M&A expected to soar in second half

News of a couple of big M&A deals are warming up the market

During the pandemic, investment into M&A reduced significantly, while newly-registered and additional investment decreased by a smaller rate, with occasional rises.

The foreign direct investment (FDI) report of the Ministry of Planning and Investment’s Foreign Investment Agency (FIA) in the first four months showed significant decreases in capital contributions and share purchases, with 1,151 instances (down 64.1 per cent) and a total investment of $1 billion (down 57.8 billion).

This can be explained by the fact that the economy and investment activities in the country were not yet impacted by COVID-19 in the first few months of 2020, so FDI and M&A activities were still quite dynamic during that time. Specifically, $827.3 million was poured into the economy through capital contribution and share purchases in the first two months of 2020, and the figure surged quickly to $2 billion in the first quarter and $2.48 billion in the first four months.

However, after one year hit by the pandemic, the FDI mobilisation and M&A deals' value in the first four months of 2021 has reflected the worry of foreign investors.

“Amid the economic and financial instabilities during the past year, it is understandable that investors are holding their money and think a lot more before making any large investment decisions,” Nguyen Viet Cuong, an FIA senior expert, explained, but saying that FDI mobilisation in the first four months of 2021 was acceptable, compared to other countries.

“While there was a decline in the number of deals and M&A deal value in the first four months, the value of capital contributions and share purchases has soared by 10-30 per cent on-year,” added Cuong.

The average value of capital contributions and share purchases in the first quarter and four months of this year was estimated at $1,1 million and $870,000, respectively, while they were $793,000 and $772,000 last year.

According to the FIA, between January and April, industries like processing and manufacturing; real estate; wholesale, retail, vehicle repair; science and technology and professional activities have seen hundreds of M&A deals with hundreds of millions of dollars in value.

Singapore and South Korea were the biggest M&A investors with $265 million and $258 million these months, followed by Thailand, Taiwan, and Japan.