M&A wave hits Vietnam’s shores

Vietnam is riding high on a fresh wave of M&A activity with various foreign partners Photo: Le Toan

Research by the M&A Forum (MAF) for 2014 showed that the value of all M&A deals in Vietnam increased by almost 20 per cent, totalling approximately $4 billion.

Meanwhile, according to AVM (Vietnam) – a pioneer in M&A and investment promotion and consultancy – M&A deals in 2014 averaged at $11 million, up from the average of $5-8 million recorded over the last three years.

Vietnam International Law Firm’s (Vilaf) managing director Dang Duong Anh told VIR that last year, the firm successfully finalised around 30 M&A deals primarily in the retail, consumer goods, and manufacturing sectors. Some of the major deals included Mondelez acquiring stakes in Vietnam’s confectionery firm Kinh Do Group, and Thailand’s Central Group taking over local electrical appliance chain Nguyen Kim.

Likewise, senior managing director Masataka Yoshida at Japan-based M&A-focused consultancy RECOF Corporation stated that by the end of 2015, the company expected to conclude some 30 M&A transactions in Vietnam for its clients, an increase from 20 in 2013. “There have already been 12 transactions completed in the first half of the year. The service-related sector is currently attracting the largest amount of capital, mostly from Japan,” Yoshida said.

Foreign investors from Japan, ASEAN, the US and Europe have shown a keen interest in retail, consumer goods, the industrial sector, and telecommunications through the M&A trail. These fields have shown up in many multi-million dollar transactions recently.

AVM’s general director Dang Xuan Minh stressed that Vietnam was currently riding a second wave of M&As which would likely surpass the M&A high water mark of $5 billion in 2012. “Given the formation of the ASEAN Economic Community by the end of 2015, the country will continue to be a promising destination for new capital inflows from Asia, Europe and the US.”

Current positive trends in the local economy will continue to be a contributing factors to the M&A boom in the years to come. GDP has sprouted to an estimated 6.28 per cent for the first half, up from 5.98 per cent for 2014, and a record high growth rate since 2009. Meanwhile, inflation has remained under control at a low 3 per cent.

Along with the economic recovery, there have also been positive results in institutional reform, economic restructuring and state-owned enterprises equitisation programmes. The restructuring of the banking system, as well as international integration and M&A activities have become the primary concern of local authorities, enterprises, and investors.

In 2015, Vietnam picked up the pace of its institutional reform, and the legal framework for M&A activities is also due to be completed as part of that process. Recently, important laws on investment activities have also been amended, and put into effect, namely the laws on Investment, Enterprises, Housing, and Real Estate Business.

Do Nhat Hoang, head of the Foreign Investment Agency under the Ministry of Planning and Investment (MPI), noted that the agency had been making every effort to collect and publish more than 350 fields of information on FDI enterprises. The information has been organised and updated on a regular basis on the national foreign investment information system, which has been up and running since the start of the year.

“The system will inform potential investors of the performance, strength, and weakness of enterprises, thus supporting their M&A decisions,” Hoang said.

“I think the information disclosure has been improved. Over the past few years, we have seen big changes in it. There is now less misunderstanding between Vietnamese and Japanese companies,” Yoshida told VIR.

In addition, according to Vilaf’s managing director Anh, the ease on foreign ownership limits, coupled with the recent visit of Vietnam’s General Secretary Nguyen Phu Trong to the US, will encourage an increased flow of capital from the US to Vietnam in the time to come.

The upcoming 7th M&A Forum 2015 featuring the “Countdown to the Next Market Boom” will be held at the GEM Centre in Ho Chi Minh City on August 6, organised by the Vietnam Investment Review and AVM Vietnam, by courtesy of the MPI. The annual event will continue promoting the healthy development of Vietnam’s M&A activities, thereby accelerating the restructuring process, improving operational efficiency, and fostering competitiveness among enterprises and the economy overall.

By Minh Trang – Thanh Xuan