VIETNAM N ATIO NAL UNIVERSITY, HANOI S C H O O L OF BUSINESS Vu Minh Tuan M&A: ONE SOLUTION TO GROWTH OF SMEs - THE CASE OF GATEWAY SECURITIES AND MORGAN STANLEY SINGAPORE Major: Business Administration Code: 05 MASTER OF BUSINESS ADMINISTRATION THESIS Supervisors: Dr Ta Ngoc Cau ĐAI H Ọ C Q U Ố C GIA HA NỘI T R U N G Ĩ Ã M T H C ' N G TIN THƯ V I Ệ N I A - l / 65 f Hanoi - 2010 TABLE OF CONTENTS C ON TE N TS Pages ACKNOWLEDGEMENT i A BSTRACT ii TÓM TẮT iv TABLE OF CONTENTS vi A BBREVIATIONS ix LIST OF FIGURES X INTRODUCTION 1 Necessity o f the Thesis Research Purpose Research Scope Methodology Contribution o f the Thesis C H A P T E R - L IT E R A T U R E R EV IEW 1.1 G E N E R A L C O N C E P T O F M E R G E S A N D A C Q U IS IT IO N S 1.1.1 Mergers and Acquisitions Definitions 1.1.2 About Synergy 1.1.3 Typ es o f Mergers and Acquisitions 1.1.4 How to perform M erg ers and Acquisitions transaction 1.1.5 O verview abou t M er g er s and Acquisitions transactions 11 1.2 M E R G E R S A N D A C Q U I S I T I O N S M O T I V A T I O N FOR 15 SMEs 1.2.1 Small and M ediu m Enterprises (SM Es) definitions 15 1.2.2 Enterprise growth strategy and methodology 15 1.2.3 Problem s o f SM Es 16 1.2.3.1 Problem within SM E s 16 1.2.3.2 Problems associated with financial institutions 17 1.2.3.3 Limitations associated with financial policy 17 1.2.4 Mergers and Acqu isitions motivation for SMEs 18 CHAPTER - THE CASE OF G A T E W A Y SECURITIES 21 AND M ORGAN STANLEY SINGAPORE 2.1 I N T R O D U C T I O N S A B O U T S E C U R I T I E S IN D U S T R Y AN D 21 G A T E W A Y S E C U R I T I E S J S C (2007) 2.1.1 Vietnam E om y 21 2.1.2 Introduction o f Vietnam Securities Industry 23 2.1.3 G atew a y Securities Introduction 25 2.2 M & A A N D T H E C H O I C E O F G A T E W A Y S E C U R I T I E S ’S 28 STRATEGY TO DEVELOP 2.2.1 External and Internal analysis in Securities Industry to 28 define Opp ortu nities and Threats 28 2.2.1.1 External Analysis in Securities Industry 2.2.1.2 Internal Analysis in Securities Industry - Five 37 Forces model 2.2.2 Value chain analysis for G a t e w a y Securities 46 2.2.3 Sum m arization 54 2.2.4 Mergers & Acqu isitions - The choice o f G atew ay Securities 2.2.4.1 M o rg an Stanley Singapore Introduction 2.2.4.2 T h e Merger s 56 & Acqu isitions Transaction CHAPTER - EVALUATE THE RESULT OF MERGER 56 & 58 vu ACQUISITION TRANSACTION 3.1 Strategy o f Morgan Stan ley/Gateway Securities - effects to 58 o perating fields 3.1.1 Strategy o f M organ Stanley/Gateway Securities 58 3.1.2 Effects to operating fields 59 3.1.3 Ev aluation key success factors o f Morgan Stanley/Gateway Securities 3.1.3.1 Strength o f Morgan Stanley as a Leading 61 Investment Bank and Securities Firm in the World 3.1.3.2 Key success factors o f Morgan Stanley/Gate way in comparison with 64 other company 66 3.2 Analysis financial performance R EC O M M ENDATIO N AND CONCLUSION 71 REFERENCES 72 V I 11 ABBREVIATIONS For the purpose o f this thesis, the following abbreviations apply: M&A : Mergers and Acquisitions SMEs : Small and Medium Enterprises FDI : Foreign Direct Investment SOEs : State Owners Enterprises I IoSTC : Hochiminh Securities Trading Center HaSTC : Hanoi Securities Trading Center LIST OF FIGURES Names Figure 1.1: M&A Process Figure 1.2: Strategic Planning and Organization Figure 1.3: Identifying the Targets process Figure 1.4: Negotiating a Definitive Agreement process Figure 1.5: M &A transactions in the world Figure 1.6: M&A Supplier - follow industry (up to Q l-2008) Figure 1.7: M &A transactions in Vietnam industries (%) Figure 1.8: Typical M&A transactions in Vietnam Figure 2.1 : Asean Economic Statistics —2007 Figure 2.2: Vietnam’s GDP by sector Figure 2.3: Top subscribers holder Figure 2.4: Top trading volume implementer Figure 2.5 : Gateway Securities Structure Figure 2.6: GDP and real GDP Growth rates o f Vietnam Figure 2.7: Annual inflation rate o f Vietnam Figure 2.8: Saving rate comparing with real GDP Figure 2.9: FDI in Vietnam Overview Figure 2.10: Market capitalization o f Vietnam Figure 2.1 1: SOE reforms are strengthening the private sector Figure 2.12: Number o f registered trading account Figure 2.13: Some typical securities firms Figure 2.14: Increasing in number o f companies Figure 2.15: Formal markets - trading overview Figure 2.16: fixed cost in comparison with other competitors 39 Figure 2.1 7: human resources demand o f hot field for Q4/2007 41 Figure 2.1 8: human resources supply o f hot field for 04/2007 42 Figure 2.19: Requirement capital according to Securities Law 44 Figure 2.20: Services providers’ comparison 46 Figure 2.21: 2007 - Securities companies ranged by Chartered Cap 47 Figure 2.22: 2007 - Revenues from operation activities in VND mill 51 Figure 2.23: Compare G atew ay’s activities with competitors 54 Figure 2.24: M&A Transaction history' 57 Figure 2.25: Capital Structure o f new company - Morgan 57 Stanley/Gateway Securities Figure 3.1 : capacities o f new company compare with other providers 66 Figure 3.2: Morgan Stanley/Gateway Income Statement 67 Figure 3.3: Financial Performance within industry on 2008 69 Figure 3.4: Financial Performance within industry on 2007 70 XI IN TR O D U C TIO N Necessity o f the Thesis Vietnam Economy as other emerging economies has transformed in two decades o f rapid It has opened its door to the outside world and liberalized its economy There emerge high competition within industry, between domestic enterprises and foreign enterprises How to win in competition, to exist and develop in the high competitive environment as Vietnam? This is the problems with every Vietnamese firms, especially with Small and Medium Enterprises, who lack o f capitals, resources, technologies in compared not only with bigger domestic but also with foreigner companies, that are strongly penetrating into Vietnam economy My thesis will analyze the case o f Morgan Stanley/Gateway Securities JSC, the mergers and acquisitions transaction result between Morgan Stanley Singapore - one official member o f Morgan Stanley and Gateway Securities one mall securities enterprise, to explain why Gateway has chosen mergers and acquisitions as their way to growth and comment how this strategy affected on it Research Purpose This thesis based on the strengths and weakness, the opportunities and threats that Gateway have to face, to find that mergers and acquisitions is one o f good ways to implement their problem in operation in a emerging and high completion market like securities industry o f Vietnam My analysis o f Morgan Stanley/Gateway Securities JSC leads me to the conclusion that with a small and medium company in emerging market like Vietnam, mergers and acquisitions is the good choice to help company growth by taken full advantages o f one bigger company that have strong resources I Research Scope Thesis only centers to analyze the existed problems o f Gateway Securities JSC as the reason lead the managers o f company choose mergers and acquisitions as a way to develop and growth in competitive environment o f industry, economy and results after followed this way Methodology The methodology will be base on by collecting data as: statements, reports from newspapers, magazines, and announcements o f companies and other state departments like General Statistic Office or State Securities Commission and Ministry o f Finance , reviewing all the studies related to competitive strategies Contribution o f the Thesis The student hopes this thesis will contribute one significant thing to other students who are interested in researching on the competitive strategy in future and choice one suitable strategy for company C H A P T E R - L IT E R A T U R E REVIEW 1.1 G E N E R A L C O N C E P T O F M E R G E S AND A C Q U IS IT IO N S 1.1.1 M ergers and Acquisitions Definitions Mergers & acquisitions (M &A) refers to the management, financing, and strategy involved with buying, selling, and combining companies, they are one o f the popular topics in business today [Michael E.S.Frankel, 