South Korean M&A investment leans towards green and digital transitions

What are the key trends in South Korean investment in M&A activities in the region and in Vietnam?

Cha Sung Wook, deputy director of the Korea Trade-Investment Promotion Agency’s Hanoi Office

North America, Asia, and West Europe are the three most focused regions for South Korean companies regarding M&A activities.

Within Asia, out of the deals that we have supported, Vietnam takes about one-third of the deals. We see that Vietnam is a significant country and gaining more popularity as the first M&A destination in the Asia region for South Korean M&A transactions.

When we look at the history of South Korean investment in Vietnam, we can divide the investment into three phases. The first phase was early 1990s when labour-intensive, South Korean companies mainly in the garment and clothing sector came to the southern region.

The second phase was from early 2000, when manufacturing companies, such as Samsung and its vendors and also companies relocating from China, came to the northern region. And the third phase is in recent years, with companies in consumer goods and in the various service sectors looking into Vietnam for investment opportunities.

With this and the China+1 trend, South Korean companies in consumer goods, health-related services, manufacturing businesses, energy, infrastructure, financial services, and tech-related businesses are the prominent sectors that are attracting more South Korean companies for M&A in Vietnam. And the trend will continue in the future.

Is the legal framework for M&A activities in Vietnam favourable enough?

The fundamental legal framework for M&A activities in Vietnam is provided by relevant laws such as those on enterprises, investment, and competition.

However, to increase the favourability of the M&A environment in Vietnam, there are additional legal instruments that must be considered, particularly by using the experience of developed countries that have come through a long way to ease and simplify the M&A process.

It is clear that reducing the time and cost of M&A transactions, improving transparency and predictability in the regulatory environment, strengthening measures to protect investor rights, and aligning regulatory frameworks with global best practices are needed to enhance the country’s reputation among international investors.

This will help to increase investor confidence and draw in more foreign investment into the country.

What lessons should Vietnam learn from South Korea in developing the M&A market?

South Korean businesses have been actively participating in the M&A market in Vietnam, with many investors focusing on consumer goods, industrial materials, and chemicals that accompany the growth of industrialisation and urbanisation in Vietnam.

Vietnam could learn from South Korea’s experience in overcoming regulatory hurdles and restrictions in the M&A market. Despite the general slowdown in foreign direct investment during the pandemic, investors from the country are nevertheless continuing their acquisition spree in Vietnam, with millions of US dollars being spent snapping up local groups.

South Korean investors have carried out almost 70 M&A deals in Vietnam since 2005, with a total value of $5.1 billion. This indicates that Vietnam could benefit from South Korea’s experience in identifying and investing in promising sectors and companies.

However, it is important to note that the M&A market is complex and dynamic, and there is no one-size-fits-all approach to developing it. Therefore, Vietnam should also consider its unique economic, political, and social context when formulating its own M&A strategy.

Manufacturing M&As continue to manifest Despite slowdowns, manufacturing is predicted to be one of the most attractive sectors for foreign investors to conduct dealmaking activities.

Range of Asian neighbours explore M&A potential Amidst the challenging environment, strategic investors from the likes of Thailand, Singapore, Japan, and South Korea continue to dominate merger and acquisition transactions in Vietnam.