Tài liệu Merger and acquistion in vietnam securities sector identify motives nennefits and obstacles luận văn thạc sĩ

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY By TRUONG NU PHUONG LOAN MERGER AND ACQUISITION IN VIETNAM SECURITIES SECTOR IDENTIFY MOTIVES, BENEFITS AND OBSTACLES Ology: Finance – Banking Ology code: 60.31.12 MASTER’S THESIS Advisor PhD. Nguyen Thu Hien HO CHI MINH CITY 2010 ACKNOWLEDGEMENTS First of all, I would like to express my deepest gratitude and sincere thanks to Dr Nguyen Thu Hien, my thesis advisor, for her valuable advises and support throughout every stage of my study. Secondly, I am also grateful for the suggestions and comments from my friends, colleagues, relatives during the time of study. Thirdly, I would like to extend deep senses of gratitude to all of my teachers who have taught and guided me throughout the period of MBA Program at University of Economics Ho Chi Minh City . Fourthly, I would like to thank my family for the constant encouragement and moral support given to me throughout my studies. Lastly, this study paper is the meaningful gift to my mother who always expects me to progress in the life. Ho Chi Minh City, Vietnam October, 2010 Truong Nu Phuong Loan ABSTRACT M&A activity is still rather new to the Vietnam’s economy. Together with the stock market, M&A has just appeared and been developing for 10 years in Vietnam. Although, it has not had a long development history, the M&A activity has obtained certain critical development milestones as there have been more and more companies choosing M&A as a way to expand business, and achieve objectives of business growth as well. This researching topic aims at exploring and discovering the motives, potential benefits, and obstacles of the M&A activities of the companies in the securities sector in Vietnam. In order to achieve the set targets of the research, it was started by studying relevant basic theories of the international researchers on the motives, potential benefits and obstacles of the M&A activity. Researching method used was namely the qualitative and quantitative approach. The data of the quantitative method was done by researching 32 securities companies in Ho Chi Minh City The results of relevant tests showed that the companies paid more attentions to the motives of improving operation management, market penetration, penetration into new market, as well as efficiency factor. The results of relevant test also showed that the most critical obstacle to which the companies of the securities sector in Vietnam did face with were those of regulatory and administrative procedures. TABLE OF CONTENTS ACKNOWLEDGEMENTS ............................................................................ i ABSTRACT ................................................................................................... ii TABLE OF CONTENTS .............................................................................. iii LIST OF FIGURES...................................................................................... vii LIST OF TABLES ....................................................................................... vii LIST OF ABBREVIATIONS ....................................................................... xi CHAPTER I : INTRODUCTION ...............................................................1 1.1 General background ..................................................................................1 1.2 Research objective.....................................................................................4 1.3 Scope of study ...........................................................................................5 .CHAPTER II: LITERATURE REVIEW..................................................6 2.1 General views ............................................................................................6 2.2 Characteristics of Merger and Acquisition waves in the USA .................7 2.3 Research theories on merger motives......................................................10 2.4 Concept of Synergy as a Main Motive for M&A....................................12 2.5 Obstacles preventing M&A activities .....................................................17 2.6 Vietnam M&A activity review – 2009....................................................19 2.7 M&A in Vietnam securities sector in indispensable...............................22 CHAPTER III : RESEARCH METHODOLOGY .................................28 3.1 Research model .......................................................................................28 3.2 First phase – Qualitative research ...........................................................29 3.2.1 Interview ..................................................................................29 3.2.2 Build questionnaire ..................................................................29 3.2.3 Pilot testing ..............................................................................30 3.3 Second phase – Quantitative research .....................................................31 CHAPTER IV: RESULT............................................................................32 4.1 Sample profile .........................................................................................32 4.2 Results of qualitative research step .........................................................33 4.3 Group of factors.......................................................................................34 4.3.1 