How would you evaluate developments in the M&A market in the last 10 years? Where do you see Vietnam in the regional M&A market?
|Pham Van Thinh |
2018 marks the 10th year of the journey of the biggest M&A forum in Vietnam—and a period of remarkable development for the Vietnamese M&A market. According to a recent report of the Vietnam M&A Forum (MAF) Research, total M&A value has reached $48.8 billion in the 2009-2018 period, and the market was 10 times as large in 2017 than in 2009. As can be seen, after 10 years of development, M&A has become a major channel for capital mobilisation, especially foreign investment.
The M&A market has grown both in the number and value of transactions. As for transaction size, the Vietnamese market is still dominated by small- and medium-sized transactions, with small transactions (under $10 million) accounting for over 90 per cent of the total number. Foreign investors continue to play a vital role in large transactions.
Despite the smaller size of the Vietnamese M&A market than its Southeast Asian counterparts, its recent growth rate has been especially strong. Particularly, there have been large M&A transactions among giant companies or groups whose size exceeds $1 billion in Vietnam.
The ceaseless pursuit of an open market economy by the Vietnamese government translates into the continuous expansion of businesses in which M&A can be effectively utilised to assist the businesses in accomplishing their goals and improving their competitive advantages. I believe Vietnam will remain an attractive market for investors, at least in the next 5-10 years. However, with the predominance of promising small- and medium-sized enterprises (SMEs) that do not have a clearly defined strategy and high transparency, in addition to their average market size, it seems unlikely that any significant growth in terms of transaction value would be achieved in the near future.
What do you think will incentivise the Vietnamese M&A market in the near future: state divestments, domestic private investors or foreign investors?
From an investor’s viewpoint, foreign investors will continue to lead the Vietnamese M&A market. However, domestic private investors would play an increasingly important role and will develop more proactive strategies, with the leading players being Vin-group, Masan, Sovico, and KIDO.
As for the “goods” in M&A transactions, the continuous divestment of the state from state-owned enterprises (SOEs) (over 400 during 2017-2020, according to the government’s plan), and the requirement to restructure the banking system would create a great supply for the market, in addition to private companies and foreign-funded companies.
The biggest challenge in the development of the M&A market remains the readiness of businesses. The appeal of factors like strategy, business plan, transparent information, human resources or business size will have a significant impact on the success of M&A transactions as well as the market growth in the future.
|The government's initiative to restructure the banking system will bring more M&A opportunities |
|As urbanisation shows no signs of stopping, real estate will continue to be in the focus |
Which sectors will drive M&A activities? How are the prospects of Vietnamese startups?
The domestic market, with almost 100 million people, can be extremely inviting, especially in light of the fast growth of the middle class and changes in consumer behaviour, especially among the youth. In recent years, the fast-moving consumer goods (FMCG) segment has attracted remarkable investments, and according to our prediction, it will continue to attract significant funding in the near future.
Real estate is also expected to continue drawing attention from investors. Together with the revitalisation of the economy, high population and urbanisation growth rates would be the major incentives for M&A deals in Vietnam.
Additionally, finance and banking is a potential field for M&A activities thanks to the coming reinforcement of the restructuring of the banking system.
As for Vietnamese startups, I believe there will be many opportunities for them, as venture investment funds are willing to invest. The Vietnamese government has always encouraged and facilitated the development of startups. The remaining issue is that startups must adopt clear goals and a strategic orientation in order to attract investment capital.
As a leader of Deloitte Vietnam-a reputable financial advisory firm providing M&A services-can you offer some recommendations for investors? In addition, looking back at the successes and failures, what do you think businesses need to pay attention to in their strategic management and post-M&A management to achieve success?
M&A is a tool to support the implementation of corporate strategy. Therefore, first and foremost, enterprises need to define strategies for their organisations. M&A plans will then be developed to fit and complement each organisation's strategy.
For sellers, the business needs to take specific steps to prepare for the sale, such as developing business plans, including short-, medium-, and long-term business plans, strengthening its corporate governance system as well as preparing financial information and personnel. For buyers, the determination of a business strategy in a market, especially in Vietnam, is crucial to how the business will invest, either directly or through M&A. Understanding the market and competitors will help businesses identify goals and prepare and implement the most effective M&A plans. For both sides, I always encourage businesses to seek help from professional advisors.
Strategic management and post-M&A management play a vital role, which is by no means secondary to pre-M&A preparation in ensuring that the transaction will accomplish its goals. Good post-M&A consolidation is crucial to the success of the transaction. Besides operation issues, management, and information disclosure, businesses should pay particular attention to factors concerning business culture, and have clear orientations on this issue after the M&A transaction. Furthermore, it is essential to prepare suitable core personnel to ensure the post-M&A strategy is implemented according to the goals specified.
What do you think about the role of advisors like Deloitte Vietnam in the success of M&A deals over the past 10 years in Vietnam?
Advisors have played a very active role in bridging buyers and sellers in M&A deals. By participating in both M&A cycles, advisors have helped businesses identify strategies, prepare plans, and implement them. Specifically, the advisors assist businesses in preparing information and valuation, while also helping organisations select and screen potential partnerships.
There will always be differences in the goals of sellers and buyers, so the advisor, as a bridge, will help the two sides understand each other's goals and cultures to reach a consensus. At Deloitte Vietnam, we take pride in having a team of highly experienced and highly qualified professionals with extensive knowledge of the industry and regulations to ensure a successful M&A transaction as cross-border transactions are becoming more common.