In 2012, I vividly recalled the RWE IT Slovakia M&A deal. RWE IT Slovakia, based in Košice with around 400 engineers, incurred an annual cost of approximately 35 million euros for their parent company RWE in Germany, a leading European enterprise in the energy sector. In the context that Europe was gradually moving to a period of decentralization of the electricity industry to break the monopoly and separate stages from production, distribution to transmission of electricity, RWE Group had great pressure to minimize Optimize operating costs, including cutting IT Services budget while still ensuring system continuity. From here, an attractive opportunity had been created for FPT with the possibility of acquiring RWE Slovakia.

Until now, when talking about the deal with this European IT company, I still can’t help wondering why RWE trusted a partner from Vietnam to operate the SAP system, in the midst of such a difficult time. Many choices came from European companies or large Indian corporations.

Was it because of the reputation and extensive connections of Mr. Uwe Schlager (Germany) who was invited by FSOFT CEO at that time, Mr. Nguyen Thanh Lam, to take over the position of CEO of FPT Germany (the company later owned FPT Slovakia)?

Or was RWE convinced by the profit figure in this deal?

One of the most “stressful” moments could be mentioned at the meeting near the end before the two sides conducted in-depth appraisal and sent the Letter of Intent (LOI), when RWE forced FPT to come up with a convincing number.

Initially, RWE “requested”: “We brought you a business pipeline worth 80 million euros in 4 years and more than 300 Slovak engineers fluent in two languages: English – Virtue. So how much will you pay us?”.

In response, I frankly expressed my opinion that the project would bring benefits to both sides. Specifically, with current costs, the partner would have to spend 130 million euros within 4 years, while FSOFT packaged at a price range of 80-85 million euros, thus saving 30-40 million euros, which would be the profit that RWE could receive from the deal.

Finally, a 90 million euro contract lasting 4 years was successfully signed with only an extremely modest budget (less than 2 million euros). With sales just reaching the 100 million USD mark in 2013, this success created a moment of “sublimation” in FSOFT and the entire Vietnamese IT industry in terms of both joy and doubt. We were happy, yet there were controversial discussions in the industry that the deal was potentially risky because it was impossible to be that easy and quick.

Signing the contract, FSOFT took on additional tasks of researching SAP HANA, with the expectation of expanding FPT’s customer base in the European as well as global market.

POST-MERGER BUBBLES OF JOY… 

In the new position, the parent company FSOFT awkwardly promoted research and implementation of Change Management (a very new concept at that time at FPT). At the same time, FSOFT also invested in learning and researching SAP HANA for the electricity industry. Even though the brief from RWE was not clear and too new, FSOFT still committed to training 100 engineers in this field…

In the second commitment, FSOFT promised to relocate Slovak personnel to Vietnam as a cost-cutting measure and bring Vietnamese personnel for a 3-6 month exchange. Unfortunately, this endeavor faced challenges as it proved unsuccessful, encountering barriers imposed by the EU’s General Data Protection Regulation (GDPR) law. Compliance with GDPR, restricted FPT from exporting data outside of Europe, ultimately impeding the intended transfer of personnel between Slovakia and Vietnam.

The 2 big goals above, in retrospect, both failed. In 2014-2015, we spent more than $3 million more and still reported losses after the first year and a half of operation, creating even more pressure and suspicion.

After re-planning, FSOFT decided to only operate self-contained personnel in Slovakia, stop investing in SAP HANA and cut foreign personnel. From there, FSOFT quickly generated profits. At the same time, FSOFT also had the opportunity to cross-sell and develop other customers, as well as expand to other divisions of the RWE Group.

After 2 years, FSOFT grew very quickly thanks to the In-Organic (M&A) development model. In the two consecutive years, sales increased by 35%. FPT had an offshore competitive advantage recognized by Germany. The operational efficiency was enhanced by strategically combining work in Europe to align with GDPR compliance, with only the remaining tasks transferred to Vietnam. This strategic approach not only facilitated a more convenient workflow but also contributed to the establishment of a best-shore brand, solidifying FSOFT’s position in the market.

After Mr. Uwe said goodbye to FSOFT and handed over the work to his colleague Bui Hoang Tung, in the second half of 2017, Mr. Tung introduced a project affectionately named Planet, presenting the opportunity to acquire a publicly traded consulting company recognized for its “fastest growth rate” in the United States: Intellinet Atlanta. FSOFT highly appreciated Intellinet’s position and reputation as they had a number of key customers on the Fortune Global 500 list. Therefore, we thought that FPT could step in and cross-sell offshore value.

