M&A Case in Vietnam: Japanese "White-Knight" with an Vietnamese Target Company
I joined Nihon M&A Center Vietnam in 2022 with the purpose of assisting good companies in Vietnam to develop sustainably through M&A with Japanese strategic partners. Prior to this, I gained two years of experience as an M&A Advisory analyst at Grant Thornton Vietnam.
I would like to share some insights about a recent deal, codenamed "Project T," that our team successfully completed in last year. When considering M&A in Vietnam, it is typically a friendly process between two parties. Hostile takeovers are quite rare in the Vietnamese market, let alone experiencing a deal with a white knight defense mechanism.
"A white knight is a hostile takeover defense whereby a 'friendly' individual or company acquires a corporation at fair consideration when it is on the verge of being taken over by an 'unfriendly' bidder or acquirer. The unfriendly bidder is generally known as the 'black knight.' Although the target company does not remain independent, acquisition by a white knight is still preferred to the hostile takeover. Unlike a hostile takeover, current management typically remains in place in a white knight scenario, and investors receive better compensation for their shares."
The target company was founded by the CEO and other 5 shareholders, who were his close friends, in 2013. Since then, the CEO solely managed the daily operations. Starting as a small company in 2013, the CEO has successfully managed to achieve double-digit growth over the past ten years, with an EBITDA margin of 10% or more, making his company one of the top ten largest flexible packaging companies in Vietnam and of the most profitable one in the industry. Due to the different business owned by other shareholders, they ultimately reached a consensus to transfer the company as soon as possible to focus on their own business operations.
The target company is one of the few remaining local companies in the field of flexible packaging in Vietnam. Most companies in this industry have been acquired by Thai or Japanese companies. This situation made T an attractive target for FDI companies. The target company had been approached by numerous buyers from around the world, including Thailand, the US, Europe, and financial funds. The CEO was under significant pressure because, on one hand, he had to divest to maximize shareholder benefits as quickly as possible, and on the other hand, he must find a reliable strategic partner who can enjoy him in sharing his passion of building the company into the industry leader. A Japanese buyer appeared as a "white knight," for T. The buyer is one of the leading paper packaging players in Japan, and although they initially seemed to have limited synergy with the seller, they believed they could utilize the seller's network to cross-sell their products due to their existing manufacturing presence in Vietnam and experience in cross-border M&A. Furthermore, they empathized with the CEO's story and genuinely wanted to become a long-term partner. As a result, the buyer took swift and decisive action to pursue the deal and help the CEO from the dilemma. Through sincere conversations with the buyer, the CEO developed an appreciation for Japanese working culture and believed that he could develop his company with the participation of a trusted partner.
Experiencing a “white knight” deal in real life has been a fascinating and rare occurrence for me, and it may become a once-in-a-lifetime experience. Thanks to the creative matching skills of our buy-side team, who dared to think outside the box, we were able to bridge two companies with the same vision for growth. In Vietnam, finding a suitable successor for a target company through M&A is not a top common priority, given that we are still a young population. In my opinion, M&A serves as a tool for Vietnamese companies to overcome their most challenging obstacles and transition towards sustainable development.
This post was written and published with the permission of Dynapac Co., Ltd., the transferee company, and VIETNAM TKT PLASTIC PACKAGING JOINT STOCK COMPANY, the transferor company.
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