Under the current Competition Law, an M&A
transaction needs to be notified to the competent authority if
the concerned parties' combined market share reaches between
30% and 50%. However, the new Competition Law which will take
effect from July 1 2019 prescribes the value of the M&A
transaction as a trigger of the merger filing requirement.
The new law allows the government to set the specific amount
of the triggering value. In the most recent draft of the
governmental decree, a contemplated merger, acquisition or
joint venture whose value is VND 500 billion (approx. $21.7
million) or more will need to be notified to the National
Competition Commission and may only proceed after getting the
green light from this authority.
This value-based approach allows the parties concerned to
easily determine whether they should wait for antitrust
clearance, which may take up to five months depending on the
complexity of the case, before moving ahead with the closing.
However, if the threshold value is as low as the amount
specified in the draft, it will definitely delay high value
transactions, as deals valued at hundreds of millions of
dollars are no longer rare in Vietnam.
The new rule should worry investors seeking to acquire big
stakes in Vietnam-based companies, especially by taking part in
the privatisation of state-owned conglomerates. In general,
shares divested by the state must be sold via auction. It may
not be cost-efficient for the investors to obtain antitrust
clearance without being assured that they will win the auction.
On the other hand, the current legal framework is not designed
to have the closing of the auction sale conditional upon the
antitrust clearance. Splitting the sale into multiple tranches
would not be an option that the government will be willing to
take as only a share sale in bulk may deliver high return.
Obviously, the value of the deal does not decide the
post-closing market share or power of the involved companies.
What the government can do now is set a very high value
threshold though this may undermine the purpose of the new law.
At a recent public conference discussing the new law, the above
concerns were raised to the government's representatives who
promised to take them into consideration when finalising the
draft decree.
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Tran Duy |