This was the 1st deal that we handled the entire process independently – from the negotiation phase to legally hiring a lawyer and reviewing the sales contract… The official contract was up to 200 pages thick with many appendices. The process of negotiating and drawing up LOI were really confusing. At first, FSOFT negotiated to buy 50% and pay the rest according to earn-out agreement (mechanism to determine purchase based on business performance criteria of the business after M&A), but later raised it to 70:30. This was the first time FPT had spent that much money to buy a company! An interesting point during the negotiation process was that I was always sandwiched between FPT and Intellinet to find a price range and close within the expectations of both sides, while continuously updating the actual negotiation situation so that both sides understand clearly. During the process, FSOFT also invited the partner to Vietnam to visit our headquarters and office, learn directly about the business, thereby helping to skip the bank guarantee step.

Especially at the stage of completing procedures, FSOFT encountered a “rock” when it was not easy for a Vietnamese company to buy and purchase for a foreign company. According to Vietnamese law, there must be a contract and acceptance documents from the host country before the State Bank and the Ministry of Planning and Investment agree to process the transaction. Here there was a “chicken and egg” situation because if the deposit was not received, Intellinet would not make a transfer contract. “The difficulty comes… the way”, we had to go through FPT Japan to book an investment loan to the US, after 12 months the procedure was completed to submit documents to the Ministry of Planning and Investment, then continue increasing capital for FPT USA to buy, then pay FPT Japan.

Applying experiences from the RWE deal, we thought we could access the US market and cross-sell offshore values, but the first two years were a complete failure. Once again, business promotion scenarios failed when a number of cooperation deals with “whales” in the IT field, non-life insurance and fast food… failed to achieve results.

Partly due to internal subjective factors, Intellinet did not really trust FPT because the engineers were not good at English and lack of experience working with American customers. Therefore, the worst scenario… happened again. During the first year, we actually tried to avoid the story of reporting on Intellinet’s financial situation in consecutive briefings.

At the same time, we strived to challenge the biases held by members of American consulting companies regarding the sale of offshore services and the application of FSOFT’s capabilities in Vietnam. Recognizing that exclusively “selling” consulting services would incur a high cost for FPT with a potential decrease in business efficiency, we aimed to shift these perceptions.

18 months post-merger, the once overcast sky in the US began to clear as Intellinet CEO Mark Seeley presented an opportunity to collaborate with the world’s leading technology and solutions company specializing in the automotive buying, selling, and auctioning domain – an entity likened to an “Amazon” in the automotive service industry. The subsequent successful partnership with this industry giant and the pivotal mega contract C99 not only salvaged the entire Intellinet acquisition scenario but also propelled remarkable growth within FPT’s Consulting segment in the nation. This achievement stands as a testament to the unwavering spirit of perseverance, maximum effort, and seizing every opportunity, embodying the ethos of finding “In danger lies opportunity”.

In recent years, the Intellinet M&A deal has brought breakthrough growth to the US market, contributing to expanding service provision capabilities, solutions and products to market, 24/7 support through nearshore software production center systems. The Intellinet deal lays the foundation for subsequent M&A deals. In 2023 alone, FSOFT have successfully carried out a series of M&A deals: In early 2023, FSOFT acquired the entire IT Services segment – a strategic business segment of Intertec International (USA).

In November 2023, FSOFT purchased Cardinal Peak – a 20-year-old technology engineering service provider in the North American market. Just one month later, FPT Software continued to acquire French IT company AOSIS. And there are also strategic investment deals with Landing AI… We have been having other, consecutive and larger-scale deals to make M&A become a growth engine for FSOFT and for FSOFT to realize becoming a classy global company with strong international staffs.

After 20 years alongside FSOFT, reflecting on my journey brings an overwhelming sense of “satisfaction”. The opportunity to soar to new heights with my company and teammates, embarking on unimaginable ventures from the starting line, occasionally feeling “folly”. I and company had some “blue day”, but then received “unexpected happiness”, when FSOFT have now made a strong mark, reaching out to the world’s digital map, presented in 30 countries and worked with many leading customers.

Everything I did in my youth stemmed from one thing – my love for FPT. This love comes slowly, silently every day until it becomes the inspiration for our successes today, creating the Desire for the Future. Just as Den Vau’s “Ten Years” resonates with deep emotion, FSOFT have woven a tapestry where my “Ten Years” is not only sweet but also profoundly beautiful and meaningful.

Article: Shared by Mr. Nguyen Khai Hoan Senior Executive Vice President of FSOFT

Designer: Ha Duyen