Multibillion-dollar M&A wave targeting Vietnamese SMEs

South Korean businesses are shifting investment strategies but remain interested in Vietnamese M&A deals

Focusing on SMEs

Kim Ja Jum, deputy general director in charge of investment in SMEs at Kiwoom Securities Co., Ltd., arrived to Vietnam for the first time to participate in the Vietnam-Korea M&A seminar organised by the Korea Trade and Investment Promotion Agency (Kotra) to find M&A opportunities with Vietnamese SMEs in numerous fields.

With a total capitalisation of $1.5 billion, Kiwoom is currently South Korea’s leading online securities company with the largest brokerage market share during the past 12 years.

Jum came to Vietnam on this working visit as he saw numerous investment opportunities. According to Jum, Vietnam is currently undergoing a large-scale shift in the structure of its industries. Accordingly, instead of focusing on developing labour-intensive industries, namely the previously popular garment and textile and leather shoes segments, Vietnam currently invests to develop services, retail, electronics, and the fintech sector.

“Kiwoom focuses on pouring capital into manufacturing enterprises to catch the South Korean investment trend in Vietnam. Notably, South Korean enterprises will import materials from Vietnam to manufacture products and then export the finished products to Vietnam. Additionally, South Korean enterprises will directly manufacture products in Vietnam and then sell them domestically and across the ASEAN,” Kim said.

If Kiwoom finds suitable partners, the company will spend at least $25 million on buying a controlling stake in each company.

Along with Kiwoom, 13 other investment funds joined the seminar to find investment opportunities.

Michael Dc Choi, deputy director of the Korea M&A Centre under Kotra, the investment capital volume arriving to Vietnam via M&A deals will increase in parallel with the rise in foreign direct investment (FDI) capital from South Korea. South Korea is currently the largest foreign investor in Vietnam.

Choi revealed that South Korean enterprises have negotiated with 12 Vietnamese enterprises in the sectors of food processing, pharmaceuticals, and fintech. According to the schedule, within the next six months, a number of these deals will be completed. However, the South Korean enterprises are aiming to seize a controlling stake (50 per cent and more) or at least to become strategic investors in these 12 enterprises.

Strong financial potential for M&A deals

According to Jacob Won, managing director of Locus Capital, South Korean M&A transactions have increased across Asia. Along with becoming the largest foreign investor of Vietnam, South Korea has spent massive capital on conducting M&A deals.

At present, South Korea has 14 investment organisations and funds holding a capital funding of at least $1 billion each, almost all of which are operating in the insurance and banking sectors with the capitalisation of $1 trillion.

Besides, South Korea’s growth fund plans to spend $1 billion of investment fund worth $3 billion on M&A activities. Furthermore, the Global M&A Fund will pour $2 billion into 10 other funds to conduct M&A deals.

Almost all South Korean enterprises are concerned about the consumer, retail, and real estate sectors. However, Vietnam still has barriers in attracting capital in M&As due to the lack of transparency in financial reporting. If this problem is surmounted, there will be more massive FDI inflows from South Korea to Vietnam.

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