Signs of heightened Japanese M&A activity

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According to Masataka Yoshida, senior managing director at the M&A-focused consultancy RECOF Corporation, Japanese investors are increasing their presence in Vietnam’s M&A market.

“A range of Japanese investors have bought stakes in projects such as Aeon, Daibiru, Hankyu Realty and the Nishi-Nippon Railroad,” said Yoshida.

Analysts from the Japan External Trade Organisation (JETRO) also noted that Vietnam had witnessed a surge in Japanese direct and indirect inflow into real estate in the past few years.

Hirotaka Yasuzumi, managing director of JETRO, said that property has become a growing attraction among Japanese investors.

“Aside from the increased capital, the number of projects has also grown substantially. The trend of investment is changing as Japanese investors form partnerships with local developers or acquire domestic projects rather than developing on their own,” said Yasuzumi.

Oliver Massmann, general director of Duane Morris Vietnam LLC, said this change in the investment environment was largely due to the fact that since July 2015 when foreign investors did not need to undergo lengthy licensing procedures when buying stakes in Vietnamese target companies.

“We have seen a strong increase of interest from international investors, especially in the last months of 2014 continuing into 2015,” said Massmann.

“The Trans-Pacific Partnership (TPP), which includes the US and Japan, the EU-Vietnam Free Trade Agreement (EVFTA) as well as the tariff reductions under the ASEAN Free Trade Area (AFTA) are all scheduled for this year. These will increase market access for foreign investors in Vietnam and lower barriers to trade in goods and services,” he added.

Massmann confirmed that the primary M&A investors to Vietnam have been from Japan, Korea, Taiwan and recently from other ASEAN members.

Around 20 cases of M&A from Japan were reported in 2013 and this number is expected to be as high as 30 in 2015.

M&A cases from Japan have been mostly focused on Hanoi and Ho Chi Minh City. In the months and years ahead, according to Yoshida, there will be more medium and small sized companies from Japan participating in M&A activities in Vietnam. He added that these future M&As would likely extend to other cities, such as Danang and Haiphong.

Moreover, the focus will not be centred on retail and property as was previously the case, but would encompass other sectors such as restaurants, consumer finance, tourism, electronic trading and logistics.

“There will still be difficulties in investment in Vietnam, however, Japanese investors would be able to overcome this, and would build upon their success in the time to come,” Yoshida said.

In 2014, according to a report published by Stoxplus, Japan still ranked sixth on the list of countries conducting M&As in Vietnam, while focusing mainly on the production of goods and services.

Stoxplus also showed that there is a new wave of Japanese investment in other sectors such as construction, real estate, transportation and financial investment.

Vietnam has become an attractive destination for foreign investment through its stable policies and economic environment and especially through a range of revised legal barriers such as the laws on Enterprises, Investment, Housing and Real Estate Business.

According to figures published by AVM Vietnam, a M&A and investment promotion consultant, in 2014, the total value of M&A activities in Vietnam reached $4.2 billion, with an average of $11 million per case, proving a huge boom compared to the $5 - $8 million per case in 2012.

In the eyes of Japanese firms, Vietnam is the second leading M&A market in Southeast Asia, lagging just behind Thailand.

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