Effective M&A deal depends on thorough understanding, value addition potential: Kido exec

An effective M&A transaction depends on fully understanding the company being acquired in order to create added value, says Kido Group CEO Tran Le Nguyen.

The food group’s top executive was speaking at a Tuesday talk show.

Kido, listed on the Ho Chi Minh Stock Exchange (HoSE) as KDC, has developed from a candy maker into a multi-sector conglomerate with a wide range of products including ice cream, cooking oil and freshly baked goods. It also engages in real estate development.

"M&A is crucial for sustained growth in a competitive landscape. Without it, our industry’s growth potential will be limited to a maximum of 10% annually. With M&As, a single successful deal can yield significant returns.”

Nguyen noted that the company’s 2014 divestment of its candy segment provided the capital needed for the firm to pivot towards the cooking oil market. This strategic shift opened substantial growth opportunities, given the large scale of the cooking oil industry.

The company expanded from 100,000 to 450,000 retail points, which was not feasible with the smaller candy market.

In addition to cooking oil, Kido has developed other related products such as seasoning and fish sauce. In 2023, the group’s acquisition of Tho Phat brand enabled further diversification with steamed buns, rice dumplings and other products, while enhancing its candy segment.

The group aims to grow its MiniBao steamed buns chain from 300 to 2,000 sales points by next year, and it plans to expand this 12,000 sales points in the longer term, Nguyen revealed.

The recent purchase of the Hung Vuong Plaza in Ho Chi Minh City marks Kido’s entry into real estate and its future plans include the Van Hanh Mall.

Nguyen said a core business principle was to create consumption markets, diverse product lines and a complementary ecosystem to boost sales.

“To effectively engage consumers, we need tools like shopping centers for events. Van Hanh Mall, for example, attracts about 20,000 visitors each weekend day, creating valuable marketing opportunities.”

He also stressed the necessity of maintaining control in M&A transactions. “If we find that an acquisition is not generating value or we lack control, we’re prepared to divest,” he said.

Nguyen also emphasized the importance of strategic partnerships, particularly with foreign investors, to obtain financial leverage in M&A deals.

Stock market diligence

The seasoned market player advised investors to focus on blue-chip companies with strong brand recognition and market share to minimize risks.

He cautioned against chasing trends with small caps, which can be unpredictable. “Investing is not holding stocks indefinitely but knowing when to buy and sell them, and monitoring financial statements and business strategies is key,” he said.

Success in stock investment requires continuous research and vigilance, he stressed. “Understanding market dynamics and timing are crucial. To profit from investments, we must dedicate time to research and analysis.”

In the first half of 2024, Kido recorded a 19% year-on-year fall in net revenue to VND3,532 billion ($141.45 million) and a 94% decrease in after-tax profit to VND33 billion ($1.32 million).

This result has added great performance pressure H2/2024, with Kido's board of directors setting very ambitious annual targets including VND13 trillion ($510.75 million) in revenue, a year-on-year increase of 50%; and pre-tax profits of VND800 billion ($31.43 million), 2.5 times the 2023 figure.

At the end of the year’s first half, the group had achieved just 27% of the year's revenue target and 7% of the profit plan.

KDC closed Wednesday at VND50,600 ($2) per share.