M&A FORUM VIETNAM M&A Trend between Vietnam and Japan. August 7, 2014

Transcription

1 M&A FORUM VIETNAM 2014 M&A Trend between Vietnam and Japan August 7, 2014

2 Agenda 1. Introduction to RECOF Corporation 2. M&A Trend between ASEAN Countries and Japan 3. Prospects of M&A between Vietnam and Japan 4. Hurdles and Solutions in M&A Transactions between Vietnam and Japan 5. Prospects for The Second Wave of M&A (Privatization of SOEs) 1

3 1. Introduction to RECOF Corporation

4 1. RECOF Corporation: Brief Profile Foundation December 10, 1987 Key Feature The oldest and one of the largest M&A boutiques in Japan. Independent and neutral from any Keiretsu groups. Unrestricted and free access to various Japanese companies. Approx. 1,000 transactions closed since foundation. Contacts with over 20,000 companies in Japan, including almost all of the listed companies. Direct access to top decision makers in Japanese firms and government organizations. Full range of M&A advisory services in the whole process of M&A transactions with the emphasis on strategy-driven deal origination. Employees Approx. 70 Affiliate company Address Website RECOF DATA Corporation (M&A database and magazine publication) Kojimachi Diamond Building Kojimachi, Chiyoda-ku, Tokyo JAPAN TEL 81-(3) FAX 81-(3)

5 2. M&A Trend between ASEAN Countries and Japan

6 2. M&A Trend between ASEAN Countries and Japan Number of M&A Transactions from Japan to 9 ASEAN countries excluding Singapore (from January 1, 2010 to June 30, 2014) No. of Transactions Vietnam Thailand Malaysia Indonesia Philippines Myanmar Cambodia Laos Brunei Total ~June 30, Total Sharp slowdown Since 2010, the number of M&A transactions between Vietnam and Japan has been 69, same as Thailand and the largest among all the 9 ASEAN countries Source: MARR Data (RECOF Data Corporation) Note: A year refers to a calendar year (Jan 1~Dec 31) 5

7 3. Prospects of M&A between Vietnam and Japan

8 3. Prospects of M&A between Vietnam and Japan 1 What attract Japanese companies to Vietnam (1) Large young population and abundance of labor force (2) Lower labor cost compared with China and other emerging ASEAN countries (3) Booming of the domestic consumption due to the growing middle class population with rising income (4) 41-year long term historical partnership between Vietnamese and Japanese governments (5) Stable political environment (6) Steady and sizeable economic growth (7) Similarity in culture as a base for mutual understanding (8) Access to the Greater Mekong Sub-region (GMS) 7

9 3. Prospects of M&A between Vietnam and Japan 2 Vietnam's Advantages to other ASEAN Countries (Ranking in 2013) Market Size / Growth Potential Well-prepared infrastructure Speed of Various Procedures Low Labor Cost / Abundant Work Force High Stability of Work Force High Quality of Work Force Political and Social Stability Low Hurdle in Language and Communications Vietnam 3 rd 3 rd 5 th 1 st 1 st 1 st 2 nd 4 th Thailand 4 th 1 st 2 nd 5 th 2 nd 2 nd 3 rd 3 rd Malaysia 5 th 2 nd 1 st 6 th 4 th 4 th 1 st 2 nd Indonesia 1 st 5 th 4 th 4 th 6 th 6 th 4 th 5 th Philippines 6 th 4 th 3 rd 3 rd 5 th 5 th 5 th 1 st Myanmar 2 nd 6 th - 2 nd 3 rd 3 rd 6 th 6 th Relatively attractive to the investors due to the abundant human assets and growing domestic market Source: Questionnaire Survey on Overseas Business Operations by Japanese Companies in 2013, JETRO Note: JETRO sent questionnaire to 9,800 Japanese companies who are highly interested in overseas business and received responses from 3,471 companies (response rate 35.4%). 8

10 3. Prospects of M&A between Vietnam and Japan 3 Annual Labor Cost Actually Born by the Japanese Companies (USD) (2013) Manufacturing - Worker Non-manufacturing - Staff Labor cost is lower in Vietnam than other major ASEAN countries (e.g. Indonesia, Philippines, Thailand, Malaysia) Source: Survey of Japanese Companies In Asia and Oceania, JETRO Note: Annual labor cost refers to average salary cost of employees (incl. base salary, allowances, social contributions, overtime, bonus etc., but excl. severance payment) actually born by the company in Year

11 3. Prospects of M&A between Vietnam and Japan 4 Number of Japanese companies entering ASEAN countries registered at the Japan Chambers of Commerce and Industry (as of June 2013) No. of Companies Vietnam is ranked 1 st in the number of new companies entering the country and 2 nd in the total number of companies among the ASEAN countries No. of New Companies Note: Number of the companies in Vietnam refers to the total number of firms in Ha Noi, Ho Chi Minh City, Da Nang registered at the Japan Chambers of Commerce and Industry Source: JETRO prepared from the data of each Chamber of Commerce and Industry 10

12 3. Prospects of M&A between Vietnam and Japan 5 Number of M&A Transactions between Vietnam and Japan by sector (2013) In 2013, M&A deals have been closed in 12 sectors/no more than 3 deals in one sector/spread in every sector Source: MARR Data (RECOF Data Corporation) Note: A year refers to a calendar year (Jan 1~Dec 31) 11

