|Vietnam’s M&A market is expected to move towards stronger cooperation, rather than simple acquisitions. Photo: Shutterstock |
Masan Group Corporation (HSX: MSN) and SK Group last week inked agreements to purchase secondary shares of The CrownX for $345 million in cash, with SK Group contributing $340 million. Masan will own 85 per cent of The CrownX after the deal is completed, while SK will own 4.9 per cent, with Masan potentially increasing its stake in The CrownX in the near future.
Over the past few years, Masan has been the most active player in Vietnam’s merger and acquisition (M&A) scene. It has actively scooped up numerous businesses such as VinMart+, Phuc Long Kiosk, and Mobicast JSC, a startup mobile virtual network operator, to scale up The CrownX’s mini-mall, Point-of-Life concept.
On November 5, Masan MEATLife announced the signing of strategic agreements with Dutch-backed De Heus Vietnam, pursuant to which De Heus will obtain control of the feed business and invest $600-700 million in Vietnam’s animal protein supply chain.
Last week, KIDO also announced that it has spent more than $52.98 million buying more than 44 million shares or 36.3 per cent stake in Vietnam Vegetable Oils Industry Corporation (Vocarimex) from State Capital Investment Corporation. Following the deal, KIDO has increased its ownership from 51 per cent to 87.29 per cent in Vocarimex.
According to the latest report by international law firm White & Case, Vietnam’s M&A market for this year is set for another robust year following 2020’s potent performance. In the first three quarters of 2021, deals with disclosed value totalled $3 billion. With one and a half months of dealmaking left in the pipeline, 2021 is on track to overtake 2020’s annual total of $3.9 billion.
This strong performance was largely due to an active second quarter. The total volume of deals came to 19 during the quarter, reaching the highest quarterly volume on record. A quarterly deal value of $2.5 billion, meanwhile, marked the second-highest quarterly value on record, below the $5.2 billion struck in the fourth quarter of 2017.
Although dealmaking dipped in the third quarter after a wave of lockdowns, Jon Bowden, partner of US law firm White & Case, said that the endurance of Vietnam’s dealmaking in the face of ongoing disruption displays both market resilience and an enduring appetite for local assets. “Strong underlying fundamentals such as an educated, low-cost workforce, a burgeoning middle class, and a stable political climate will continue to make the country an attractive investment destination,” Bowden said.
He added that high-growth industries such as consumer finance, electronics, and retail will continue to attract attention from both strategic and private buyers, providing plenty of opportunities for dealmaking in the final quarter of the year. The easing of restrictions in October and the ongoing vaccination programme will only further boost the country’s recovery.
On the same note, Vu Thi Que, chairwoman of Rajah & Tann LCT Lawyers, told VIR, “All enterprises should have realised that they will need to strengthen cooperation, rebuild strategies, and transform and innovate business models due to the emergence of new business needs, policy changes, and consumer demands.”
M&A transactions appear to be more active in sectors that have been seriously affected by the pandemic. Specifically, the real estate business was mostly frozen but acquisitions in this area, especially industrial and hospitality real estate, have become very active, focusing on up to 40 per cent of M&A deals.
Que added that there is an increasing number of domestic enterprises participating in M&A. Only 18 per cent of Vietnamese enterprises were buyers in 2018, but during 2019-2020, the rate rose to 30 per cent.
Enterprises have tended to restructure their business by cooperation and association – 9 per cent of joint ventures and 11 per cent of mergers in the period of 2019 to 2021, according to Que.
On the other hand, 45 per cent of M&A deals are operating in one relevant market, 19 per cent are involving enterprises operating in different related markets, and 36 per cent are mixed transactions.
“Having said that, M&A in Vietnam will continue to grow strongly under the impact of COVID-19, but with a strategy of a chain link, business model transformation, and business expansion rather than an acquisition or a merger. M&A deals after this long pandemic year will likely turn more to the form of cooperation and association for more sustainable growth,” she stressed.