Quality can shine through in Japanese M&A developments

Could you shed some light on the outbound merger and acquisition (M&A) activity from Japan to Vietnam last year?

Masataka “Sam” Yoshida

According to our latest data, the deal value involving Japanese investors in Vietnam declined significantly ($167 million in 2024 versus $1.55 billion in 2023), while the 2024 deal count of 21 transactions was two higher than that of 2023.

The deal value in 2023 was exceptionally high with SMBC’s investment in VP Bank, while no such mega deal between Vietnam and Japan was announced in 2024. In the banking and finance sector, because major Japanese players already have strategic investments in Vietnamese partners, it has become more difficult than before to make a new match between Japanese and Vietnamese companies in this sector. In addition, the real estate sector remained relatively quiet again in 2024, which was also part of the reason for less deal value.

Actually, in most of the transactions between Vietnam and Japan, the deal value was not disclosed, so we usually look at the number of transactions for the indication of the levels of market activities. There is a small but steady increase in deal count in 2024 over 2023. This indicates that the basic sentiment of the market has not changed despite negative factors, such as global geopolitical tensions and potential customs duty increases.

We witnessed Japanese transactions in a broad range of sectors in 2024, including IT/software, education, healthcare, distribution/retail, and manufacturing.

What is the outlook for major deals involving Japanese investors in 2025?

In January, AEON Financial Service was approved by the State Bank of Vietnam to scoop up the entire stake in Post and Telecommunications Finance from SeABank. AEON Group has been successful in developing retail and credit businesses, in Japan as well as Southeast Asian countries like Malaysia. The expansion of the credit business by AEON in Vietnam is expected after the impressive success in the retail business.

In terms of major M&A deals in 2025, we are expecting more interest from Japan in such sectors like energy, fintech, education, and retail. The manufacturing sector also attracts more investments in Vietnam due to the need to shift production from China, but greenfield investment is considered more often, in which case the Japanese companies can fully control the product quality and manufacturing process though it usually takes more time than M&As.

The long-term growth differential between the young and growing Vietnamese economy and the fully matured Japanese market remains obvious, and the Japanese companies in almost all the sectors are increasingly interested in making entries to this country to capture the growth potential.

However, for non-Vietnamese investors, the dealmaking approval process often causes unexpected delays in completion. We are aware that some transactions fall away after the parties fully agree on the terms, even though the seller and buyer are cooperating closely to complete the transactions as soon as possible.

What are some catalysts for Japanese dealmakers to acquire Vietnamese assets, particularly in relation to high-tech industries and supply chain diversification?

The AI wave has the potential to influence Japanese dealmakers evaluating acquisitions in Vietnam. The country’s AI sector is expanding rapidly, with companies such as FPT Corporation, VinAI, and Viettel AI driving advancements in automation, cloud computing, and AI-driven business solutions.

Vietnam’s cost-effective talent pool and growing innovation ecosystem present clear opportunities for Japanese firms seeking to expand their presence in high-tech industries. However, despite its rapid evolution, Vietnam’s AI ecosystem remains in its early stages. Investors are likely to remain cautious about market maturity, scalability, and intellectual property protections before making significant commitments.

Further supporting high-tech investment, the recently created investment support fund offers cash grants and tax incentives for semiconductors, AI, and research and development projects. While this policy underscores Vietnam’s commitment to attracting foreign investment, its success will depend on transparent execution, regulatory clarity, and ease of access for investors. Japanese dealmakers are likely to adopt a wait-and-see approach, assessing how efficiently the fund operates before committing to major acquisitions.

Beyond these high-tech drivers, Japanese companies are also motivated by supply chain diversification amid persistent geopolitical uncertainties. Vietnam’s strategic location and extensive free trade agreements position it as a compelling alternative to other manufacturing hubs, particularly for companies looking to reduce reliance on China. Steady economic growth and an expanding consumer base will also continue to attract Japanese interest in retail, financial services, and logistics.

Vietnam M&A Forum 2024 reveals new opportunities The 2024 Vietnam M&A Forum, themed 'A Blossoming Market', is taking place at JW Marriott Hotel & Suites Saigon in Ho Chi Minh City on November 27.

The key factors shaping Vietnam's M&A market for 2025 Nguyen Cong Ai, senior partner of Deal Advisory at KPMG Vietnam, delivered his keynote speech at the 2024 Vietnam M&A Forum on November 27, highlighting the key factors shaping the outlook for next year.

Banking mergers and acquisitions drive Vietnam’s future aspirations If the activities and initiatives over the past few years are any indication to go by, we can safely say that the Vietnam’s banking sector will be entering a transformative phase in 2025 and beyond, marked by significant mergers and acquisitions (M&A) that have reshaped the industry landscape over the past few months.