Experts introduce model for boosting acquisitions abroad

Tuesday, May 27, 2008
The State Securities Commission (SSC) yesterday joined forces with three US-based financial institutions to introduce Vietnamese enterprises to a model for raising capital and engaging in acquisitions overseas.

The model, known as a Special Purpose Acquisition Corporation (SPAC), is a shell corporation formed for the purpose of consummating a business combination with another, operating business. It can also be used to raise capital through an initial public offering (IPO) abroad.

According to data from Chardan Capital Markets, the auction of SPACs has raised US$21.5 billion through 156 auctions on US stock exchanges since 2004, accounting for 23 per cent of IPOs last year.

"This model has become common and has played an effective role as a capital mobilisation channel for foreign enterprises in this market," said Kerry Propper, CEO of Chardan.

The model has worked well in China, helping Chardan raise $811 million through SPACs for investments in China.

"Vietnamese enterprises can also enter US equity markets using this model because your economy is similar to the Chinese. The most important thing is the transparency that your firms create in the overseas market," Propper said.

BBV Viet Nam SEA Acquisition Corporation is the sole SPAC created in Vietnam so far for the purposes of raising capital through an IPO or acquiring an existing business in Vietnam.

"As we know, Vietnamese firms are quite attractive to US investors thanks to the growing economy and the potential that domestic firms have not yet exploited," said Eric Zachs, managing partner of BBV-Asia LLC.

He said the model had yet to become common in Vietnam because the domestic firms had little demand to make IPOs offshore.

The director of the State Securities Commission's international co-operation department, Nguyen Ngoc Canh, said that domestic firms hoping to sell shares offshore faced challenges in terms of incompatible accounting systems and capital and disclosure regulations.

He cautioned domestic firms wanting to auction shares offshore, not only in US markets, to consider carefully the suitable target market before making an IPO.

"The firm itself has to improve its managerial, operational, and financial capacity in order to meet the high requirements of foreign securities markets," Canh said. (VNS)