|Domestic developers are entering into cooperation with foreign partners with increasing frequency. Photo: Le Toan |
Mergers and acquisitions (M&A) in the real estate sector have been picking up speed in recent years. In the first half of 2021 alone, Phat Dat Real Estate JSC acquired 99.5 per cent of the stakes in the Binh Duong Tower project, carmaker Truong Hai Auto Corporation (THACO) acquired E-mart Vietnam, and Becamex IDC cooperated with Central Retail Vietnam to develop GO! Trade Centre in the southern province of Binh Duong.
Some other developers are also aggressively pushing forward by buying shares.
An Gia Group is completing the legal process of purchasing land funds from Nam Bay Bay JSC. Every year, An Gia spends around $130-220 million to expand its land fund, targeting large-scale land plots to deploy complex projects.
Elsewhere, Danh Khoi Group has announced acquiring three land projects from domestic and foreign companies in Danang and Nha Trang. In addition, this group also revealed that it has acquired three other large-scale projects in Quy Nhon and Ba Ria-Vung Tau.
According to Nguyen Quoc Bao, deputy CEO of Danh Khoi, key factors for successful M&A developers depend on a strong sales and distribution team, financial capacity, high market reputation, and choosing the right product and market segments.
Many experts also shared that foreign developers are keen to cooperate with domestic ones because they understand the market and are more capable in clearing land.
Catalysing domestic developers
Previously, most M&As were concluded between domestic and foreign partners wherein the overseas side met hurdles in finding good locations completing administrative procedures. Nevertheless, M&A often offer ready-for-built projects which can be constructed right away, instead of taking up time and expenses for land clearance and paperwork.
But in recent years, domestic investors have been more confident in M&A activities. They actively seek deals and focus on the new markets in suburban and satellite areas.
There has been a substantial rise in domestic M&A deals. However, figures from the Ministry of Industry and Trade showed that the value of acquisitions by Vietnamese corporate buyers previously accounted for around 12 per cent. In the last two years, however, this value increased to more than 30 per cent.
Masan, Vinamilk, Gelex, THACO, and The PAN Group were some of the buyers involved in the largest transactions in the country. Some of these M&A deals have also been shifting from pure acquisitions to mutually beneficial cooperation.
In particular, the value chain is more mentioned in all deals. Multi-sectoral corporations enhance their ecosystem based on their core business, while respecting brand reputation and essential market experiences.
Talking with VIR, deputy general director of NovaGroup Nguyen Thai Phien, said that his company was targeting capable partners to expand its market share and gradually complete its ecosystem to strengthen its stand as one of the leading multi-functional corporations of Vietnam.
Novaland, the company’s real estate arm, is establishing a strong foothold in industrial property to meet the increasing waves of foreign manufacturers that are expected in the future. Nova Services Group meanwhile centres around respected brand names in retail, restaurants, hospitality, and entertainment, and Nova Consumer is manufacturing and supplying consumer goods to the market.
Tran Dinh Thien, a member of the Prime Minister’s Economic Advisory Group, said that it is time for Vietnamese businesses to consider M&A as a solution to increase their competitiveness and firmly stand on their capacity.
“M&As are not just about acquiring assets to develop but for creating a more solid combination among enterprises,” Thien said. “Domestic groups will be more dominant in the coming time to restructure and develop themselves.”
Thien added that only when participating in the value chain can Vietnamese enterprises increase their strength and become a better link of the global supply chain and contribute to bolstering Vietnam’s position in worldwide markets.
Assessing the potential of the industrial property M&A market and its ability to participate in the global supply chain, Dang Trong Duc, CEO of KTG Vietnam Industrial Development JSC said that the sector is changing itself to welcome the shifting production trends from outside Vietnam.
“M&A in industrial property helps buyers and sellers, and both domestic and foreign partners can utilise all of their advantages to co-develop business,” Duc said.
Previously, M&A mostly took place in large cities such as Hanoi, Danang, and Ho Chi Minh City. However, land funds in these areas are increasingly scarce, leading to higher transaction prices.
Therefore, developers are shifting to neighbouring localities such as Vinh Phuc, Bac Giang, and Haiphong. Two main factors driving demand are transport connectivity to inner-city areas and the presence of large-scale real estate developers in those markets.
In addition, already occupied office buildings and flats with good location are always the most interested assets.
Another trend is the increased demand for residential and resort real estate projects that combine their base services with healthcare and sports services.
Meanwhile, greenfield development across logistics, commercial, and residential sectors is likely to continue to be attractive.
At the same time, assets such as prime offices and hotels could be well sought after as soon as the country reopens.
Henry Chin, CBRE’s head of research for Asia Pacific, said that bargain-hunting investors may be disappointed as increased purchasing activity make discounted assets harder to find.
“With the office leasing demand continuing to improve, rents are expected to stabilise in 2022 and return to growth in 2023. Investors can consider counter-cyclical opportunities in the office, retail, and hotel sectors,” Chin said.
“There is an increasing volume of capital-exploring ways to access the hospitality sector, particularly in countries with a large pool of domestic tourists. In the logistics sector, continued tight yields will make greenfield development an attractive route to capturing additional alpha,” he added.
VIR, in cooperation with NovaGroup, is organising an online seminar themed “M&A amid the pandemic: Growing the value chain”.
Leading experts, managers, and representatives from enterprises with many years of experience in M&A in Vietnam will discuss recent trends. Among the guests will be Prof. Tran Dinh Thien, member of the Prime Minister’s Economic Advisory Group; Phan Duc Hieu, standing member of the Economic Committee of the National Assembly cum vice director of the Central Institute for Economic Management; Nguyen Cong Ai, partner, head of Strategy from KPMG Vietnam; Le Khanh Lam, chairman of RSM Vietnam; Vu Huu Dien, director, Investment Advisory, DCVFM; Su Ngoc Khuong, senior director at Savills Vietnam; and Nguyen Thai Phien, deputy CEO of NovaGroup.
The seminar will focus on discussing market developments, potentials, and prospects of M&A activities in Vietnam in the context of the pandemic, as well as analyse key studies and lessons learned from businesses and experts who have been directly involved in M&A deals.
The seminar will be held online from 8.30am to 11.30am on Friday, October 15, accessible via the fanpages https://facebook.com/tinnhanhchungkhoan and facebook.com/NovaGroup.jsc.