Dealmaking activities in healthcare have been ramped up across all subsectors that have stayed resilient during the prolonged pandemic.
|Health awareness adds to potential in funding, illustration photo |
Huong Trinh, managing director and head of Ho Chi Minh City at BDA Partners, told VIR that healthcare in Vietnam is remaining an attractive sector for foreign investors. “Recent outbreaks of the pandemic might put a temporary halt on progress in economic transformation but will not reverse ongoing socioeconomic changes,” Trinh said. “A bourgeoning middle class with an increased health awareness in response to the pandemic will continue to propel demand for higher standards in all aspects of healthcare.”
For all of its negative impacts on society, the pandemic also brought about positive changes in health awareness among Vietnamese people, whose rapidly-growing spending power will continue to provide headroom for the expansion of the private healthcare market.
“We believe that during the pandemic and also in the long term, private healthcare services will still remain popular for merger and acquisition activities in Vietnam, as foreign investors continue to be keen on private hospital and clinic assets in the country, understanding their potential given the issues of overcrowding within the public healthcare system,” she added.
In recent years, private hospitals and clinics have gained more reputation and trust from Vietnamese people with Vinmec, FV Hospital, and Hoan My being notable examples, and assets in this segment have been actively attracting inflows of capital. Last year, a GIC-led consortium invested in Vinmec, while Vinacapital funded Thu Cuc’s network of hospitals and clinics.
Additionally, the dental clinic sub-segment will continue to attract investors with newly established chains with high-quality facilities and well-trained dentists, especially in a post-pandemic world when travel restrictions are eased, given Vietnam’s strong potential as a dental tourism destination. Other specialised clinics focusing on certain other medical fields such as gastroenterology, physiotherapy, and pediatrics are also in strong demand, Trinh claimed.
Private dental care providers are expected to capture market share from mom-and-pop clinics and public hospitals. In early 2021, Kim Dental successfully raised primary capital from ABC World, a transaction with BDA Partners acting as an exclusive financial advisor to Kim Dental.
According to Fitch Solutions, healthcare spending in Vietnam is expected to reach $23 billion by 2022. The growing demand for high quality healthcare will provide and require further growth opportunities for private healthcare providers, as concerns about the lack of capacity within the public system remain unaddressed. In addition to healthcare, pharmaceuticals, as a defensive sector, has continued to see a steady pipeline of deals from both financial sponsors and strategic investors during the pandemic, with examples such as SK Group’s investment into Imexpharm and Aska Pharmaceutical’s investment into Hataphar.
Research by BMI Research reveals that Vietnam’s pharmaceutical industry could reach $7.7 billion in 2021 and $16.1 billion in 2026. The industry is set to benefit greatly from the government’s national strategy to promote domestic manufacturing, which aims to increase the market share of locally produced pharmaceuticals to 80 per cent.
Furthermore, the decrease in direct human interaction as a result of the pandemic has also brought healthtech into the spotlight, given the increased demand for virtual healthcare services. Remote medical examinations and digitalisation of medical records have been among the key focuses of the Vietnamese government, as evidenced in the approval of a five-year project to establish a national distance healthcare network involving 24 hospitals, according to Trinh of BDA Partners.
As part of the project, mobile apps will be developed to allow storage of medical records and enable users to make appointments and consult doctors through video chat. In the private sector, healthtech startups such as JioHealth and Med247 have recently successfully raised funding from foreign investors, highlighting the prospect of this relatively nascent segment in Vietnam.
“With the swift progress in technology adoption in the country, healthtech is still behind other tech-related sectors such as payment processing or e-commerce in terms of investments and development progress, and thus there is still a lot of room for foreign investors to add value,” Trinh noted.