13 4. Hurdles and Solutions in M&A Transactions between Vietnam and Japan

14 4. Hurdles and Solutions in M&A Transactions between Vietnam and Japan 1 Hurdles in M&A Deals No. Stage of the Deal Examples of Hurdles Vietnamese Companies Japanese Companies Ⅰ ORIGINATION STAGE 1. Different style of managing deal information 2. Differences in the deal size and investment ratio Provide deal information to multiple advisors at the same time in order to make the transaction possible Deal sizes are usually small and structures of transactions are usually minority investment (Restriction on foreign investors also exists in various industries) Focus on reliable deal information Prefer relatively large deals and majority investment 3. Work speed that does not match Seek for judgment and commitment from the potential investors with less information disclosure Seek from the beginning the accuracy and quantity of information Ⅱ DUE DILIGENCE STAGE 1. Differences in compliance to the regulations Incompliance to legal, financial or tax regulations could be seen during the transaction from time to time 2. Insufficiency or Insufficiency, incompleteness or incompleteness of duplication of the information disclosure information disclosure could be found from time to time Requirement for being fully compliant to the regulations is strict (particularly for listed companies) Thorough investigation is required for internal approval process and report to shareholders (particularly for listed companies) Ⅲ EXECUTION STAGE 1. Differences in negotiation method 2. Differences in perceptions of evaluation methods Changes in contents of the agreement occurring often Too high expectation on the value which is difficult to be explained by standard valuation methods Less flexibility (once decided, it is difficult to change) Seek evaluation based on the market prices 13

15 4. Hurdles and Solutions in M&A Transactions between Vietnam and Japan 2 Solution to Overcome the Hurdles in M&A Deals Advices to Vietnamese Companies (1) To be patient and don t approach the same Japanese investors through multiple advisors (2) To provide precise information to the Japanese investors during the early stage (3) To hire a qualified Financial Advisor that understands the difference in business styles and customs between Vietnamese and Japanese companies and can follow up both sides closely (4) To understand that price is not everything in M&A transactions Advices to Japanese Companies (1) To understand thoroughly that they can obtain a growing market outside their home country and reasonable premium on the price is necessary (2) To understand the existence of competition with other investors (e.g. from ASEAN countries in addition to China and Korea) (3) To understand the difference in negotiation method (Japanese method is not always applicable in Vietnam) (4) Not to wait until receiving complete information and to make preliminary judgment as early as possible It will be important to recognize that a clear gap exists between the two countries and to do their best to reach a mutual understanding in each step of the deals 14

16 5. Prospects for The Second Wave of M&A (Privatization of SOEs)

17 5. Prospects for The Second Wave of M&A (Privatization of SOEs) Expectations of Japanese Companies (1) Relatively large-scale deals (e.g. companies with high market shares in the key industries) (2) Opportunities to enter into the industries that has been difficult to enter so far (3) Companies with relatively high quality in terms of management and internal control could be available (4) In case of the investment in majority or substantial minority shares, opportunities to build up long-term and strategic relationships with Vietnamese companies Attentions required on the Vietnamese side (1) Necessity of centralizing the management of the transaction process (2) Fairness of the transaction process (including scheduling) (3) Realistic expectations of the values to be brought by the Japanese partners (4) Necessity to disclose information thoroughly before the LOI (5) Potential problems in the compliance By the Vietnamese side to recognize the above issues, Japanese companies may welcome The Second Wave of M&A (privatization of SOEs) 16

18 RECOF Vietnam Team Contacts Address: Kojimachi Diamond Building Kojimachi, Chiyoda-ku, Tokyo , Japan Tel: RECOF Vietnam Team Direct Masataka Sam Yoshida Tamotsu Majima Tran Hoai Vu Kei Ogasawara Toru Sakurada Ying Wang Tatsunori Ito 17 17

19 Thank you 18 18

20 Disclaimer This material is prepared by RECOF Corporation for the purpose of furnishing information only. This material is not intended to recommend or solicit any particular transaction. Any information contained in this material shall be used at your own discretion and risk. RECOF Corporation will not be subject to any liability for any consequence caused by your reliance on the information contained in this material. This material may be changed without any prior notice. Subject matter of this material may significantly change according to any changes in the situation or effects of additional information after its preparation. However, RECOF Corporation shall undertake no obligation to update, revise or complement this material according to such changes. While this material is prepared based on public information and other information RECOF Corporation duly obtained, RECOF Corporation has not independently verified its accuracy, completeness, or suitability for your purpose, and will not make any warranties thereto. RECOF Corporation reserves the copyright of this material. This material is protected by the copyright laws of Japan and other countries, as well as treaties regarding copyrights between Japan and other countries. For any purpose whatsoever, you may not duplicate, summarize, quote, or reprint this material, or disclose it to a third party without RECOF Corporation s prior consent. The calligraphic characters M and A depict the top of mountains, which symbolize RECOF s belief that our ultimate goal is to create new value for our clients through M&A. New value creation should be the paramount goal for our clients and requires incessant hard work with strong inner strength and careful consideration of the harmony of the people, which has been highly treasured by Japanese corporations