VietNamNet Bridge – After the smooth merger of Habubank into SHB, bankers seem to think that merger and acquisition (M&A) should be the top priority choice in their struggle to survive. However, there always exist the obstacles.

The golden time for M&A

In late October 2012, To Duy Lam, Director of the HCM City Branch of the State Bank of Vietnam, informed that the central bank gave the nod to the merger of Dai A Bank and HD Bank.

The information immediately caught the special attention from the public, because both of them are not the subjects for compulsory restructuring. At this moment, the banks that the State Bank requests to undergo a compulsory restructuring are understood as the “problematic banks.”

Most recently, when asked about the possibility of merging Sacombank and Eximbank, Pham Huu Phu, the new President of Sacombank, noted that “this is a good idea.”

After the merger deal of SHB and Habubank, Dong A Bank, one of the most well-known joint stock banks, has also sent a message that it is preparing for a restructure campaign through M&A.

President of Dong A Bank Tran Phuong Binh said the State Bank’s policies and the current finance and banking conditions now pave the way for the banks with strong inner strength to speed up their development by merging with other banks.

The M&A would create the new banks which can have the combined advantages of the involved parties in terms of client sources, transaction network and distribution channels. Besides, this would also allow banks to cut down expenses to obtain higher profits.

Besides the above said banks, which have made public about their M&A plans, other banks are preparing for M&A deals quietly because they don’t want to be disturbed by the media.

The barriers

There are at least three big obstacles that banks would have to overcome to have successful M&A deals.

Firstly, it is very difficult for banks to seek suitable partners to merge. Most joint stock banks plan to develop as retail banks. As such, banks would have to spend time and efforts to find out the differences in the same retail segment. Meanwhile, they have too many problems to deal with when governing the credit institutions in larger scale.

The bank development strategy for the post-M&A period would be the decisive factor that strengthen the determination of the boards of directors and persuade shareholders to agree on the merger plan.

Secondly, the involved parties would have to think about the reasonable share exchange rates in order to ensure the shareholders’ benefits, especially the banks which still have not listed shares on the bourse.

If the problem cannot be settled well, this would ignite an underground war among the shareholders later. It would also be a big challenge to “integrate” the two systems, including the labor apparatus, procedures, business culture harmonization and treatment to the officers.

Thirdly, the readiness of the involved parties would decide if the M&A deals can succeed. No one would be able easily to “cast off the past,” and they may hesitate to implement the M&A, even though the M&A procedures have been clearly stipulated in the Circular 13 guiding the merger.

Regarding the merger of SHB and Habubank, economists say this is a typical story about the success of M&A deals.

A finance expert said that SHB, the new bank after the merger, has made a wise decision in dealing with the bad debts at Bianfishco, paper and cashew companies. The debtors, in the long term, would be the loyal clients of SHB.

Tri Nhan