One of the landmark events with Kinh Do Corporation (KDC) in 2010 was the merger of North Kinh Do Food Joint Stock Company and Kido Corporation into KDC. This not only helps Kinh Do Corporation increase the position but also create preconditions for the Group implement similar deals, especially enhancing operational efficiency through utilization and resonant power promotion after the merger.

Foundation for the merger

Mr. Tran Le Nguyen – General Director of  Kinh Do  emphasized: “We consider M&A as a positive activitie contributing to the growth of Kinh Do , creating the platform for the similar M&A event in the future”. The Kinh Do Boards of Directors realizes that in order to have the smoothly merging other companies, Kinh Do system itself must be “standard” first. Accordingly, Kinh Do has institutionalized organization and operation according to the model of the strategic business units (SBU), standardized work processes through the implementation of SAP business management software, invested strongly in expansion of distribution channels and continued to build and maintain strengths of the brand.

Moreover, to operate the new process smoothly, Kinh Do develops personnel work based on the 3B principle (Build, Borrow, Buy). According to this principle, Kinh Do  both recruits, develop talents, and transfer personnel between the companies together.

Strengthening position

With the successful merger of North Kinh Do Food Joint Stock Company and Kido Corporation in 2010, Kinh Do Corporation has now become a Multi-sectoral Food Group. Previously, the Corporation only manufactured and traded in main confectionery products, but the product list is now quite diverse, including ice cream and dairy products.

Along with the merger, Kinh Do’s network covers nationwide, boasting some 200 distributors in food business reaching 120,000 retail outlets, 65 specialized distributors with chilled storage, servicing 30,000 outlets. With a far-reaching and versatile network, KDC confirms that the Company truly excels in its capability to distribute - broadly and deeply and with great efficiency - a wide variety of products.

Depth factor

After the merger, capital, asset, market share and scale of the Company soared. This has created a new position for KDC when negotiating with raw material suppliers, distributors and partners.

Beside the growth in scale, the competitive advantage in the depth of KDC is strengthened. It is the ability of financial supporting among members to minimize the use of loans and make performance of the Group increased. Not only creating breakthroughs in revenue and profit, but the merger increases capacity, scale and advantage of KDC of a wide variety of products, distribution systems, consolidate its position and strengthens its cooperation with the supermarket channel, a chain of retail outlets.

Given scale and capacity after the merger, KDC’s position in negotiations is increased. For example, the Company will greatly reduce cost of inputs thank to the economics of scales. In addition, coordination of production materials helps KDC to reduce waste because resources will be managed closely and allocated effectively. In general, after the merger, the strength is not an arithmetic problem 1+1 +1 but is the power coming from resonance.

The first quarter Food sales of KDC reached VND 635 billion. The figure demonstrates performance and position of the Company after completion of the merger.

Looking to position in Asia

From M&A experience, Mr.Nguyen shared that to merger other companies, Kinh Do  itself must determine the long term development strategy. Base on that strategy, Kinh Do  will accelerate merger and acquisition of suitable companies. In fact, after the merger, KDC’s scale has increased relatively rapidly, which helps the Company become one of large-scale food enterprises in the continent.

Mr.Nguyen insisted that the year of 2011 is a milestone for transition from Kinh Do to a Food Corporation. In the coming time, Kinh Do  will continue to improve this model through acceleration of the M&A process, to ensure the rapid and sustainable growth. According to the proposed objectives, Kinh Do  expects to merge Vinabico Company (KDC owns 51% of the company) and Binh Duong Kinh Do  Corporation (Kinh Do owns 80% of the Corporation) into KDC to help Kinh Do  own 100% of their capital, then, merge Kinh Do Sai Gon Bakery Joint Stock Corporation and some other food companies.

Currently, Kinh Do  has the ready platform for M&A such as a strong and well-known brand, strong financial foundation, standard operation and control procedures, outstanding management technology and strong distribution system. Along with the development based on internal force, KDC will continue to implement M&A deals in both directions. Kinh Do will continue to deeply merge Food companies to enhance the capacity and scale. At the same time, based on the merger, KDC will diversify a variety of products broadly. With regard to orientation, Kinh Do expects to reach the growth in un-fulfil market segments and the product categories for the future needs of the market.

According to the 2011-2015 objectives of the Group, the annual growth is expected to reach 30% and by 2015, excluding sales of the merger of new members, the Group's revenue is estimated to achieve over VND 10,000 billion.

Talking with Vietnam Investment Review, Mr. Tran Le Nguyen, General Director of Kinh Do  Group emphasized that M&A activity is considered as a positive motivation contributing to the growth of the Group. Sharing practical experience after Kinh Do’s successful M&A activities, Nguyen said: - What factors bring success of an M&A deal, in your opinion? With Kinh Do , we just acquisition or merge with a company suitable for our long-term development. Specifically, it is a food company. In the period after the merger, Kinh Do will create dynamic links between old and new resources, namely addressing issues of leadership, employees, cost control, brand integration and development, market expansion, etc. In my opinion, the success of an M&A deal comes from a suitable direction for the long-term strategy of the company, thereby, merging problem is resolved properly. -  What are the challenges in the post-merger? The general challenges come primarily from human factor, company culture, corporate governance structure and system. Additionally, difficulties may rise from the different angle in strategy and vision and no reasonable compromise for interests of stakeholders. -  With Kinh Do , How have specific issues been handled? 8 years ago, Kinh Do  acquisitioned Wall’s Ice cream Company. When a domestic enterprise buy back shares of a 100% foreign owned company, the corporate culture is a very different factor. In the restructure process, Kinh Do focused on two importance issues which are personnel and strategy. For the former, we retained almost of the key personnel in their positions and motivate them in execute their works. The in-place labor force was also not changed much. For the latter, we continued to follow the high-end product development orientation of Wall’s and we gained the success with alternative labels such as Merino and Celano. In a recent merger, we take advantage from the preparation and readiness for ages of member companies. Human and corporate culture factors are not an issues because of the previously mutual support of these companies. Therefore, after a very short time, we have created a driving force for effective performance of companies.

According to M&A Special issue–Vietnam Investment Review