M&A arena expects growth next year

M&A arena expects growth next year, illustration photo/ Source: Shutterstock

Such views were outlined during a VIR talk show series looking at Vietnam’s merger and acquisition (M&A) market on November 15 and 20, with experts and investors saying they expected some growth despite the choppy economic outlook.

According to Binh Le Vandekerckove, CEO and head of M&A for ASART Deal Advisory, in 2024, the market will still be under pressure from the macroeconomic situation, as well as the stuttering global outlook.

“To reduce inflation, the US is trying to push interest rates to high levels, from zero to nearly 5.5 per cent. With the previous zero interest rate, investors had the choice to come to Vietnam with interest rates at 6-8 per cent. But now, the US has raised interest rates to 5.5 per cent, while Vietnam is under pressure in many aspects, so investors will have a wait and see attitude to investing in Vietnam. Throughout 2024, Vietnam will have to endure this pressure,” Vandekerckove said.

She confirmed that despite the desire of businesses to invest in the long term, now was a sensitive time for sides to sit together and come up with valuations and agree on a suitable price for an M&A deal.

“It is a relatively unstable geopolitical situation globally. We cannot know how the economic and political connections between countries will pan out,” Le said.

She believes that in a market with many uncertainties, the general psychology will be to do nothing and wait for a better time.

From the investor’s perspective, Khanh Nguyen, a business development director at Gamuda Land in Ho Chi Minh City, mentioned the project approval progress and challenges in developing Gamuda Land’s fund.

“We hope that the government will continue to remove obstacles so that Vietnamese businesses and investors can have legally completed projects to participate in the market and avoid supply shortages in 2024-2025,” Khanh said.

In addition, to develop the available land through M&A, Gamuda Land hopes to receive fully legal land according to the initial schedule set by the seller.

On the seller’s side, Khanh said the challenge will come from foreign investors. “Some investors bought land 5-10 years ago but could not yet develop it, and strategic investment funds believe it’s almost time to divest, so then they must enter the M&A field,” Khanh said.

Meanwhile, for domestic investors, Khanh also hopes that the price gap challenge will gradually narrow for successful transactions.

Besides the many existing challenges, Vandekerckove still evaluates that Vietnam as a bright spot in the region when production, trade, and economic activities from China have gradually shifted to Vietnam over the past three years.

“Vietnam is a stable destination in a rather unstable general picture, so we are attracting many investors from Japan, South Korea, America, and Europe. From an investor perspective, Vietnam is more stable and relationships with other countries are more extensive,” Le said.

“These are positives that have been and will continue to draw in investors to Vietnam. It is important that we have policies, open dialogue, and information exchanges so that foreign and domestic investors understand the policies to support them.”

Vandekerckove believes that the top five industries that will continue to be attractive to investors include consumption, finance, real estate, logistics, and medical services.

Meanwhile, Khanh said that macro premises and fundamental analysis show a strong foundation in Vietnam’s market and Gamuda Land will continue to be interested in investing in the country’s infrastructure.

“Next year, the government will have policies and programmes to promote public investment. Gamuda Land expects that Metro Line 1 in Ho Chi Minh City will come into operation after 2-3 years of adjustments. Similarly, Ring Road 3 is also an important route to connect Ho Chi Minh City with satellite provinces and cities,” Khanh explained.

Gamuda Land will follow the state’s actions and develop residential real estate in areas where infrastructure investment is key with a rapidly growing population, therefore, land in Ho Chi Minh City, Binh Duong, and Dong Nai province will also be promoted, Khanh added.

From an investor’s perspective, 2024 as a good opportunity for individual investors to invest in real estate, with better conditions offered by developers.

The banking and finance industry is also a bright spot, as 2023 saw a number of large deals in the sector. In addition, there is currently a trend of financial corporations entering Vietnam to find short-term or long-term investment in real estate, expecting a high rate of return.

Data from the Foreign Investment Agency under the Ministry of Planning and Investment shows that registered foreign capital reached $25.76 billion in the first 10 months of 2023, representing an on-year hike of 14.7 per cent, while disbursed capital posted $18 billion, inching by 2.4 per cent over the corresponding period last year. Of which, capital through capital contribution and share purchases exceeded $5.13 billion, recording an on-year surge of 35.4 per cent.

Manufacturing M&As continue to manifest Despite slowdowns, manufacturing is predicted to be one of the most attractive sectors for foreign investors to conduct dealmaking activities.

Range of Asian neighbours explore M&A potential Amidst the challenging environment, strategic investors from the likes of Thailand, Singapore, Japan, and South Korea continue to dominate merger and acquisition transactions in Vietnam.

South Korean M&A investment leans towards green and digital transitions Energy and infrastructure, as well as tech-related businesses, are emerging as the main sectors for South Korean merger and acquisition (M&A) investment in Vietnam. Cha Sung Wook, deputy director of the Korea Trade-Investment Promotion Agency’s Hanoi Office, talked to VIR ’s Bich Thuy about the current interest in the domestic market.