brings both advantages and disadvantages to Vietnam enterprises. Foreign partners participate in the business management, especially Japanese investors who are hard to please. They place emphasis on the reliability and openness of the shareholders and require a very high transparency of the company.
Nowadays Vietnam enterprises are more careful about finding foreign partners. They have to think of a long-term orientation to cooperate that each party can make use of its advantage. For example, domestic partners are expert at domestic market while foreign have financial strength, technology and management skills.
A number of deals are announced by the parties to have been purchased with "above-market price". When strategic investors want to buy large quantities of shares of enterprises in order to participate in managing that enterprise, they are willing to pay premium prices - the highest price.
Investors newly come to Vietnam are usually very cautious. They will become strategic investors at first to have the chance to understand more and penetrate the market. Then they will buy more shares in the enterprise when the opportunity comes.
Therefore, domestic enterprises need to consider the specific rate of the new investors in the business and their rights to development strategies and management issues to tell if the enterprise is really looking for strategic partners or not.
In conclusion, the tendency of Japanese to come and buy companies in Vietnam is irresistible, especially when Vietnam officially remove all trade barriers under WTO commitments. There will be more and more foreign companies in business for themselves in Vietnam market, so Vietnam enterprises have to change their way of thinking and the way to approach strategic partners. If well prepared, this will be a good opportunity for Vietnam enterprises to improve themselves according to international standards.