Small businesses and the acquisition trend of the 'big guys'

(Baonghean) - Nghe An has about 15,000 enterprises, most of which are small and medium-sized enterprises. Among them, many small-scale enterprises are in a state of limited operation and are facing a harsh reality: Larger enterprises are buying and merging other enterprises into a single owner to become stronger, have more potential and return to compete with enterprises in the same industry.

Vibrant Reality

The reality of business acquisition is quite common in the world, in the country and is increasingly "hot" in Nghe An. For example, the Plant Seed Joint Stock Company is a state-owned enterprise that, after equitization, is still operating with difficulties and losses; 51% of state capital seems to still be an obstacle to the development orientation of the unit. With a cumbersome apparatus and poor competition, this enterprise is under pressure from many stronger competitors from other localities. Given that reality, divesting 100% of state capital in this unit is necessary and the Agricultural Materials Joint Stock Company is the unit that has purchased 100% of the capital of the Plant Seed Joint Stock Company.

Nghe Tinh Port was purchased by Tuan Loc Group and became a strategic shareholder. Photo: Chau Lan

After purchasing 100% of state capital, the Chairman of the Board of Directors of Nghe An Agricultural Materials Joint Stock Corporation brought all the personnel and apparatus of the Plant Seed Joint Stock Company to operate with the parent company; the headquarters and land of the Plant Seed Joint Stock Company are planned to be used for real estate projects. The interruption of sales before the 2017 spring crop season has made Nghe An Agricultural Materials Joint Stock Corporation reap a bumper harvest from selling seeds, acquiring all rice seed sales activities into one company, starting to dominate the rice seed market in Nghe An with hundreds of orders in the province.

Mr. Truong Van Hien - Chairman of the Board of Directors of Nghe An Agricultural Materials Joint Stock Corporation said: We bought state capital from Nghe An Seed Company for more than 10 billion VND, then increased the capital for this company 5 times to about 50 billion VND and still operate in seed.

Currently, Nghe An Agricultural Materials Joint Stock Corporation, with its tendency to buy and sell enterprises, has 18 enterprises in its hands, including 13 companies in the same districts (Nam Dan, Do Luong, Thanh Chuong, Tan Ky, Anh Son, Con Cuong, Tuong Duong, Nghia Dan, Phu Quy, Yen Thanh, Quy Chau, Quynh Luu, Nghi Loc). In addition, there are Ha Nam Food Materials Company, Petroleum Minerals Joint Stock Company, Dak Lak Food Materials Company, Groundwater Exploitation Company of Region 2 in Ho Chi Minh City...

In other enterprises in the construction industry, the buying and selling is also taking place fiercely. Vinaconex 16 Company is currently selling to Vinh Golden Gate Company Limited (Vuvuzela) to make a commercial center for 25 billion VND. Tecco Company also acquired Irrigation Construction Joint Stock Company 24; Tuan Loc Group - a major investor that has been implementing a number of important infrastructure investment projects in the province has now purchased shares of Traffic Construction Corporation 4 and Nghe Tinh Port to become the controlling shareholder. In the industrial sector, Song Con Sugarcane is emerging by becoming a strategic shareholder of Nghe An Water Supply Company; Cua Lo Water Supply Company, TH True Milk has acquired Nghe An Tate & Lyle Sugarcane Company; meanwhile, Nghe An Tea Development Investment Company is looking for a new partner...

Purification trend

It is easy to see that if the purchase is made at the right time, in the right industry, in the right profession, the buyer has the ability to assess the financial situation of the business, evaluate the future prospects of the business, and the output of the business's products, then most businesses that merge and buy will "do well", have stronger potential, higher bidding capacity, and better business records. After buying, selling, and merging, the apparatus is streamlined, the new business is given a new breath of life, and the apparatus is able to promote its creativity in front of the new owners.

Vuvuzela has acquired the prime location of Vinaconex 16. Photo: Chau Lan

The purchase and sale of enterprises also promotes enterprise restructuring - a major policy of the Party and the State; in which state-owned enterprises and enterprises with remaining state capital will be a "lively" market for business purchase and sale. Currently, state-owned enterprises are divesting capital according to the mechanism prescribed in Decree No. 71/2013/ND-CP dated July 11, 2013 of the Government on state capital investment in enterprises and financial management of enterprises in which the State holds 100% of charter capital.

In addition, to remove the limitations and obstacles that slow down the progress of state capital divestment in enterprises, the Government issued Resolution 15/NQ-CP dated March 6, 2014 on a number of solutions to promote equitization and state capital divestment in enterprises and Decision 51/2014/QD-TTg dated September 15, 2014 stipulating a number of contents on capital divestment, sale of shares and registration of transactions and listing on the stock market of state-owned enterprises, thereby accelerating the progress of capital divestment of state-owned corporations and groups. In addition, successful enterprises also have the opportunity to sell their enterprises to large foreign enterprises and groups, earn large profits and continue their investment journey...

However, the agencies implementing the divestment of state capital also need to avoid selling off state capital at a low price. The auction in the market needs to be transparent and avoid formalities, legalizing the interests of investors. In addition, local authorities also need to provide stronger support for small and medium enterprises./.

Pearl