Measurements scales of variables “Motives, benefits of M&A in Vietnam securities sector” ................................................34 4.3.2 Measurements scales of variables “Obstacles of M&A in Vietnam securities sector”..................................................35 4.4 Exploratory Factor Analysis ...................................................................37 4.4.1 Measurement scales of “Motives, benefits of M&A in Vietnam securities sector”..................................................38 4.4.2 Measurement scales of “Obstacles of M&A in Vietnam securities sector” ................................................41 4.5 Reliability analysis ..................................................................................43 4.5.1 Measurement scales of “Motives, benefits of M&A in Vietnam securities sector “................................................44 4.5.2 Measurement scales of “Obstacles of M&A in Vietnam securities sector”..................................................50 4.6 Observing variances and Cronbach’s Alpha after reliability analysis .....................................................................................54 4.6.1 Result of Cronbach’s Alpha for factor of “Motive, benefits of M&A activity” ..............................................................................54 4.6.2 Result of Cronbach’s Alpha for factor of “ Obstacles of M&A activity” .................................................................................57 4.7 Descriptive statistic of motives, benefits and obstacles of M&A activity. ......................................................................................60 4.7.1 Number of years experience factor ..........................................61 4.7.2 Chartered capital factor............................................................62 4.7.3 Profit before tax factor .............................................................66 4.7.4 M&A dynamic factor...............................................................67 CHAPTER V : CONCLUSIONS...............................................................73 5.1 Summary of findings ...............................................................................73 5.1.1 Motives and benefits of M&A after analyzing the factors and measuring the reliability of the scales........................................74 5.1.2 Exploration of obstacles of M&A after analyzing the factors and measuring the reliability of the scales........................................75 5.1.3 Result of Descriptive statistics and ANOVA test on classification variables .....................................................................76 5.2 Limitation of research ............................................................................77 5.3 Recommendations ...................................................................................78 REFERENCES ............................................................................................79 APPENDICES ..............................................Error! Bookmark not defined APPENDIX 1: SURVEY QUESTIONNAIRE – ENGLISH ...............81 APPENDIX 2: SURVEY QUESTIONNAIRE – VIETNAMESE.......88 APPENDIX 3: LIST OF M&A DEALS FOR SURVEY.....................95 APPENDIX 4: LIST OF INTERVIEWEES.......................................102 LIST OF FIGURES Figure 2.1: Vietnam Deal Activity 2008-2009 by quarter. ...........................20 Figure 2.2: M&A target in Vietnam Percentage of announced deals by the top five most active industry sectors. ................................................21 Figure 2.3: M&A deals in Vietnam securities sector from 2007 to now ............................................................................................................25 Figure 3.1: Research model...........................................................................28 Figure 3.2: Qualitative research ....................................................................31 LIST OF TABLES Table 1.1: Announced M&A deals .................................................................2 Table 2.1: Common Theories of What Causes Mergers and Acquisitions ............................................................................................14 Table 2.2: Commonly Citied Reasons for M&A Failure ..............................17 Table 2.3: Deal Activity Summary ..............................................................20 Table 2.4: M&A deals in Vietnam securities sector .....................................24 Table 4.1: Characteristic of samples .............................................................32 Table 4.2: Descriptive Statistics in Motives, and Benefits ...........................36 Table 4.3: Descriptive Statistics in Obstacles ...............................................37 Table 4.4: KMO and Bartlett’s test with scales of “ Motives, benefits of M&A in Vietnam securities sector..............................................38 Table 4.5: Extracting Component Analysis with Varimax rotation with scale of “Motives, benefits of M&A activities in securities sector”. ............39 Table 4.6: KMO and Bartlett’s test with scales of “ Obstacles of M&A in Vietnam securities sector. ........................................................................41 Table 4.7: Extracting Component Analysis with Varimax rotation with scale of “ Obstacles of M&A activities in securities sector” ...............41 Tables 4.8: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FM _1” ...............................................................................44 Table 4.9: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FM _2” ...............................................................................45 Table 4.10: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FM _3” ...............................................................................45 Table 4.11: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FM _4” ...............................................................................46 Table 4.12: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FM _5” ...............................................................................46 Table 4.13: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FM _6” ...............................................................................46 Table 4.14: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FM _7” ...............................................................................47 Table 4.15: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FM _8” ...............................................................................48 Table 4.16: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FM _9” ...............................................................................49 Table 4.17: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FO _1” ................................................................................50 Table 4.18: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FO _2” ................................................................................51 Table 4.19: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FO _3” ................................................................................52 Table 4.20: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FO _4” ................................................................................52 Table 4.21: Results of Reliability analysis on Cronbach’s Alpha Coefficient of :FO _5” ................................................................................53 Tables 4.22: Results of Cronbach Alpha’s for factor of “ Motives, Benefits of M&A activity ” ...........................................................................56 Tables 4.23: Descriptive statistic of “ Motives and Benefits of M&A activity”...............................................................................................57 Tables 4.24: Results of Cronbach Alpha’s for factor of “ Obstacles of M&A activity” ..........................................................................................59 Tables 4.25: Descriptive statistic of “ Obstacles of M&A activity” .............60 LIST OF ABBREVIATIONS 1. ANOVA : Analysis of Variance 2. EFA : Exploratory Factor Analysis 3. KMO : Kaiser - Meyer - Olkin Measure of Sampling Adequacy 4. M&A : Merger and Acquisition 5. SPSS : Statistical Package for the Social Sciences 6. U.S : United States -1- CHAPTER I: INTRODUCTION 1.1 General background In January 2010, Vietnam concluded three years of membership in the World Trade Organization. Membership infused a new spirit into the business environment in the country and also facilitated higher visibility for Vietnam as an international trading partner and as an investment destination. Membership status has also motivated Vietnamese enterprises to evolve and to adopt international best practices in order to maintain their rate of development and their competitiveness against current and future entrants of foreign competitors. To raise funds for the economy to facilitate economic growth, Vietnamese government has issued many policies attracting foreign investment. Government decree 139, which became effective on 1 January 2008, removed limit on foreign ownership ratios in Vietnamese companies except in relation to public listed companies where the 49% cap remained in place along with a 40% cap in public non-listed companies. In addition, sector specific limitations, most importantly in telecoms, financial services and other services remained in place. Besides, the development of stock market in Vietnam also attracts funds from local investors, who used to choose gold, foreign currencies and real estates to be only choices before the introduction of stock market. Interest in Merger and Acquisition has remained extremely high in Vietnam during 2008. Successful domestic companies have been increasing open to deal making as they pursue expansionist strategies, while companies struggling to cope with the changing economic environment were more open to discussion regarding the scale of equity stakes to domestic and foreign suitors. The number of deals between Vietnamese companies doubled in comparison to 2007. -2- Table 1.1 Announced M&A deals Announced M&A deals – Target region/ Nation 2008 2007 % change 2008 2007 US $ Million Number of deals Worldwide 2.395.960 4.169.287 -29.6 39.597 43.817 USA 986.283 1.570.848 -37.2 9.165 11.296 China 104.253 75.390 38.3 2.983 2.587 South East Asia 75.176 75.675 -0.7% 2.065 2.001 Vietnam 1.009 1.719 -41.3% 146 108 Source: Thomson Reuters, Pricewaterhouse Coppers Research. % change -9,6 -18.9 15.3 3.2 35.2 Financial services are a strong case for Mergers and Acquisitions, especially in securities sector. The explosion in the number of securities companies over the past 10 years creates an intensely competitive market place for the small players in a country where number of investors is still limited. In addition, the impact of global