Could you shed light on the landscape of merger and acquisition (M&A) activities by Vietnamese firms in 2023?
Domestic companies have become more active in M&A activities. They have gradually transitioned into a phase of maturity both in terms of scale, positioning them as viable buyers for acquisition and consolidation initiatives, and also awareness and application, where business owners understand M&A is a rewarding and appropriate corporate development strategy if done right, which ultimately shaping their deal-making decisions.
We estimate that about 17 per cent of inbound and outbound transactions in the first 10 months of 2023 were conducted by Vietnamese companies.
M&A activities of Vietnamese firms in 2023 have seen a strong focus on IT, high-tech manufacturing, and consumer sectors in both domestic and cross-border transactions. Notable domestic deals are FPT acquiring Cardinal Peak with an undisclosed minority stake, VinFast’s $456 million merger with Vin Energy Solution, Duc Giang Chemical’s $5.7 million investment into Tiasang Battery, and KIDO Group acquiring 68 per cent stake of Tho Phat.
Do you see a rise or fall in M&As by local companies amid the challenging economic environment?
Despite the current economic complex conditions, healthy and strong companies can still take charge and gain prominence and we see a potential increase in Vietnamese companies’ M&A activities. Navigating opportunities and challenges to mitigate risks and foster investment returns is more crucial in the current market fluctuations.
Ongoing economic and geopolitics uncertainties introduce complexities in decision-making. The lingering effects of supply chain disruptions pose challenges to revenue recovery, economies of scale, and the efficiency and cost-effectiveness of M&A activities.
A major problem we observed is determining reasonable valuations and how to bridge the gap between the expectations of business owners and investors, as a majority of businesses have still yet to recover from the pandemic impact, with top-line and bottom-line of many companies are not fully recovered.
Nevertheless, not all companies suffered and instead benefited and therefore presented a range of opportunities for market consolidation as companies seek to strengthen their positions through strategic M&A.
While foreign investors are facing issues with their central banks tightening credit policies and an unfavourable global economic environment, windows of opportunities are wide open for domestic players in certain sectors. These include agriculture, manufacturing, healthcare, and logistics, where growth is anticipated and M&A activities hold the potential for sector-specific expansion and market positioning.
What are the strengths of Vietnamese firms in the M&A market and how they can achieve successful transactions?
In one of our ASART’s recent research, it showed that Vietnamese firms have been acquiring others since the early 1990s, however with a modest total number of transactions and value executed, M&A has not been a major or regular activity for them over the last 30 years, and so they are considered to be the young players in the field where many have already been professional.
Despite being the young players, Vietnamese companies are quite ambitious and strategic in their M&A moves while able to control and utilise resources. These are certain strengths that with overtime and additional catalysts can help them succeed in the market.
There are many areas of expertise needed and many things to be considered for an M&A deal to be successful. It is also an area where theories alone are not enough, and only practice can make it perfect. For example, it typically takes someone around 10 transactions, from start to finish, to understand a typical transaction, and it takes a lot more for that someone to lead and orchestrate a transaction.
The same thing applies to companies, they will need a lot of practice and experience for their long-term success. One way to mitigate risks and increase the chance of long-term success while waiting for the “practice makes perfect” would be having the right M&A lead advisors and team in place.
They will need to understand why M&A is the right strategy for their organisation, what are the outcomes they wish to see with the deal, and not leaving many unknown factors unattended or emotionally driven. Understanding valuation correctly will also help them arrive at a successful deal faster. They will also need to diligently follow and not skip necessary steps, including planning carefully for all steps including pre and post preparation.
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