M&A still in vogue despite economic headwinds

With only three months of the year left, how has Vietnam’s M&A for 2023 fared so far?

Huong Trinh of BDA Partners

Over the second and third quarters of 2023, a number of M&A transactions with deal size of over $100 million were announced. Some notable deals are the investment of up to $500 million into Masan Group Corporation led by Bain Capital, the $381 million acquisition of FV Hospital by Thomson Medical Group, and the investment into Xuyen A Hospital by Warburg Pincus.

In addition, there are ongoing sizable M&A transactions across the consumer, healthcare and education sectors, which have received strong interest from both strategic and financial investors and are likely to reach the signing stage in the next six months.

Even though the total deal volume in 2023 might be impacted, the average transaction value based on recent transactions has increased significantly. The healthy deal flow emphasises investors’ confidence in the market’s long-term growth potential.

As local businesses are struggling amid a challenging economic outlook, do you see foreign investors stepping up their M&A transactions here?

Despite various macroeconomic challenges, Vietnam is expected to achieve a GDP growth rate of 5-6 per cent in 2023. The macroeconomic environment and consumer demand are expected to start to recover in the first half of 2024.

Foreign investors, despite the market’s weakening performance in 2023, continue to source and monitor the investment opportunities in Vietnam. There has been a long-term view that Vietnam is one of the most attractive markets for investment in Southeast Asia thanks to its favourable demographics, resilience, as well as government efforts in improving the investment environment.

Inbound M&As remain vibrant in banking, healthcare, renewables, and real estate. Why do these sectors remain a target?

Vietnam’s favourable demographics, stable socioeconomic environment, increasing disposable income, and improving investment environment remain key factors that underpin the inbound investments into the banking sector, such as the $1.5 billion acquisition of a 15 per cent stake in VPBank by Sumitomo Mitsui Banking Corporation, and the $850 million acquisition of 15 per cent stake in BIDV by KEB Hana Bank.

Notable deals in the healthcare sector are the acquisition of FV Hospital by Thomson Medical Group, the investment into Xuyen A Hospital by Warburg Pincus, AIH by Raffles Medical Group as well as Singapore’s sovereign wealth fund GIC’s investment into Nhi Dong 315, a Vietnamese pediatric clinic operator.

In the renewable energy sector, Vietnam witnessed the $165 million acquisition of a 49 per cent stake in Vietnam solar platform Solar NT from Super Energy Corporation by AC Energy Corporation, and the $108 million acquisition of a 35 per cent stake in Gia Lai Electricity by JERA.

Regarding real estate sector, there is the $250 million investment into Novaland led by Warburg Pincus, along with the $650 million investment into Vinhomes by KKR. We expect that M&A activities in these sectors will continue to increase in the future.

Do you expect any shift in investor interest in emerging fields in Vietnam, such as electronics, semiconductors, and electric vehicles?

Yes, we have seen increasing interest in these areas as a result of Vietnam’s unique positioning - strategic location, skilled workforce, cost advantages, and stable socioeconomic environment.

Following the supply chain diversification which started during the pandemic, and increasing global demand for these products, Vietnam continues to invest in infrastructure and technology to become a major industrial hub in Asia. The government has taken a proactive approach in developing these new sectors.

In August 2023, the Ministry of Transport submitted its proposal on special incentives for electric vehicle (EV) producers and users to a deputy prime minister.

These incentives included preferential special consumption tax, exemption of licence plate issuance fees, preferential import tariffs on equipment, production lines and components for the production and assembly of EVs and batteries, and a $1,000 incentive for each EV purchases.

As for semiconductors, while it is not a new area as foreign players, Samsung, Amkor Technology, and Hana Micron have already established presence in Vietnam.

Such moves have been in the spotlight recently, being a key topic of discussion at the Vietnam – US Summit in September 2023.

The Vietnam – US comprehensive strategic partnership and the government support will help Vietnam’s semiconductor industry to develop further.

M&A activity likely ahead within real estate sector With lower cash flow, bonds tightened, and interest rates hiked, mergers and acquisitions are being considered an effective solution to help real estate businesses in difficulty.

Landmark M&A transactions highlight hospitality allure The hotel and resort segment is proving enticing to foreign investors in mergers and acquisitions.

Vietnam heads regional M&A bounce The end of 2023 is forecast to be an exciting time for mergers and acquisitions in the real estate sector, which is set to help domestic enterprises lower their debt repayment pressures.

Japanese investors won’t shy from possible M&As Despite market turbulence, Japanese investors are stepping up their mergers and acquisitions in Vietnam in 2023 with increasing deal values. Masataka “Sam” Yoshida, head of the Cross-border Division of RECOF Corporation, spoke with VIR’s Thanh Van about dealmaking activities involving Japanese investors in Vietnam.