2007] Mergers & acquisitions is a commonly used term however its meaning can vary depending on the context Often the term are incorrectly used unchangeable or the group name M &A is used The key principle is to create shareholder value over and above that o f the sum o f the two companies Two companies together are more valuable than two separate companies - at least, that's the reasoning behind M&A This rationale is particularly alluring to companies when times are tough Strong companies will act to buy other companies to create a more competitive, cost-efficient company The companies will come together hoping to gain a greater market share or to achieve greater efficiency Because o f these potential benefits, target companies will often agree to be purchased when they know they cannot survive alone Distinction between Mergers and Acquisitions Mergers A merger takes place when two or more firms combine to form a single enterprise, owned by a single set o f stockholders to a single management staff Mergers are classified according to how the merger takes place, the m anagem ent’s attitudes toward the merger and relationships between the Become a leader in technology applying T o t a k e till I a d v a n t a g e s o f m o d e r n t e c h n o l o g y t h a t u s e d b y M o r g a n S t a n l e y , a p p ly to V ie tn a m m a rk e t 3.1.2 Effects to operating fields Brokerage and Principal Investment activities C onsolidate m anagem ent and w o rk ing ability by ap p ly in g intern atio n al standard o f M o rg a n S tan ley sh o w n by: • C lear/tran sp aren t p ro ce d u re/p o licies: u n ited w ith the B ro k e g e s y s te m o f M o r g a n S tan ley • S tro n g c o m p lian c e p rocedure • G o v e r n m e n t b o n d p rim a ry d e a le r as a o n ly a n d leg al r e p re s e n ta tiv e o f f i c e o f M o r g a n S t a n l e y in V i e t n a m • G o od brand nam e C o n t i n u o u s l y d e v e l o p a n d i m p r o v e b r o k e r a g e o p e r a t i o n in: • T arg et C lien ts: high net w o rth indiv idual and institutional clients, esp ec ially w ith b ig institutional fo reig n clien ts w h o are alre a d y a c u s to m e r o f M o rg a n S tan ley • P r o d u c t s & S e r v i c e s : I n t r o d u c e p r o d u c t s a n d s e r v i c e s th a t a r e in lin e w ith the m a rk e t p ractice an d satisfy the d e m a n d s o f targ et clien ts su c h as R ep o , M arg in trading , S ecu rities m o rtg a g e • T e c h n o lo g y : c o re s y s te m u p g r a d e a n d fu rth e r c h a n g e s to q u a lify w ith H an o i S tock E x c h a n g e (H N X ), H o c h im in h C ity S to c k E x c h a n g e (H O S E ), V ie tn a m S ecu rities D e p o sito ry (V S D ), a n d S tate S ecu rities C o m m is s io n (S S C ) req u irem en ts 59 • M arketin g & PR A ctivities: d evelop this field in V ietn am , in i n t e r n a t i o n a l s c o p e ; t h is a c t i v i t y is s t r o n g l y s u p p o r t b y M o r g a n S t a n l e y a s a n official m e m b e r o f g ro u p Investment Banking and Advisory activities T h i s is a o p e r a t i o n f i e l d t h a t h a v e a lo t c h a n g e s a f t e r M & A w i t h M o r g a n S ta n le y S in g ap o re, n early o n e y e a r after M & A , Investm ent B an k in g and A d v i s o r y a c tiv itie s g a in s o m e r e s u lt f r o m n o t h i n g in th e p r e v i o u s p e r i o d , sh o w n by: • W o r k e d a n d c o n tr ib u te d s ig n ific a n tly o n s o m e ty p ic a l c o n tra c t like: - P etro v ietn am In su ran ce JS C (P V I) bidd ing - P roject E cho - P otential S in g T el m a n d a te - S o u rced P etro leu m T ech n ical S ervices C o rp o ratio n (P T S C ), T a n T a o In v e s tm e n t In d u stry C o rp o tio n (IT A ), a n d o th e r p o ten tial tran sactio n s • A ssisted M o rg a n S tan ley IB tea m d e v elo p in g a n u m b e r o f indu stry c o v e r a g e (i.e te l e c o m , s te e l, re ta ilin g , re a l e s ta te , ta x i, b a n k i n g a n d i n s u r a n c e ) • E