Environment strong for ready-money investors

The last few years globally have greatly affected economic and investment activities. How do you assess the market in Vietnam for mergers and acquisitions (M&A) in recent times?

Nguyen Cong Ai, senior partner at KPMG in Vietnam

The scale of the M&A market is slowing down in terms of the number and value of deals. In 2021, there were more than 700 deals, but in the 10 months of 2022, the number was only about 350. The average value of a deal also decreased from $31 million to about $15 million. There were plenty of billion-dollar deals last year, but the highest value of a deal this year was around $500 million.

According to data from KPMG, so far in 2022, the total value of M&A deals reached $5.7 billion, down 35.3 per cent on-year. Singapore is the leading country with about $1.2 billion in cross-border transactions, followed by the United States at $570 million and South Korea with $370 million.

Similar to 2021, transactions continued to be led by Vietnamese businesses with a value of more than $1.3 billion. The main fields that attract the most investment are consumption ($1.2 billion), real estate (nearly $1 billion), and industrial production ($800 million).

Particularly, the energy industry is the hottest in 2022 in terms of value growth, reaching nearly $600 million. This is an increase of six times compared to the whole of 2021.

Investors are concerned about this year’s not-so-positive M&A report. Will the market fall into a hibernation state in the near future?

In the current difficulties around the world, borrowing money for M&A activities is not as easy as before. Costs of investment of South Korean and Japanese investors have multiplied 20 times due to the changes in foreign currency exchange, and so it is a challenge for them.

Entering a recession, the US grew negative in the last two quarters. It did turn positive this past quarter but it is not yet sustainable growth so it is impossible to predict how the next quarter will be. Therefore, KPMG recommends our partners should be cautious, not expand, and not spend money at this time.

However, the global economy is struggling, but not all economies are in trouble. The US and Europe fell into recession, but there are still bright spots. For example, the Gulf countries are now enjoying high income from oil prices, and they have a lot of money and are willing to invest.

In Vietnam, the economy is also experiencing many fluctuations. The stock market is struggling with legal issues, and investors are hesitant to spend money, so the M&A market will have quiet periods in the near future. But this may be an opportunity for investors that have a lot of available money to buy attractive projects in new perspectives on property valuation that is much more affordable than before.

This will be a good chance for buyers and investors with available money, especially foreign investors because we see that the domestic money source is increasingly limited as interest rates of banks are on the rise.

On the other hand, Vietnam’s economy is evaluated positively by foreign investors and international organisations compared to the region and beyond. Vietnam’s GDP growth this year is expected to grow by 7.5-8 per cent and it may be 6.5 per cent in 2023, which is quite bright. So, we still provide an optimistic assessment of the M&A market in Vietnam.

Although this year’s M&A arena is quieter than the excitement of 2020-2021, it does not mean that the market will fall into hibernation in the time coming. Some businesses will be able to make positive moves, break the ice, and stir up the market to a vibrant status.

In KPMG’s private resources, there will be M&A opportunities in the financial services sector – some deals have been negotiated on for many years, and will head into the closing stages in 2023. Financial services will be a very hot industry next year; for example, big banks like BIDV and VPBank, as well as smaller ones like Ocean Bank and Nam A Bank, are now in need of capital mobilisation.

In general, industries related to the retail market in Vietnam are promising land. I believe that the M&A market will prosper soon.

How do you see the positive trends affecting the M&A market in the coming years?

The wave of digital transformation is positively affecting the entire livelihoods of people as well as businesses. The continuous rise of the middle class is leading to a sharp increase in consumption and shopping demand. And the trend of greening the economy is getting more popular as it helps reduce carbon emissions.

In these fields, there will still be many opportunities for both buyers and sellers in 2023, following exciting deals in retail, commerce, and consumer goods in recent times. Sectors such as real estate and energy will also get vibrant again with the increasing participation of Vietnamese businesses as buyers.

FDI inflow from RoK helps Vietnam move up global value chain ladder The strong foreign direct investment (FDI) inflow from the Republic of Korea (RoK) has been giving a significant push to Vietnam in the battle to move up the global value chain ladder and promote sustainable development.

FDI inflows reach 22.46 billion USD in 10 months Foreign capital inflows fell whereas disbursed capital rose in the first 10 months of 2022, according to the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment.