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|Range of sectors to feel impact of new transactions. Photo: freepik.com|
The new law transitioned to a notification threshold based on assets, revenues, and transaction values, which are more objective measurements and provide businesses with greater clarity about when these thresholds are fulfilled.
Thus, the number of notifications received by the Ministry of Industry and Trade (MoIT) has increased sharply. This stands in contrast to the Law on Competition 2004, when many businesses found it difficult to be certain of their notification obligations due to uncertainties. As a result, a large number of transactions have gone unnoticed in the past.
Of the 125 dossiers, approximately 30 per cent of the transactions reported to the MoIT were conducted outside of Vietnam’s borders. However, the new law clearly states that it applies to any acts by foreign individuals or entities that have or may have the effect of restricting competition in Vietnam’s markets. For some sophisticated cross-border transactions, the the Vietnam Competition and Consumer Authority (VCCA) consulted with a number of foreign competition authorities in order to exchange and share relevant information that could aid in the assessment of the impact or anticompetitive effects of those transactions on the Vietnamese market.
According to the report, 112 transactions were approved following preliminary examination (approximately 90 per cent), with the other 13 deals undergoing in-depth review.
Due to the new approach in economic concentration assessment, that requires the assessment of substantially lessening competitive effects, a higher degree of analysis and sophistication is demanded. In order to examine the possibility of an economic concentration transaction to generate significant lessening competition impacts, the VCCA collaborated and consulted with relevant authorities, units, and connected stakeholders during the preliminary assessments.
Over the past two years, such transactions in Vietnam have taken place in many sectors and fields, from manufacturing and trading to services. However, the real estate sector, which includes both residential and non-residential real estate, has the highest number of economic concentration notifications filed with the MoIT.
In 2019, the overall amount of economic concentration, commonly known as mergers and acquisitions (M&A), in Vietnam was $7.2 billion, representing a 94.7 per cent increase over 2018.
Even though the value of M&As declined, the market had some good aspects. Many big transactions were completed by foreign investors and domestic firms in the second half of 2019. The share swap of VinCommerce, VinEco, and Masan Consumer Group, as well as the transfer of a 15-per-cent stake in BIDV to KEB Hana Bank, are examples of typical deals.
The unexpected emergence of the pandemic has had a huge impact on the global economy and M&A activity in particular. Global activity, in Vietnam too, fell dramatically in the first half of 2020 as investors reacted cautiously.
At the same time, worldwide social distancing measures obstructed M&A transaction analysis, appraisal, and decision-making. As a result, the value of economic concentration deals in Vietnam decreased in 2020, reaching $3.5 billion, equivalent to 48.6 per cent of 2019.
Real estate, finance, industrial, and retail are the primary industries that have attracted investment capital through M&A in Vietnam in recent years. There were also other noteworthy deals in logistics, agriculture, pharmaceuticals, healthcare, and construction.
M&A transactions have also been carried out in various industries such as beer, food and beverages, milk, paper, confectionery, seafood, construction, and so on.
The number of notification dossiers filed to the MoIT is expected to rise considerably, given the trend of economic concentration activities on the market in the next two years. As the global recovery and acceleration trend of M&A activities spreads to the domestic market, and business activities in the global value chain increase, around 30-40 per cent of the dossiers will be related to transactions undertaken outside of the country.
In the near future, a wave of international firms will increase their acquisition and indirect investment in countries throughout the world, including Vietnam, particularly in light of the global economy’s challenges as a result of the pandemic. As a result, economic concentration transactions in the form of acquisitions between foreign and domestic enterprises are likely to increase in the second half of 2021 and throughout 2022.
According to the VCCA report, the consumer goods, retail, real estate, industry, and agriculture sectors are predicted to emphasise economic concentration operations into next year. In addition, the telecommunication, energy, infrastructure, pharmaceuticals, and educational sectors are projected to contribute considerably to economic concentration activities in Vietnam in the second half of 2021 and into 2022.
Additionally, investors from South Korea, Japan, Thailand, and Singapore will continue to dominate the acquiring corporations. Large local enterprises will continue to be the main force behind the resurgence of economic concentration activities in Vietnam in 2021 and beyond.