sta b lish ed w o rk in g relatio n sh ip w ith d ifferen t M o rg a n S tan ley in d u stry groups • V isite d b ig a n d p o ten tial c o m p a n ie s an d in c re a se d visibility for M S G S b n d n a m e locally - P r o d u c e call re p o rts a fte r e v e r y m e e tin g M ain tain relatio n sh ip s w ith the lead in g co m p an ies for p otential c o o p e r a t i o n in t h e f u t u r e ( E V N , E V N T e l e c o m , H a n o i T e l e c o m F P T , H o a P h a t G roup, PV Tex D in h Vu, P etroV ietN am 60 D rilling an d W ell S ervices JS C (P V D ), V ietn am D ataco m m u n icatio n C o m p a n y (V D C ), M obifon e, V in ap h o n e, V ie tte l,, Jaccar, In tim e x ) • P a r t i c i p a t e d in s e v e r a l d o m e s t i c a n d i n t e r n a t i o n a l c o n f e r e n c e s to e x p a n d netw o rk s • P ro d u c e d in d u stry rep o rts for th e fo cu sed industries: T e le c o m , L o g istics, C om m od ities, Foods and B everages, Real E states, and H ouseho ld and P ersonal C are 3.1.3 Evaluation key success factors of Morgan Stanley/Gateway Securities 3.1.3.1 Strength of Morgan Stanley as a Leading Investment Bank and Securities Firm in the World T o d a y , M o r g a n S t a n l e y is a g l o b a l f i n a n c i a l s e r v i c e s p r o v i d e r , h e a d q u a r t e r e d in N e w Y o r k C i t y , N e w Y o r k , U n i t e d S t a t e s ; o t h e r m a i n lo c a l o f f i c e s a t L o n Don and Hong gov ern m en ts, Kong financial It serves a institutions, a n d diversified group indiv iduals of M organ co rpo rations, S tan ley also o p e r a t e s in c o u n t r i e s a r o u n d t h e w o r l d , w i t h o v e r 0 o f f i c e s a n d a w o rk fo rc e o f o v e r ,0 0 In th e w h o l e w o r l d , t h e y p r o v i d e all s e r v i c e a s S e c u r i t i e s F i r m a n d I n v e s t m e n t B a n k a n d locally m a n a g e th eir o p eratio n s, in clu d in g : - S ales a n d T rad in g : d istrib u tio n an d trad in g o f eq uity, eq u ity -lin k ed a n d e q u ity -d e riv a tiv e securities - In v e s tm e n t B a n k in g : M o rg a n S tan ley co n siste n tly n k s a m o n g th e top firm s in m e r g e r s a n d a c q u i s i t i o n s , e q u i t y u n d e r w r i t i n g a n d d e b t f i n a n c i n g s - In v e s tm e n t M a n a g e r: striv es to p ro v id e o u ts ta n d in g lo n g -te rm in v e stm e n t p e rfo rm a n c e an d b est-in -class service to a d iv e rse client base, w h ic h in c lu d es g o v e rn m e n ts , institu tio n s, c o rp o tio n s a n d in d iv id u a ls w o rld w id e 61 - B ro k e g e : for m o r e th a n y e a rs, M o r g a n S ta n le y h a s led th e in d u s tr y an d s e t t h e s t a n d a r d fo r e x c e l l e n c e in p r i m e b r o k e r a g e T h e i r la r g e m a r k e t s h a r e n o t o n ly testifies to th e v a lu e th e y p ro v id e - B e s i d e th a t, M o r g a n S t a n l e y a ls o p r o v i d e s e r v ic e fo r in d iv id u a l c u s t o m e r like: co nsu ltant, planning, provid e in v estm en t pro d u cts, and m anage personal accoun ts In 0 , M o r g a n S t a n l e y is a l e a d i n g g l o b a l f i n a n c i a l s e r v i c e s f i r m p r o v i d i n g a w id e n g e o f in v e stm e n t b a n k in g , securities, in v e stm e n t m a n a g e m e n t and w e a lth m a n a g e m e n t se rv ic e s w ith total net re v e n u e o f $ b illio n s , s o m e i n f o r m a t i o n a b o u t th e ir b u s i n e s s in 0 : • I n v e s tm e n t B a n k i n g r e v e n u e s in c r e a s e d 31 p e r c e n t f r o m last y e a r to a re c o rd $ 5 billion A d v is o ry re v e n u e s w e re a re c o rd $ b illio n , u p 45 p e rc e n t f ro m last y e a r, a n d u n d e r w r itin g r e v e n u e s in c re a s e d 21 p e rc e n t to a r e c o r d $ b illio n M o r g a n S t a n l e y r a n k e d #1 in G l o b a l C o m p l e t e d M & A a n d # in G l o b a l A n n o u n c e d M & A • E q u i t y s a l e s a n d t r a d i n g d e l i v e r e d