M&As working in tandem with health development

Q4 of 2024, however, has seen a marked uptick in M&A activity in Vietnam, across a range of key industry sectors. Transaction pipelines, general outlook, and investor sentiment all currently point towards a strong 2025.

Justin Gisz and Phong Nguyen Partners, Asia Counsel

Earlier in 2024 and in 2023, a number of key industry sectors continued to perform comparatively well, despite the relatively low levels of M&A activity overall. Arguably foremost among these standout areas was the healthcare sector, which has experienced impressive activity in a number of key subsectors such as hospitals, specialist clinics, polyclinics, telehealth, medtech, pharmaceutical, medical equipment distribution, and healthcare-related logistics.

Investors of varying types and sizes have shown great interest in Vietnam’s healthcare sector during the last two years, and this trend looks set to continue into the foreseeable future. Private equity funds and regional or multinational corporates have been at the forefront of recent investment activity in Vietnam’s healthcare space, and interest from these key categories shows no sign of abating.

Significant transactions involving high-profile investors such as Thomson Medical Group, KKR, and ASKA Pharmaceuticals are indicative of the exceedingly strong market fundamentals which sophisticated investors see in Vietnam’s healthcare sector. In addition to the big picture fundamentals of Vietnam’s large, aspirational, and increasingly wealthy and health-conscious population, the comparatively under-developed status of Vietnam’s healthcare sector (which remains to a significant extent dominated by state-owned hospitals), serves as a strong attractant for foreign and domestic investors alike.

The Vietnamese government has also made clear its commitment to the development of the healthcare sector, including by introducing new laws designed to foster private investment in and modernisation of the sector. For example, the new Law on Medical Examination and Treatment, which came into force in January, has introduced a number of welcome reforms, including in relation to tightening of professional standards among the medical fraternity, the digitalisation of the medical sector, and recognition of the telemedicine sub-sector.

In addition, the draft new Law on Pharmacy, which is expected to be passed by the National Assembly soon, appears set to introduce a number of welcome reforms applicable to pharmaceutical business, including the establishment of an improved framework for foreign investment and participation in the pharmaceutical sector. The entry into force of the new Law on Pharmacy is expected to give rise to a significant increase in foreign investment activity in Vietnam’s already vibrant pharmaceutical sector.

Of note is the rapid and continuing emergence of specialist clinics and polyclinics, throughout Vietnam and particularly in the major metropolitan centres. An unusual feature of healthcare practices in Vietnam has historically been that many people’s first point of medical consultation was often the local state-owned hospital (as opposed to the scenario in many other jurisdictions, in which a local general practitioner at a non-hospital clinic is normally the first point of medical consultation).

The population is clearly beginning to embrace the concept of seeking initial care from GPs at local clinics, and the market has responded decisively to this increase in demand by developing and modernising specialist clinics and polyclinics. Strong and sustained growth in the specialist clinic and polyclinic sub-sectors is expected in the upcoming years.

There are approximately 1,400 hospitals throughout Vietnam, of which only about 17 per cent are privately owned, which is a modest number, when considered in the context of the size of Vietnam’s population. Vietnam’s per-capita healthcare expenditure in 2017 was approximately $170, and it has been estimated that this is likely to grow to approximately $400 by 2027.

Approximately 90 per cent of medical devices in Vietnam are imported. These numbers assist in providing insight as to the investment opportunities which abound in Vietnam’s healthcare sector and which to date have been tapped only to a limited extent.

There can be no question as to the current strength and enormous growth potential of demand in the Vietnam market for international standard healthcare services and products, across all the key healthcare sub-sectors. The Vietnamese government is to be commended for having laid the regulatory groundwork to attract the huge volume of investment which is required to meet this ever-increasing demand.

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