Asian investors still on lookout for deals

Last week, Masataka Yoshida, CEO of RECOF Vietnam Co., Ltd., pointed out that Japanese companies are still trying to ink strategic deals with Vietnamese companies. “Over the past 5-6 years, Vietnam has been ranked second among M&A destinations for Japanese investors in Southeast Asia, behind Singapore. In terms of the number of transactions, there are many deals that are not yet announced, so it is very difficult to compare. However, the size of Japanese deals in Vietnam has become bigger than that of 5-6 years ago.”

Mergers have been muted in 2022 but some Asian groups are still keen, Photo: Shutterstock

Looking at recent moves, Cool Japan Fund has chosen to contribute around $10 million to 4P Holdings, the company that owns and operates a popular network of 4P’s pizza restaurants. The move is part of the fund’s strategies to tap into Vietnam’s lucrative food and beverage market. Meanwhile, Japanese gas distributor Toho Gas has signed a strategic investment cooperation agreement with Phuc Sang Minh Trade Engineering Services to scoop up 40 per cent of the Vietnamese gas distributor.

Other notable M&A deals involving Japanese investors are also expected to take place in the coming time, including Sumitomo Mitsui Banking Corporation’s acquisition of SmartNet in a deal worth $9.36 million.

According to data by RECOF, Vietnam ranked 10th in the world in terms of the number of M&A transactions involving Japanese investors in the first 10 months of 2022. Among Southeast Asian countries, Vietnam is trailing behind Singapore and Indonesia, but the country is far ahead of Thailand, the Philippines, and Malaysia. Japanese investors have been slow to return to the market after the pandemic, but are now catching up, despite the volatility in the global financial market and growing geopolitical tensions.

Likewise, South Korean investors remain active in Vietnam’s M&A market. Pharmacity, one of the largest chains of pharmacies in Vietnam, has joined SK Group with the aim to enter Southeast Asia’s rapidly expanding retail and healthcare markets.

Meanwhile, SK Group’s member SK E&S inked a deal to acquire a 99.99 per cent in New Renewable Energy JSC No.1, a unit of Gia Lai Power Electricity JSC, with an estimated value of $37.5 million. The deal will pave the way for SK E&S to penetrate Vietnam’s renewable energy market.

South Korean financial groups are also making combined investment of billions of US dollars into Vietnamese partners as they are upbeat about the country’s long-term outlook. In May, South Korea’s Shinhan Financial Group concluded a strategic agreement to take a 10 per cent stake in Vietnamese e-commerce company Tiki. In April, Hana Financial Investment Co. Ltd., scooped up 35 per cent in BIDV Securities with a total transaction value of nearly $117 million.

“Up to a few years ago, South Korean investors preferred to make acquisition of entire target companies. As a result, new owners had to restructure and make additional investments to make the business profitable and stable. However, now they have been looking for Vietnamese partners to create a synergy based on combination of market know-how, reputation, and local manpower,” said Hanh Nguyen, associate of Bae, Kim & Lee Vietnam.

She added that some $370 million was poured into Vietnam through M&A deals by South Korean investors in the first 10 months of 2022.

Meanwhile, Singapore is among the most active foreign buyers this year with a number of sizable deals, such as the $50 million deal between Vietnamese e-commerce solutions provider OnPoint and an indirect subsidiary of Singapore’s Temasek. The investment, which focused on Vietnam’s rapidly expanding e-commerce sector, marked the region’s largest private fundraising round for e-commerce enablers in the last five years.

In addition, Singaporean venture capital (VC) funds have set up a stronger footprint in Vietnam by making investments into home-grown startups. Last week, Vietnamese electric motorbike startup Dat Bike announced that it has wrapped up $8 million investment in a new funding round led by Singapore-based Jungle Ventures.

GSR Ventures and Delivery Hero Ventures also participated in the round, along with Wavemaker Partners and Innoven Capital. In August, Jungle Ventures also led an $8.5 million investment in local healthcare and insurance platform Medici, in its Series A funding round.

Meanwhile, Golden Gate Ventures, a Singapore-based VC fund, is establishing two offices in Vietnam to invest in the nation’s rising tech industry, which it believes could catapult Southeast Asia’s next phase of growth. Another VC fund, Quest Ventures, is also partnering with Enterprise Singapore to run a GIA acceleration programme to support Singaporean tech startups and small- and medium-sized enterprises in entering Vietnam.

Pham Duy Khuong, managing director of ASL Law, said, “It is difficult to predict the trends in 2023. Still, Vietnam remains appealing for investors from Japan, South Korea, and particularly Singapore.”

Domestic corporations turn to global credit financing sources Given current challenging fundraising and bleak merger and acquisition circumstances, a number of Vietnamese groups are looking to financing sources from overseas credit facilities to strengthen their resilience in the face of market fluctuations.

Experts look to 2023 for top M&A deals Although the merger and acquisition market in Vietnam has been slow going in 2022, opportunities next year should be abundant even despite concerns from prolonged global economic storms, according to various insiders.