Wednesday, October 01, 2008

Lots of SMEs for sale in Vietnam

18:57' 30/09/2008 (GMT+7)

VietNamNet Bridge – TigerInvest, a merger and acquisition (M&A) brokerage company, said it has received 670 offers to sell businesses so far this year, while the figure was just 300 last year.

 

According to TigerInvest, it seems that more and more business owners want to sell the businesses they took great pains to build up to foreign investors as they have become financially exhausted.

 

Two months ago, the director of a small private-owned business in the northern province of Hai Duong came to TigerInvest, offering to sell his business at VND70bil.

 

The workshop could not become operational after the construction finished earlier this year, as the company could not borrow money from banks to purchase input materials.

 

The director was not the only client of TigerInvest. Prior to that, another director came with the same offer. He wanted to sell his workshop, equipment and business after injecting in VND25bil he borrowed from friends and banks. If a bank had foreclosed on the workshop he would have become penniless and would not have had money to pay back his friends and relatives.

 

ICE, another business trade company, said that it receives 3-5 requests to bridge business sales and purchases a day.

 

The number of businesses trying to sell themselves seems to be increasing, though most of the cases will never be made public as per request of the sellers.

 

A lot of enterprises have been falling into financial difficulties in the last five months since the application of the tightened monetary policies.

 

Statistics from the State Bank of Vietnam show that the credit growth rate decreased sharply to 16.78% in mid September from the highest peak of 54% last year.

 

Pham Xuan Can, Director of TigerInvest, said that businesses’ profit must be as high as 40% to be high enough to bear the lending interest rate of 21%.

 

“40% proves to be unfeasible. As a result, businesses dare not borrow money,” Can said.  “A lot of enterprises have to sell their businesses, or close their doors temporarily.”

 

Small- and medium-size enterprises, which account for 90% of the total 300,000 businesses in Vietnam, and provide jobs to 50% of the labour force, are suffering the most.

 

Cao Sy Kiem, Chairman of the Vietnam Association of Small- and Medium-size Enterprises, said that 20% of its members have reported they will halt or scale down production due to capital shortages.

 

Kiem’s words have been proved by an independent survey conducted by the Vietnam Chamber of Commerce and Industry recently, which showed that most businesses find it difficult to borrow money from banks.

 

Nearly 30% said that they could borrow 25% of the capital needed, 33% said that they could borrow 50%, 26% said they could borrow 75%, and only 10% said they could borrow all of the money they wanted.