its b e s t f u l l - y e a r r e s u l t s e v e r , w i t h n e t re v e n u e s for th e y e a r in c re a sin g p e rc e n t to a re c o rd $ b illion T h is r e f le c te d r e c o r d r e s u lts in b o t h d e r i v a t i v e s a n d p r i m e b r o k e r a g e , d r i v e n in p a r t b y o u r c o n t i n u e d i n v e s t m e n t in t h e s e b u s i n e s s e s E q u i t y u n d e rw ritin g re v e n u e s in c re a se d p e rc e n t to a re c o rd $ b illion • F i x e d i n c o m e s a le s a n d t r a d i n g a c h i e v e d r e c o r d r e s u lts in i n t e r e s t te & c u r r e n c y p r o d u c ts , u p p e r c e n t fro m last y e a r, a n d th e ir s e c o n d b e st y e a r e v e r in c o m m o d i t i e s F i x e d i n c o m e u n d e r w r i t i n g r e v e n u e s o f $ billion w e re a record • G lo b al W ealth M a n a g e m e n t net re v e n u e s w e re $ 6 billion an d p re-tax in c o m e w a s $ billio n , a 127 p e rc e n t in c re a se fro m 0 P re-tax m a r g i n f o r th e y e a r a n d t h e f o u r t h q u a r t e r o f 17 p e r c e n t a n d 21 p e r c e n t, resp ectiv ely , w e re th e h ig h est an n u al an d q u a rte rly m a rg in s sin ce 0 T h is b u sin e ss also a c h ie v e d re c o rd a n n u a liz e d p ro d u c tiv ity p e r g lo b al r e p r e s e n t a t i v e o f $ , 0 in t h e q u a r t e r w h i l e i n c r e a s i n g g l o b a l rep resen ta tiv es by p e rc e n t o v e r the past y e ar, a n d g e n e te d stro n g c lie n t in f lo w s o f $ b illio n in th e y e a r • A s s e t M a n a g e m e n t d e l i v e r e d its b e s t y e a r e v e r , w i t h a s s e t s u n d e r m a n a g e m e n t o f $ billion, u p $101 billion fro m a y e a r a g o , an d re c o rd net in flo w s o f $ b illio n for the y e a r c o m p a r e d w ith net o u tflo w s o f $9.3 b illio n a y e a r ag o P re -ta x in c o m e in c re a s e d 72 p e rc e n t to a re c o rd $1.5 billion • T h e F irm 's in te rn a tio n a l b u s in e s s e s a c h ie v e d re c o rd r e v e n u e s o f $ b illio n , u p 4 p e rc e n t fro m last y e a r, o n s tr o n g re s u lts a c ro s s E u r o p e , A sia an d th e e m e rg in g m a rk e ts D e s p i t e t h e c h a l l e n g i n g e n v i r o n m e n t in 0 - t h e w o r l d f i n a n c i a l r e c e s s i o n , M o r g a n S ta n le y d e liv e r e d th r e e s tra ig h t q u a r te r s o f p r o f ita b ility f o r th e first n in e m o n t h s o f th e y e a r a n d w a s p r o f ita b le fo r th e full y e a r w ith n e t i n c o m e o f $ b illio n a n d n e t r e v e n u e s o f $ b illio n T h e F i r m s t r e n g t h e n e d its c a p ita l p o s itio n - w ith a to ta l o f $ b illio n In m a i n o p e r a t i o n fie ld s, M o r g a n S ta n le y h a s s o m e results, in c lu d in g : • E q u ity sales an d tra d in g d e liv e re d reco rd n et r e v e n u e s o f $ 0 billion, a n i n c r e a s e o f 10 p e r c e n t f r o m la s t y e a r , r e f l e c t i n g r e c o r d r e s u l t s in d e r i v a t i v e s a n d s t r o n g re s u lts in th e c a s h b u s i n e s s e s • F ix e d in c o m e sales an d tra d in g net re v e n u e s o f $ b illio n in c lu d e d r e c o r d r e v e n u e s in c o m m o d i t i e s a n d f o r e i g n e x c h a n g e , o f f s e t b y l o w e r r e v e n u e s in o th e r in te re s t rate, c r e d it & c u r r e n c y p r o d u c t s ( I R C C ) a n d net m o r tg a g e relate d lo sses o f $ billion 63 • In v e s tm e n t b a n k in g d e liv e re d n e t re v e n u e s o f $ billion, d e sp ite th e c h a l l e n g i n g m a r k e t e n v i r o n m e n t , a n d a d v is e d o n s o m e o f th e y e a r's b ig g e s t tr a n s a c tio n s in c lu d in g th e y e a r's la rg e st a irlin e m e rg e r , la rg e st m e d ia tran sac tio n a n d sev eral o f the largest rights issu es b y financial in stitu tio n s • A s s e t M a n a g e m e n t e x p e rie n c e d a p re-tax loss o f $ billio n , d riv e n p r i m a r i l y b y m