M&A, the way for local players to grow after COVID-19

Local businesses are reaching for M&A in increasing numbers to scale up operations

M&A has been a favoured channel for foreign investors to penetrate the Vietnamese market. But in the new normal, it has become a means for domestic enterprises to fast-track their growth.

More favourable institutional reforms and policies are required for local businesses to grow into conglomerates and dive into the global market. M&A is an open playing field where they can realise these ambitions.

In the past, M&A deals were mainly featuring foreign investors on the buyers' side while domestic companies primarily acted as the sellers or the 'prey'. Things are different now. A string of Vietnamese enterprises has turned the tables to become the 'hunter' pursuing an aggressive M&A strategy to go regional and global.

Masan Group was one of the first to stir up the retail market through M&A, THACO has boosted investment in agriculture through acquisitions, while Vinamilk has picked the channel to go global. Meanwhile, Vingroup is refocusing on its industrial ecosystem by acquiring research and development capabilities across the globe. At the same time, NovaGroup has been reinforcing its multi-disciplinary ecosystem under its sustainable development strategy.

At the online seminar on M&A held by VIR yesterday, Phan Duc Hieu, standing member of the National Assembly Economic Committee said that the resurgence of local forces is lead by Vietnam's flagship corporations. Local players are on a drive to improve their competitiveness in both the domestic and foreign markets. A number of Vietnamese corporations have been actively conducting M&A transactions overseas – and "are very wise to do so."

The upsurge of Vietnamese businesses has brought the market to an inflection point, he added. The ratio of Vietnamese companies acting as buyers in M&A deals has jumped from 11.8 per cent in value in 2018 to over 30 per cent in 2019-2020. The most prominent M&A deals between 2019 and 2020 all bore the marks of Vietnam's leading private companies as overseas transactions were held up by COVID-19 complications.

Pham Van Thinh, CEO of Deloitte Vietnam said that local companies have long been preparing to step up their M&A game. "They have even hired professional teams to support their strategy, which has generated great values for them. Efforts have been made to mobilise capital and identify suitable investment targets," urged Thinh.

The increasing role of domestic companies as both buyers and sellers in the M&A market has made significant contributions to the rise of the country's leading corporations, enabling them to go further and play a larger role in the M&A game.

The resurgence and "maturity" of domestic groups are felt through their market and their approach and conduct throughout M&A activities. More proactive participation has helped local corporations to shape and even transform many economic sectors.

Meanwhile, Nguyen Thai Phien, deputy CEO of NovaGroup, shared that the company pursues an M&A strategy to find potential businesses and well-developed platforms, which could help the group to expand its revenue, profit, and market share, thus perfecting the NovaGroup ecosystem for customers' benefit.

"We are seeking cooperation opportunities with those capable of joining our culture and ecosystem, sharing the same foundation and core values, and capable of contributing to our sustainable development goals," he explained.

Meanwhile, the ambition of Masan Group is to represent Vietnam in the overseas M&A market. "We have had hundreds of brands carry out an array of M&A transactions in Vietnam, as well as in Europe and other foreign markets. We conduct M&A deals with both upstream and downstream companies, which has helped reinforce our structure and boost digital transformation, which is also expected to underpin exponential growth," Danny Le, CEO of Masan Group said.

Companies can leverage M&A to swiftly ramp up their presence in new markets or industries, while enlarging their market share and penetrate deeper into value chains. A proper M&A strategy can act as a vital tool for businesses to overcome challenges and grow robustly in the current context and the coming years.

"Certainly, M&A activities in the pandemic will create a foundation for the Vietnamese economy to have more powerful economic groups building a value chain for a breakthrough," VIR's editor-in-chief Le Trong Minh said.