Opportunities abound for professional advisors

VPBS has successfully advised on various equitisation transactions and IPOs of state-owned enterprises

Notable deals were primarily in the retail sector, including Thailand’s BJC negotiating to buy Germany’s Metro Cash & Carry Vietnam in a deal valued at $879 million; Thailand’s Central Group purchasing a 49 per cent stake in Nguyen Kim with a value of $80 million; Vingroup buying Ocean Mart for $25 million; and Japan’s AEON taking a 49 per cent stake in Citimart valued at $20 million. The food and beverage sector has also seen significant mergers and acquisitions (M&A) activities, with Modelez International buying an 80 per cent stake in Kinh Do Binh Duong, an arm of Kinh Do Group that specialises in cakes and candies, for $370 million; Daiwa PI Partners and VinaCapital purchasing a 70 per cent stake in International Dairy JSC valued at $45 million; and Kinh Do Group buying a 51 per cent stake in Vocarimex. The oil and gas sector saw some of the biggest mega-deals, with two Malaysian investors, Sapura Kenca Energy and Petronas, trading a big stake in three oil blocks in shallow Vietnamese waters, valued at $400 million.

The real estate, financial services, and manufacturing sectors, which had been predicted to have many large deals, were indeed very robust. Keangnam Landmark Tower has been seeking investors to sell out its offices, apartments, and hotels for an expected sum of $800 million. Vingroup bought a 90 per cent stake in Hong Ngan Real Estate JSC valued at $60 million. HDBank sold a 49 per cent stake in HDFinance to Credit Saison. Semen Indonesia Group has been negotiating to buy a 70 per cent stake in a private cement company located in the north of Vietnam with a capacity of 1.8 million tonnes per year, valued at $70 million.

Both domestic and foreign investors have been very active in M&A activities. From the sellers’ perspective, this is to revamp the business and financial structures of the target company. From the buyers’ perspective, it is to expand and develop new markets and new projects. In the context of various free trade agreements signed between Vietnam and strong economies like South Korea, Japan, and Europe, as well as the Trans Pacific Partnership and ASEAN Economic Community, which are beginning to take shape, production and consumption in Vietnam is expected to soon increase sharply.

M&A activities in the next two to three years will continue to follow a trend of restructuring enterprises and changing the growth model of the Vietnamese economy, after the negative impacts of economic slowdown and the excessive growth of credit in 2010-2011. Major engines further stimulating M&A activities in the near future are stronger macro-economic foundations, bilateral and multi-lateral FTAs between Vietnam and its business partners, government polices to hasten the process of restructuring the banking system; equitisation of SOEs; further liberalisation of the prices of necessities such as electricity, water, and gasoline; and relaxation of foreign ownership restrictions in public companies and housing in Vietnam. The sectors expected to see robust M&A activities in the next few years include food & beverage, retail, banking and finance, real estate, food processing, manufacturing, energy, and logistics infrastructure, as demand remains high and stable from both buyers and sellers, coupled with favourable macroeconomic factors, policies and regulations, which are catalysts for the success of M&A deals.

As in 2014, M&A flows in 2015 are predicted to still come mainly from Asian investors in Thailand, Malaysia, and Japan. Anticipating this trend, VPBank Securities (VPBS) has been working hard to support a Vietnamese energy company in finding an investor and selling a stake valued at $25 million to a Malaysian corporation; and in negotiating with a Japanese company in the food processing sector to help another domestic firm sell a stake for $35 million. VPBS has many advantages in providing advisory services for cross-border M&A deals, derived from direct relationships with potential international investors and close contacts with professional international M&A advisors, as well as its position as the exclusive Vietnamese member of IMAP – a leading global M&A network in 40 countries. Founded in 1973 by M&A consultants in the US, IMAP has grown into a coalition of reputable consulting firms in the Americas, Europe, Asia, the Middle East, and Africa, focusing on M&A advisory service for medium-sized enterprises with values up to $500 million. In 2013, IMAP ranked 5th in the world in terms of the number of closed transactions valued up to $200 million, with 196 deals, surpassing one Big4 firm and many other global investment banks. In closed transactions valued from $200 million to $500 million, IMAP ranked 8th globally, with 198 deals. Last year, members of IMAP successfully closed 228 transactions with a total value of $7.5 billion.

One factor expected to stimulate M&A activities in Vietnam is the government’s policies of restructuring SOEs through the divestiture of assets in non-core sectors or through equitisation. With policies allowing investors to hold large, even controlling shares in SOEs, more M&A opportunities for both foreign and domestic investors are on the horizon. VPBS has quickly adapted to this trend to advise on equitisation transactions and IPOs, and to arrange strategic investors for large scale SOEs in the infrastructure, construction, and construction materials production sectors. For example, in 2015, VPBS successfully advised the equitisation and IPO of Infrastructure Development and Construction Corporation (LICOGI), with a transaction value of VND200 billion ($9.3 million) and a subscription rate of 108 per cent. VPBS has been advising a large state owned corporation in selling a controlling stake to a foreign strategic partner, which has already attracted the interest of foreign investors. VPBS also successfully advised in the divestiture of the financial sector business of Vietnam National Coal-Mineral Industries Corporation, a transaction with a capital size of VND1 trillion ($46.5 million) helping the buyer gain a large and stable customer base for developing consumer finance services, which are currently growing quickly in Vietnam.

With nine years’ experience in investment banking advisory services and various large M&A deals – including cross-border transactions – successfully closed, together with highly skilled and professional advisors and an ever-expanding network, VPBS’ M&A advisory services are rising to a new level.

VPBS is ready to take advantage of all the promising M&A opportunities that are coming in the next few years, which, between 2015 and 2018, according to the Vietnam M&A Forum’s research team, are estimated at more than $20 billion.