M&A brings businesses a lot of new opportunities through market share expansion. Photo: ST

“Money talks”

Recently, a representative of Thanh Thanh Cong - Bien Hoa Joint Stock Company (TTC Sugar) - a member of Thanh Thanh Cong Group (TTC Group) said that the company is implementing a strategy to expand the market through M&A and investment in factory construction. Therefore, TTC Sugar will increase production by acquiring the Indian sugar business in Cambodia. Besides traditional markets such as Vietnam, Laos, Cambodia, and Singapore, TTC Sugar is planning to invest in building a sugar factory in Australia.

Before that, TTC Sugar bought the factory of Hoang Anh Gia Lai in Laos. Thanks to these expansion moves, TTC Sugar is holding about 50% market share of the sugar industry in Vietnam, owning 65,000ha of raw materials in three countries Vietnam, Laos and Cambodia, with an output of 1.16 million tons in 2021.

In the first nine months of the year 2021-2022, the company has VND12,818 billion in revenue and VND802 billion in pre-tax profit, up 19% and 46% respectively over the same period.

Similarly, to create growth momentum for the new period, in July 2021, Vinamilk announced a joint venture company in the Philippines, Del Monte-Vinamilk, to combine Vinamilk's strengths in production and Del Monte in terms of distribution stage.

According to the annual report in 2021, Vinamilk currently has four overseas subsidiaries, of which Vinamilk owns 100% of capital in Driftwood Dairy (USA), Angkor Dairy (Cambodia), Vinamilk Europe Spólka Z Ograniczona Odpowiedzialnoscia (Poland).

This company also owns 85.54% of capital in Lao-Jagro Development XiengKhouang (Laos); the ownership in two foreign affiliates Miraka Holdings (New Zealand) and Del Monte (Philippines) is 22.81% and 50%, respectively.

In a recent corporate analysis report, Viet Rong Securities Company (VDSC) said that Vinamilk's growth engine still lies in its core business of milk but in foreign markets. Specifically, Vinamilk is targeting to acquire a dairy company in Indonesia. If the above plan comes true, Vinamilk will benefit in the next few years.

At the recent General Meeting of Shareholders, in the 2022-2026 period, Vinamilk's Board of Directors said that it would exploit business opportunities in new markets through M&A or venture investment activities; continue to strengthen traditional export markets and seek opportunities to shift investment in local production.

Benefits from M&A

According to information from the Ministry of Planning and Investment, in the first six months of this year, Vietnam's total newly and adjusted investment abroad reached more than US$345.8 million, equaling 63.2% year on year. In which, 57 new projects have been granted investment registration certificates with a total registered capital of US$300.88 million, up 2.1 times over the same period. Newly granted overseas investment capital skyrocketed compared to the same period last year thanks to five major newly granted investment projects, namely Vines Energy Solutions Joint Stock Company project to the US, Canada, France, and Germany, the Netherlands with a total investment capital of more than US$34.68 million per project.

In addition, there were 14 times of capital adjustment with total additional investment capital of over US$44.9 million USD, equaling 11.1% over the same period last year. Adjusted investment capital increased sharply which resulted from the capital adjustment of major projects such as Vingroup with an adjusting increase of US$300 million, the project of Rubber Investment and Development Co., Ltd. Indochina in Cambodia with an additional investment of US$76 million and a project of Vinfast in Germany with a supplement of US$32 million. Accumulated to June 20, Vietnam had 1,569 valid overseas investment projects with a total capital of more than US$21.56 billion.

Despite positive growth results, Vietnamese enterprises face quite a lot of difficulties and challenges in overseas investment. At the General Meeting of Shareholders held in mid-June 2022, leaders of Viettel Global said that foreign investment activities are forecasted to face challenges from political fluctuations in investment countries and exchange rate fluctuations, foreign currency scarcity or new policies binding telecommunications providers.

However, the company will accelerate the restructuring of investment capital in overseas companies. In any market with good profits, enterprises will borrow domestically to avoid exchange rate risks. As for markets that do not have good results, Viettel Global will conduct M&A, which can be partially or fully divested.

According to PwC experts, M&A deals on a global scale in general and Vietnam in particular will keep excitement going. But to maintain a competitive edge, traders should watch out for potential factors in trading such as volatility in the financial markets and the macro economy. The domestic market is expected to maintain a good growth momentum which is hoped to open more opportunities for domestic investors and create many positive prospects for Vietnamese corporations to compete effectively on a spectacular scale as well.