Investors battle for private equities

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For the first half of 2016, overseas funds have carried on their fierce battle for private equity (PE) investments in Vietnam. The largest deal, valued at $30 million, took place between VinaCapital - DEG and An Cuong Woodworking JSC in June.

Prior to this deal, the Vietnam Opportunity Fund (VOF) of VinaCapital has invested $45 million in International Dairy JSC with Daiwa PI Partners and $10 million in Thai Hoa Hospital. VinaCapital noted that it would continue to seek foreign co-investors in future PE deals, as the private sector showed good growth potential.

“Our latest investee An Cuong JSC is similar to Kido Group and Hoa Phat Group, which used to be private medium-sized firms when they received our capital. Throughout the years, both firms have grown to be large corporations in the Vietnamese business community,” said Don Lam, chief executive officer of VinaCapital.

Also this month, Mekong Enterprise Fund III of Mekong Capital has poured $6.9 million in the restaurant chain Wrap and Roll. This is the first deal announced for the $112-million fund, which was launched in June to invest in fast-growing private firms.

Partner of Mekong Capital Chad Ovel noted that Wrap and Roll had applied the best practices seen in large international restaurant chains, providing a foundation for the firm to grow at a rapid rate. Apart from Wrap and Roll, Mekong Enterprise Fund III would continue to focus on consumer-driven businesses such as retail and consumer products.

Further back, Saigon Asset Management acquired 15 per cent of stakes in My Chau Pharmacy, a leading pharmaceutical distributor in Ho Chi Minh City and other cities. With the new capital, My Chau plans to expand its network to 80 pharmacies around Vietnam in the next three years.

It is notable that the majority of PE deals in Vietnam belong to consumer-driven sectors. Indeed, according to a recent survey by Grant Thornton Vietnam, retail, food, and beverage are considered the most attractive industries for PE transactions in Vietnam. Overall, the survey concluded that private companies remained a significant drive behind Vietnam’s economic growth and inbound investments.

According to Peter Sorensen, managing director at Hanoi-based corporate and investment consulting firm ABB Merchant Banking Vietnam, last year was marked for Vietnam’s mergers and acquisitions (M&A) market with total deals valued at $5.2 billion, and it was also ABB’s busiest year since its establishment.

ABB Vietnam has seen growing interest from Thai, Japanese, and South Korean investors for Vietnamese retail, distribution, consumer goods, agribusiness, and financial services fields. The firm was particularly impressed with the active participation of PE funds into the Vietnamese M&A market in the first half this year.

In one telling move, Navis Capital - a $5 billion fund which mainly operates in Southeast Asia, and holds governing stake in 70 companies - has acquired Hanoi French Hospital for an undisclosed value.

“Formerly, Asia’s PE funds often took part in non-dominant stock purchases at Vietnamese firms. Today, they are willing to pay more to boost margin rates and cushion the growing pressure from a limited number of good deals,” Sorensen commented.