financial crisis on Vietnamese stock market has cold the market down sharply. This lead to a drop of VNI from 1103.88 points to 315.62 at the end of 2008 .Trading volume also reduced sharply during this period from 1.239.692.000.000 VND dong to 406.560.000.000 VND dong. The reduction of trading activities has brought loss to many securities companies and some of them have to either cut down their services and lay off staffs, or find ways to merge with other companies to survive. There are over 100 securities companies in Vietnam market where of individual brokerage clients is still limited, where few new listing of companies are taking place so that the investments are unattractive. Many newly established securities firms and even some of the well established ones with relatively large brokerage bases, are looking for a strong financial institution to take a minority stake in them in order to gain access the investor’s expertise, offshore client base and their funding resources. Foreign investors for their part still see Vietnam as an attractive, developing market but in general are moving cautiously and will not willing to pay the sorts of multiples seen in past securities company Merger and Acquisition transactions. -3- In addition, the State Securities Commission has decided to stop granting license for the establishment of securities companies because of the quantity inconsistent with quality. Thus, the investors continue to “hunt”. Because they believe that the Vietnam securities market is a new market for investment. Specifically, the transaction fees in Vietnam securities companies are higher than developed countries. With the technology available these organization will participate in the exploitation of Vietnam’s securities market better. From 2005 to present, the Mergers and Acquisitions in Vietnam securities section trend to increase both the quantity and value of transaction, with participation from abroad organization .In fact, many securities companies have transferred successful, for example: Morgan Stanley has bought stake of Huong Viet Securities Company and renamed to Morgan Stanley Gateway Securities JSC, Golden Bridge has bought 49 percent stake of Click &Phone Securities company, RHB Bank (Malaysia) has bought 49 percent stake of Vietnam Securities company. OSK investment bank BHD, a wholly-owned unit of OSK Holding Bhd, withdrew its agreement to acquire a 49% stake in Seabank Securities JSC, a securities brokerage firm, for 220.5 billion Vietnamese dong. Latest business, A purchase by Woori Investment and Securities Company (Korea) of 10 percent of the Bien Viet Securities J.S.C(CBT) ‘s charter capital. Not only foreign partner but also domestic investors or large corporations are interested in this field. Specifically, in July 2009, the PetroVietNam insurance corporation’s acquisition of 19 million stake equivalent to 66.58 percent of charter capital in the PSI securities company. Seamico Securities PCL (SS) acquired a 25% stake in Thanh Cong Securities JSC(TC), a securities brokerage firm, and a majority-owned unit of Thanh Cong Textile Garment Investment Trading JSC, for 77.683 billion Vietnamese dong. Concurrently, SS was granted an option to raise its stake to 49% from 25%, by acquiring a further 24% stake in TC. Vietnam State owned Tan Binh Import-Export Corp acquired a 10% stake in Cholon Securities JSC, from Cholon -4- Investment and Import-Export Co (7.2%) and Cholimex Food JSC (2.8%). In March 2009, the Vietnamese government (VG), announced that it was seeking a buyer for its 13% stake in its Vietinbank Securities Co (VS) unit. Concurrently, VG planned to divest its 14.9% stake in VS to the public in an equity carveout transaction. Ocean group acquired a 59% interest, or 8.9 million ordinary shares, in Ocean Securities Joint Stock Company. In addition, the private investors are interested in this field. Mr Tran Minh Tien acquired a 42.86% stake in Royal Securities Corp, a securities brokerage firm, Mr Trinh Van Tuan acquired a 16.92% stake in VietNam International Securities JSC, a securities brokerage firm, from Ms Nguyen Thi Thu Trang. The above analysis shows that the takeover market in Vietnam has been very active recently and will be very potential in the future, especially for the securities sector. Therefore, this thesis focuses on identifying the motives, benefits and obstacles of mergers and acquisition activities going on in the securities sector of Vietnam with a purpose to find out the factors behind the growing trend of M&A in securities sector and provide recommendations to the policy makers to encourage the development of this important sector of the economy 1.2 Research objective The objective of this thesis is to identify motives that foster Vietnamese securities companies to do merger and acquisition, potential benefits of Merger and Acquisition, and also obstacles preventing securities companies in doing Merger and Acquisition successfully. Specifically, it attempts to investigate the following questions: 1. What are motives that foster local firm to do Merger and Acquisition? 2. What are potential benefits that enable merged firms to be more advantage? 