a r k d o w n s in p r in c ip a l i n v e s t m e n t s a n d l o w e r a s s e ts u n d e r m anagem ent • G lo b a l W e a lth M a n a g e m e n t G ro u p d e liv ered stro n g results an d g e n e te d return o n a v e g e c o m m o n eq u ity o f p e rc en t an d net n ew assets o f $ billion for the y e a r w ith a v e g e a n n u a liz e d re v e n u e p e r glo b al rep resen ta tiv e o f a p p ro x im a te ly $ ,0 0 3.1.3.2 Key success factors of Morgan Stanley/Gateway in comparison with other company A fter M &A, as a o fficial m em ber of M organ S tan ley, M organ S ta n le y /G a te w a y S e c u ritie s c re a te d tw o su sta in c o m p e titiv e a d v a n ta g e s , that c o s t l y to i m i t a t e w h e n th e c o m p e t e n c y is b e t t e r th a n c o m p e t i t o r s a n d a l s o th e c o m p e t i t o r c a n n o t c o p y o r d o t h e s a m e it i s l o n g r u n s t r e n g t h a n d w e b a s e o n t h i s t o e s t a b l i s h s t r a t e g y f o r t h e c o m p a n y a n d a l s o w e c a l l it k e y s u c c e s s f a c t o r , in cluding: Ability to attract foreign institutional clients, who already to be customers o f Morgan Stanley with huge capital In th is f a c t o r , p o t e n t i a l f o r e i g n institu tio n al clie n ts are a lre a d y clie n ts o f M o r g a n S t a n l e y in t h e w h o l e w o r l d 64 A s i n f o r m a t i o n a b o v e ; M o r g a n S t a n l e y o p e r a t e s in c o u n t r i e s a r o u n d t h e w o r l d w i t h n e t r e v e n u e s o f $ b i l l i o n s in 0 a n d $ b i l l i o n in 0 ; t h i s f i g u r e s s h o w n t h a t e v e r y y e a r , M o r g a n S t a n l e y f u l f i l l e d a t r i l l i o n s in to ta l t r a d i n g v a l u e in a r o u n d t h e w o r l d I f t h e c l i e n t s o f M o r g a n S t a n l e y w a n t to i n v e s t in V i e t n a m m a r k e t c a p ita l, t h e y w ill g iv e M o r g a n S ta n l e y / G a t e w a y S e c u ritie s a lot b e n e fit fro m the h u g e c a p ita l o f t h e ir t r a d i n g , th e i r i n v e s t m e n t in c o m p a r e w i t h th e m a x i m u m to ta l t r a d i n g v a l u e o f n e a r l y $ 0 m i l l i o n s e a c h d a y in m a i n c a p ita l m a r k e t s o f V ietnam W ith in S e c u ritie s In d u stry o f V ie tn a m , th e re are n o c o m p e tito rs , w h o h a v e the s a m e ab ility ''Ability' to jo in t international bidding (bond, stock, derivative) related to VVietnamese companies In this segm ent, just foreign Investm ent B an k in g dep artm en ts or r e p r e s e n t a t i v e s w h o a r e w o r k i n g in V i e t n a m t h a t h a v e p e r m i s s i o n t o fu lfill b id d in g s o r c o n s u lta n t c o n tra c ts M o r g a n S t a n l e y / G a t e w a y S e c u r itie s b e lo n g to th is s m a ll g r o u p , like: - M o rg a n S tan le y /G a te w a y S ecurities - JP M o rg a n V ietnam - C itiG roup - D eu tsch e B an k - O th e r rep resen tativ e office o f foreign In v e stm e n t B an k in g To co nclusion, F igu re 3.1 w ill show the ad v an tag es of M organ S t a n l e y / G a t e w a y in c o m p a r e w i t h o t h e r c o m p a n i e s t h a t p r o v i d i n g s e r v i c e s w ith th em : I Foreign Morgan Vietnam Stanley/Gate Securities Bank Restricted Activities /Company way Company Branch Jo in International b id d in g s P erm itted related to V ie tn a m e se A llo w ed w ith ap p ro v al A llo w ed c o m p a n y (both debt and o f lim itations eq u ity ) A lm o st n o n ­ D o m estic b idd ing A llo w ed A llo w ed o p erating P rin cip al In v e stm e n t A llo w ed A llo w ed A llo w ed A llo w ed A llo w ed O th e r profitable operatio n s p ro v id e d by securities D o not in d u stry (b ro k erag e, allo w ed u n d e rw ritin g ) Figure 3.1: capacities of new company compare w ith other providers 3.2 Analysis financial performance Content 2007 2008 T otal assets ,4 ,0 ,0 2 ,7 4 ,0 ,8 O w n e rs eq uity ,7 ,3 ,7 ,6 ,3 ,7 R e v e n u e s fro m eq u ity activities ,5 ,3 ,1 ,0 6 ,9 2 ,4 ,5 ,2 ,3 2 ,1 ,2 ,0 (VND) B rokerage revenues 66 P rincip al In v e stm e n t 1 ,4 ,0 ,1 ,1 ,0 Interest re v e n u e s ,2 ,6 ,0 9 ,1 ,2 ,0 7 O th e r activities ,3 ,3 ,5 ,5 ,2 ,1 In v e stm e n t activities ,5 ,2 T otal re v e n u e s ,5 ,3 ,1 ,1 ,4 ,6 (6 ,9 ,0 ,0 ) (1 ,3 ,6 4 ) ,6 ,3 ,1 3 ,8 ,7 ,2 5 (8 ,5 ,7 ,1 ) (2 ,5 ,1 ,0 ) ,1 ,5 ,9 ,2 ,6 ,2 ,4 ,9 4 ,8 ,3 ,1 ,9 ,8 ,3 ,4 7 ,5 7 ,3 ,1 ,0 ,4 ,9 Profit margin 4.33% 11.63% ROE 3.46% 1.64% ROA 1.21% 1.55% E q u ity activities e x p e n s e s G ro ss profit M anagem ent expenses P rofit fro m o p e tin g activ ities O th e r profit P rofit b e fo re ta x e s N e t profit Figure 3.2: Morgan Stanley/Gateway Income Statement Source: Financial statement 2007-2008 o f company 67 C om m ent: P ro fit m a rg in ratio in 0 is m o r e im press than 0 , alth o u g h other p r o f i t a b i l i t y r a t i o s lik e R O E , R O A is s m a l l e r t h a n 0 In 2008, M organ S tan ley /G atew ay S ecurities only in crease in interest r e v e n u e s , m a i n t a i n r e v e n u e s in b r o k e r a g e w h i l e r e d u c e r e v e n u e s in o t h e r o p e tin g fields D o n 't like o th e r se c u ritie s c o m p a n ie s , M o r g a n S ta n le y /G a te w a y d e c id e r e d u c e c a p i t a l i n v e s t m e n t in p r i n c i p a l i n v e s t m e n t a c t i v i t y in 0 , t h i s d e c i s i o n b a s e d o n a n a l y s i s o f m a r k e t t r e n d n o t o n l y in V i e t n a m b u t a l s o in w h o l e w o r l d T h i s d e c i s i o n o r i g i n a t e d in p o lic ie s o f M o r g a n S ta n le y th a t a p p l ie d in th e w h o l e w o r l d f o r e v e r y o f f ic e S o th a t, t h e f ir m n o t o n l y a v o i d lo s s in p r i n c i p a l i n v e s t m e n t a c t i v i t y b u t a l s o i n c r e a s e i t ’s p r o f i t f r o m o t h e r a c tiv itie s , e s p e c i a l l y in i n te r e s t f r o m d e p o s it B e c a u s e o f t h e w o r ld f i n a n c e r e c e s s i o n in 0 , a l m o s t f in a n c ia l o p e r a t i o n s a r e s t a g n a t e d in t h e w h o l e w o r l d , in b o t h i n d i v i d u a l a n d i n s t i t u t i o n a l c l i e n t s , s o M o r g a n S ta n le y also c o u ld n o t fulfills th e ir c o n trib u tio n p o lic ie s to M o rg a n S t a n l e y / G a t e w a y a s th e y w a n t in s o m e o p e r a t i o n s lik e: c r e a t i n g in s titu tio n a l clients service system in V ietn am (in clu d in g : in vestm ent co nsu ltant, b ro k e g e ) A fter w o rld finance system is recovered, w hen investo rs feel hig h ly e n t h u s i a s t i c in i n v e s t in m o r e p r o f i t a b l e a n d a l s o m o r e r i s k y m a r k e t l ik e V ie tn a m , effects o f M & A tran sac tio n s on M o rg a n S ta n le y /G a te w a y S ecurities w ill be clearly and show n by positive f i g u r e s in financial statem ent o f com pany B ut fin an cial results o f M o rg a n S t a n l e y / G a t e w a y S e c u r i t i e s in 0 w e r e s h o w n p o sitiv e effects o f th e tran sac tio n s, as p o sition o f th e c o m p a n y n k e d in F i g u r e 3 a n d : 68 Total revenue (fcill VND) Name Sai Gon Securities JSC Ho Chi Minh City Securities JSC PAT (bill VND) 1,135.99 250.157 231.374 23.543 107.696 10.54 Morgan Stanley/Gateway Securities JSC 43.191 5.023 Trang An Securities JSC 28.265 -19.368 Empower Securities JSC 13.227 -35.489 204.781 -86.167 Hai Phong Securities JSC 56.199 -119.801 Au Viet Securities Coiporation 47.977 -172.504 Kim Long Securities JSC 302.017 -347.443 Bao Viet Securities Company 162.841 -452.401 BIDV Securities Company 478.923 -554.088 Habubank Securities Limited Company Vndirect Securities JSC Figure 3.3: Financial Performance within industry on 2008 Source: 2008 Financial statements o f companies C o m p a r in g w ith th e fin a n c ia l p e r f o r m a n c e o f in d u s try o n 0 (in th e tab le below ), th ese financial results w ill show S t a n l e y / G a t e w a y s s e c u r i t i e s in o p e r a t i o