M&A route lends appeal for delay-ridden ventures

LDG Group is a developer with many unfinished projects that cannot be deployed in Ho Chi Minh City because of legal issues and cash flow. To solve the situation, chairman Nguyen Khanh Hung in June said he wants to mobilise capital from outside, and a merger and acquisition (M&A) is one potential method.

Vietnam boasting buoyant real estate M&A activities

“We are looking to finish legal documentation for two projects of the High Intela and the West Intela with a total of around 800 units which can be taken into M&A for other potential partners. This would be a good solution for LDG because these projects are small in scale, and LDG should leave them to drive focus towards improving its governance and construction capacity,” Hung said.

According to Do Duy Thanh, manager of Savills Hanoi Investment Advisory Department, M&As are considered a safe and beneficial solution for both parties because the domestic enterprise can solve the capital shortage, while foreign partners can reduce the legal risk when they can acquire legalised projects.

However, experts and businesses still admit that foreign direct investment (FDI) inflows into Vietnam’s real estate still face many challenges. “Two-thirds of foreign-invested enterprises in Vietnam today are large-scale with increasingly diversified and better quality forms. But in general, the amount of overseas capital over the years is actually not disbursed as committed,” Thanh said.

The biggest reason for ventures being on hold is the legal system. Thanh pointed to a typical example that condotel and officetel models, although attracting attention, do not have a full legal framework set up in Vietnam.

“The selection of foreign investors also needs to be carefully implemented and ensured, through the appraisal of financial capacity, total investment capital, implemented projects, business reputation, and investment criteria,” Thanh said.

For management authorities, the legislation for new types of real estate should be reviewed and foreign investment policies should also be adjusted to keep up with the fluctuations of the global economy.

Because of such issues, most large enterprises coming to Vietnam are looking to M&As with domestic enterprises, as advantages in the current domestic community include regional expertise, flexibility in capital flows, and at the same time, playing a pioneering role in new and suburban markets.

Some existing hurdles for M&A activities could be cleared this year. The Party issued Resolution No.18-NQ-TW dated June 16 with important new guiding points on the requirement to increase marketability, transparency, and efficiency in state management of land.

Once institutionalised and practically implemented, it is expected to bring a greater multi-faceted impact on Vietnam’s real estate market.

Vietnam saw a record $11.57 billion disbursement of FDI in the first seven months of 2022, marking the highest growth in five years. Real estate ranked second among the most invested sectors, accounting for 26 per cent of the total inflows. Groups from Singapore, South Korea, Denmark, China, and Japan are the leaders in terms of pouring money into Vietnam so far this year.

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Big M&A deals forecast in banking industry in 2022 Vietnam’s merger and acquisitions (M&A) market in 2022 is forecast to include big deals worth billions of dollars in the banking industry.

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