Notable new inked M&A deals set tone for the rest of the year

Notable new inked M&A deals set tone for the rest of the year, illustration photo/ Source: freepik.com

Last week, JB Securities Vietnam, the subsidiary of South Korea’s JB Financial Group inked a deal to acquire a 3.9 per cent stake in Vietnamese financial service provider Infina. The firm plans to increase the ownership to a 5 per cent stake in line with the performance of the partnership with Infina in the near future.

JB Securities Vietnam is specialising in stock trading, brokerage, corporate bond issuance and investment with the launch of Finavi online brokerage platform last September. Meanwhile, Infina is a leading financial platform centred in asset management, serving around 1.3 million customers and 500,000 monthly active users.

Following the deal, the two sides formed a partnership to collaborate on fintech in Vietnam. The deal is part of JB Securities Vietnam’s plans to expand presence through strategic collaboration with the Vietnamese fintech firms.

Another key deal is KKR’s acquisition of a majority stake in one of Vietnam’s biggest eye hospital chains, Medical Saigon Group, from Singapore’s investment firm Heliconia Capital.

Also, Be Group has raised $30 million from VPBank Securities to strengthen its competition with Singaporean rival, Grab. Once the deal is completed, VPBank Securities will hold a minority stake and be the first institutional investor of Be Holdings, the parent company of Be Group.

A representative from VPBank Securities said, “By officially becoming a shareholder of Be, VPBank Securities anticipates that this deal will bring great investment return by riding on the potential presented by the multiservice consumer platform Be, which is one of the frontrunners to become one of Vietnam’s technology unicorns.”

Meanwhile, Public Bank Vietnam Limited, a wholly owned subsidiary of Malaysia’s Public Bank Berhad, is acquiring an entire stake in RHB Securities Vietnam Company for about $15.2 million. Meanwhile, Finland’s Pyn Elite Fund has just finalised the acquisition of a 12 per cent stake in DNSE, a technology-based stockbrokerage company in Vietnam.

“With high level of capital and liquidity still at their disposal from previous fundraises, private equity investors have maintained their capacity and appetite to invest in Vietnamese assets but remain cautious in their investment strategy compared to two to three years ago,” Julien Curtet, a senior executive at Index Partners, told VIR. “Merger and acquisition (M&A) activity has been slow at the start of 2024 with deal tractions expected in the second half of 2024 once the market has a better view on the macroeconomy overall and a better understanding the companies’ financial performance in the context of a recovery from a difficult 2023.”

On February 28, Thailand’s SCBX Group announced the acquisition of Home Credit Vietnam in a deal worth at $860 million. (see below). Home Credit Vietnam has the second-largest market share in Vietnam’s consumer finance market, accounting for approximately 14 per cent.

According to the Foreign Investment Agency under the Ministry of Planning and Investment, as of February 20, the number of capital contribution and share purchase deals was 367, down 16.6 per cent on-year. The total value of these deals reached over $255.4 million, down 68 per cent on-year.

The slowdown is in line with the overall theme of 2023. In 2023, FiinGroup recorded 220 M&A transactions worth $5 billion, reflecting a 33 per cent decline on-year.

M&A activities in Vietnam experienced a decline during 2021-2023, due to global challenges that prompted investors to exercise caution.

In particular, the recent depreciation of the Japanese Yen posed a challenge for Japanese investors exploring new investment opportunities outside Japan. Besides this, the economic landscape of South Korea, a heavily trade-reliant country, faced a gloomy economic outlook in 2023, according to the Vietnam M&A Report 2024 released by FiinGroup last month.

Despite the quieter period at the beginning of the year, dealmaking is expected to be more robust going forward as buyers are on the lookout for potential assets to buy.

“Given the declining trend in the valuation of targets/assets, financial services, logistics, and especially environmental, social, and governance (ESG) criteria emerge as promising sectors in 2024,” said the FiinGroup report. “The financial services sector in Vietnam is expected to remain the double-digit growth in the upcoming time thanks to low service penetration rate and favourable demographic factors. Furthermore, the financial service sector poses a potential investment for foreign investors through M&A activities, with 14 active financial companies currently in the consumer finance market,” it added.

According to the report, Vietnam’s logistics industry is expected to witness a 15-20 per cent growth in the upcoming time, which is majorly driven by strong economic growth, rising manufacturing and e-commerce sectors, and favourable government policies.

In the waste and energy sector, ESG and recycling emerge as the most appealing subjects, given the country’s dedication to achieving net-zero carbon emissions.

Meanwhile, Index Partners predicts the M&A trend in the healthcare sector from previous years will be maintained over 2024.

There will be an ongoing trend of private equities investing in international private hospitals - for example, Warburg Pincus’ pending investment in Xuyen A Hospital and KKR’s majority stake investment in Medical Saigon Group.

Private equities investing is also expected in specialised clinics/hospitals, such GIC’s investment in Nhi Dong 315 in 2023, Excelsior’s investment in SIS HCM Stroke in 2022, and CVC’s 60 per cent stake in Obstetrics Hospital Phuong in 2022.

“Despite a difficult year in 2023, there are still strong fundamentals for a dynamic M&A/fundraising environment in the retail sector,” said Curtet of Index Partners.

“First is the digitalised middle class that has more purchasing power in tier 2-3 cities, such as Can Tho, Danang, Nha Trang, and Haiphong, in comparison to the surge of the middle-class only in tier 1 cities in the past. Second is the growing appetite from overseas investors bringing new sources and mediums of financing, as retailers are realising that significant investment and operating leverage are required to scale and concurrently achieve profitable economics,” Curtet said.

Industrial real estate gaining M&A interest Although not dominating in terms of the number and value of deals, the industrial real estate market is starting to record more interest in mergers and acquisitions from foreign investors.

Hopes raised for M&A improvement in 2024 With 2023 focused on finding a balance to move towards sustainable development, Vietnam’s mergers and acquisitions market is forecast to converge, ready for a new growth phase.