n s 69 the d evelopm ent of M organ C h artered N ame PAT / Ow ner E st R even u e Cap PAT E q u ity R e v en u e 864.1 Sai Gon Securities JSC 1999 500 3.896.90 1,243.83 76 69.48% 126.2 Kim Long Securities JSC 2006 315 680.834 193.898 Bao Viet Securities C om pany 150 1.067.57 374.929 1lo Chi Minh City 91 57.24% 132.1 2003 394.63 1323.45 224.706 Au Viet Securities Corporation 65.11% 214.5 1999 Securities JSC 49 45 58.81% 67.76 2007 300 194.953 12.466 60.26% 95.87 Vndirect Securities JSC 2006 300 359.71 323.383 1lai Phong Securities JSC 29.65% 65.41 2003 239.4 384.657 125.16 BIDV Securities Company 52.27% 14.3 2000 200 274.287 306.146 37.34% 2006 161 132.231 1.418 1.096 9.60% Vietnam Securities Corporation 104.2 Habubank Securities Limited C om pany 2005 Trang An Securities JSC 150 171.884 425.965 61 24.48% 139 132.834 28.514 2.072 7.27% Em power Securities JSC 2007 135 99.622 10.846 0.1 11 1.02% Gateway Securities JSC 2006 20 20.717 16.582 0.717 4.32% Figure 3.4: Financial Performance within industry on 2007 Source: 2008 Financial statements o f companies 70 RECOM M ENDATION AND CONCLUSION T o b e c o m e w i n n e r in t h e c o m p e t i t i o n e n v i r o n m e n t o f V i e t n a m F i n a n c e a n d S e c u r i t i e s S e c t o r a re th e b i g p r o b l e m s o f all c o m p a n i e s w i t h i n ind u stry E sp ecially from w hen V ietnam becam e an official m e m b e r o f W T O J a n u a ry 0 , h igh c o m p e titio n p ressu re also c o m e fro m P' stro n g foreig n er co m petitor It m e a n s t h e y h a v e t o f o u n d t h e s u i t a b l e g r o w t h o r d e v e l o p m e n t s t r a t e g y t o f o l l o w F o r S m a l l a n d M e d i u m E n t e r p r i s e s , w i t h a la c k o f c a p ita l, h u m a n ’s r e s o u r c e s , b r a n c h , t e c h n o l o g y is v e ry h a r d to a n s w e r th is q u e s tio n These an aly ses in th is t h e s i s a c c o rd in g to strategic m a n a g e m e n t theory , s t r a t e g y f o r m u l a t i n g a n d b a s e d o n o n e re a l c a s e th a t h a p p e n e d in V i e t n a m : G a t e w a y S e c u ritie s h a d c h o s e n M & A w ith M o r g a n S ta n le y a s a s o lu tio n to im p le m e n t th eir g ro w th strategy R esult o f an aly sis sh o w s that, w ith SM Es in th e e m e r g i n g m arket like V ie tn a m , M & A c o u ld be c o n s id e re d as o n e o f g o o d so lu tio n s to h e lp th e m s u c c e e d in c o m p e t i n g a n d g r o w t h in t h e h i g h c o m p e t i t i o n e n v i r o n m e n t 71 REFERENCES Tiếng Viet B o c o t i c h í n h , B o c o t h n g n i ê n n ă m 0 - 0 c ủ a c c c ô n g ty C h ứ n g k h o n F r e d R D a v i d ( 0 ) , K h i l u ậ n v ề q u a n trị c h i ê n l ợ c , N X B T h ô n g k ê G a r r y D S m i t h e t al ( 9 ) , C h i ế n l ợ c v s c h l ợ c k i n h d o a n h , N X B T hống kê L u ậ t C h ứ n g k h o n s ố / 0 / Q H 11 n g y b a n h n h / / 0 c ủ a Q u ố c H ộ i, có h iệ u lự c n g y /0 /2 0 Các website: w v vw m o f.tio v v n w w w g so g o v v n w w w ssc.g o v v n w w w n io rg an stan lev co m Tiếntĩ Anh A l d a g S t e a m s ( 9 ) , Management, s e c o n d e d i t i o n B r e a ỉe y , R ichard A & S tew art c M yers (1988), Principles o f C orporate Finance , M c G r a w H i l l B o o k C o m p a n y C h i u , x c Industrial Structure, M&A, and Corporate Value - the case o f Taiwan 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Vietnam economy My thesis will analyze the case o f Morgan Stanley /Gateway Securities JSC, the mergers and acquisitions transaction result between Morgan Stanley Singapore - one official member... but the owner o f the target company cannot replace them, M& A enables the target company to replace their inefficient managers 20 CHAPTER - THE CASE OF GATEWAY SECURITIES AND MORGAN STANLEY SINGAPORE. .. a emerging and high completion market like securities industry o f Vietnam My analysis o f Morgan Stanley /Gateway Securities JSC leads me to the conclusion that with a small and medium company