3. What are obstacles that have been preventing securities companies in doing merger and acquisition successfully? -5- 1.3 Scope of study Due to the complication of Merger and Acquisition activities, time constraint as well as the limitation of Merger and Acquisition information, this study only focuses on M&A transactions involving listed companies that are located in Ho Chi Minh City. -6- CHAPTER II: LITERATURE REVIEW 2.1 General views Merger and acquisition activities are nowadays a common phenomenon in many industries. Numerous M&A deals in diverse industries are reported in press releases every week. M&A activities change market structures, market share, and the depth of competition in a market. The amount of money at risk, the volume of the deals that are closed, and the prevalence of M&A across all industries in almost all regions in the world, gives M&A its eminent role in business administration theory. In general, the quest for growth in a company can be realized with either one of the two growth strategies, namely organic or inorganic growth strategy. Organic growth strategy, also called “internal growth strategy”, refers to the growth of revenue, market share, and the size of a company independently without acquiring or cooperating with another company. Inorganic growth strategy, sometimes called “ external growth strategy”, is the growth of a company through cooperation or concentration or both. In recent years the management of many companies turns to external instead of internal growth strategic to demonstrate growth due to time and resource disadvantages over competitors and ostensible synergies they see between other companies and their own. External growth strategy can be subdivided into cooperation and concentration based on the binding intensity between the companies involved. Binding intensity measure the level at which the resources, actions, and autonomy of decision of a company are restricted, due to a contractual arrangement with another company. As shown in Fig. I, there are two types of concentration – mergers and acquisition. Although the terms “ merger” and “ acquisition “ (M&A) technically have different meanings, they are most often confused or used as synonyms. Merger: A combination of two or more companies in which the assets and liabilities of the selling firm(s) are absorbed by the buying firm. Although the -7- buying firm may be a considerably different organization after the merger, it retains its original identity. According to Gaughan, a merger is a combination of two companies in which only one company survives and the merged company ceased to exit, whereby the acquiring company assumes the assets and liabilities of the merged company. An acquisition, also known as “takeover”, is the buying of a company the "target” by another or the purchase of an asset such as a plant or a division of a company. The premise to M&A is that it is the panacea to fast growth in a market. It is much easier for companies to generate revenue growth by simply adding the annual revenues of acquisition targets to theirs than improving the profitability of an overall enterprise. 2.2 Characteristics of Merger and Acquisition waves in the USA M&A activity has been being seen for long, starting from the years at the end the 19th century. M&A activity was first recorded in the transition period from the competitive capitalism to the monopoly capitalism with the forming of giant industrial group of companies in 1895- 1905. This was known as the period of capital mobilization of the world economy in line with the fast development of economic powerful countries, such as the U.S, and some European countries. Mainly driven by the overproduction, which resulted in the weakness of demand and declining in selling price, many U.S companies conducted the horizontal mergers in order to create huge production lines. And thus, the M&A was known since then. Following the U.S market, the UK market happened to have M&A transactions in the 60 decade of the 20th century. M&A has been also being recorded in other European markets since the years of 1980. This situation was explained as a result -8- of the globalization of the world economy and the impact of the USA economy to the others’. Moving into the 21st century, a new M&A wave happened with more diversified forms and bigger size. This wave did not limit within the developed economies, but also cover the emerging economies, such as Korea, China, Singapore, India, Vietnam and Middle East region… As such, with the history of more than 100 years, the characteristics of Merger and Acquisition waves in the USA are divided into five waves as follows: 1895-1903: The creation of the great oil, steel, and other trusts, sometimes called the “Merging for monopoly” wave. The First World War was the cause ceasing the first wave. 1920 -1929 : Consolidation in many industries, sometimes called the “ Merging for oligopoly” wave. The second wave began in the late of 1910s and continued until 1929 when the stock market crashed. 1960-1973 : Emergence of conglomerate firms and other diversifying acquisition, sometimes called the “ Conglomerate merger” wave. This period was witnessing the birth of groups of companies, and multi-national companies in the world economy. Many companies of the U.S. started to make investment in other countries to enjoy the favorable taxation policies, reduction of trade technical barriers and transportation cost…This wave was stopped in the years of the beginning of the 1970, when there were a decline of Dow Jones index, and energy crisis. 1978- 1989 : The fourth wave isn’t neatly captured in a single phrase, but included large components of hostile takeovers, bust –up and refocusing of conglomerate firms, and leveraged buyouts. Any company might also be acquired if being unable