Curbing Monopoly Oriented M&A Deals
There has been an increasing trend in both the number and total value of M&A deals in the Asean region since 1995. In the first half of 2012 alone, the cross-border M&A deals in the Asean region has reached its highest value ever, with $26.2 billion in total, even higher than the $23.2 billion in 2011. Though the number of M&A deals in the region is forecast to decrease by 22 percent in 2012, the total value is expected to increase by 179 percent. Prof Christopher Kummer, President of the Institute of Mergers, Acquisitions and Alliances (IMAA) in Switzerland, emphasized, "M&A activities have had a positive impact on the Asean region; therefore, the need to encourage such trend to bring more benefits to businesses and consumers.” Accordingly, there is an increase in demand for acquiring, merging and selling a business as well as cross investment among companies in order to improve competitiveness and attempt new operational models. This reality has led to an international conference titled "Merger and Acquisition and its Impacts on the Asean Region,” co-hosted by the Vietnam Competition Authority Department of the Ministry of Industry and Commerce, the Asean Secretariat and the International Cooperation Programme under the Australia-New Zealand Free Trade Agreement.
Over the last three years, the total value of M&A deals in Vietnam has increased in terms of quantity, scale and complexity. In 2009, 295 deals were made with the total value of $1.14 billion; 245 deals were made in 2010 with $1.75 billion in total worth; the year 2011 saw a record number of 266 deals with a total value of $6.25 billion, and in 2012 there were 60 deals worth nearly $2 billion during first quarter alone. During the last five years, M&A activities growth rate averages 30 percent, in which $2.6 billion (about 65 percent) are deals involved foreign investors. Chu Tien Dung, Chair of the Board of directors of Quang Trung Software City Development Company (QTSC) revealed that there are many foreign Information Technology (IT) and software companies planning to expand their operation and partner with software companies in Vietnam. Thus, M&A is inevitable. Not only the IT industry, but other industries such as finance and banking, agriculture, and consumer product manufacturers are also fertile grounds for M&A activities.
Bach Van Mung, Head of the Competition Authority Department, claimed that in the midst of global integration, especially towards the establishment of Asean Economic Community (AEC) in 2015, in the upcoming years, M&A will be popular not only in Vietnam but throughout the Asean region, both in terms of total value and scale. However, the investment opportunities being mentioned are often those involving foreign investors who plan to invest in Asean; the potential of integrating small and medium enterprises (SME) in the region to increase total economic value through M&A deals and the transformation of the legal system with the focus of monitoring the competition in M&A deals.
It is noteworthy that in this current turbulent period of financial crisis and public debt, M&A is considered an appropriate strategy to help companies on the verge of bankruptcy to sustain their operations and keep growing. Nevertheless, besides undeniable benefits that M&A deals contribute to economic development, there are still concerns that without strict regulation, these activities will be the chance for big corporations to dominate the market; expand their operation and kill competition, which has negative consequences on a level-playing business environment both in the national and regional scale. Therefore, M&A activities should be closely monitored and regulated by responsible government agencies.
Also regarding the M&A regulation, MS Rosemary Ann Webb, a member of the M&A Group of the Australia Competition and Consumer Commission, suggested that the law should put a limit on market share as far as M&A activities are concerned, especially for major M&A deals.
In the macro scale, Dr Hassan Qaqaya, director of Competition and Law Department of Unctad, believes that there should be adjustment and complement to the competition law regarding cross-border M&A deals since this is an inevitable trend in the market. If the law is not quickly updated, there will be negative impacts on the regional economy. While encouraging integration among companies, there should be a curb on monopoly-oriented M&A deals which easily lead to market domination at the moment.
On the same note, Dr Hiroyuki Odagiri, member of the Japan Fair Trade Commission, claimed that the increasing number of M&A deals has left significant impacts, both positive and negative, on the international market. Therefore, upon issuing new regulations, government agencies should take note of the market coverage and international competition.
In order to reduce risks in M&A activities, MS Tran Phuong Lan, Head of Competition Monitoring and Administration Department under the Vietnam Competition Authority, suggested that Vietnam Competition Law does not make it mandatory for companies to consult the Authority before a M&A deal. However, in order to avoid potential risks in the future, businesses should consult the Competition Authority to have a better understanding of the law before making an M&A deal which is likely to fall within the warning region or even be banned. This is necessary to help businesses avoid the current increasing trend of "fake” M&A deals.
