Stage is set for rejuvenation in M&A arena

The number of deals involving domestic enterprises has been creeping up in recent years, Photo:Shutterstock

Domestic merger and acquisition (M&A) deal value in Vietnam reached $1.6 billion in the first 10 months of this year, with at least 130 deals completed, unofficial figures show, with further statistics due to be officially announced this week.

Several weeks ago, NutiFood Corporation announced the acquisition of Quang Nam Ngoc Linh Ginseng Pharmaceutical Trading JSC (Quasapharco), making its entrance into the herbal field.

The value of the transaction was not disclosed. However, a representative of NutiFood said the company spent millions of dollars holding 51 per cent in Quasapharco.

Following the deal, NutiFood officially took over the Ngoc Linh ginseng farm, covering hundreds of hectares. There are hundreds of thousands of ginseng roots being grown in the forest, located on Ngoc Linh Mountain in the central province of Quang Nam. NutiFood has a plan to expand ginseng growing areas and promote Ngoc Linh ginseng to overseas markets. Meanwhile, the Nutifood Nutrition Research Institute in Sweden will conduct clinical evidence of the ginseng for international value. It is expected that the deal will open up new opportunities for Vietnam’s precious herbs.

Another local player, NovaGroup, has further restructured its M&A strategy to become an economic group operating in real estate, trade and services, agriculture, consumer goods and more.

According to the latest report by White & Case, domestic activity remained dominant in 2021 following an active 2020. A total of 20 deals were announced in Q1 and Q3, just three deals behind 2020’s record annual total. The healthy level of activity displays growing confidence among local players as they look to beef up capabilities and scale up operations.

The largest domestic deal to take place so far in 2021 was GTNFood’s $203.5 million merger with its subsidiary, Vietnam Livestock Corporation (Vilico). The deal, part of the restructuring of parent company Vinamilk, will see GTN Foods delist and transfer all rights and assets to Vilico. Through the deal, which is awaiting regulatory approval, Vilico will expand its presence in Vietnam’s breeding and meat processing market.

Another notable domestic takeover was Dong Nai Plastic’s $45 million acquisition of a 51.78 per cent stake in tile and brick manufacturer CMC JSC. Through the acquisition, the plastics manufacturer will expand its position as a supplier of materials for civil and infrastructure construction works.

A report by the Vietnam Competition and Consumer Authority noted that the number of deals involving Vietnamese enterprises has increased. In 2018, Vietnamese buyers accounted for only 11.8 per cent of the deal value while foreign investors accounted for the remainder. In the period of 2019-2020, Vietnamese buyers made up for over 30 per cent of the total value of M&A deals in Vietnam.

Phan Duc Hieu, permanent member of the National Assembly Economic Committee told VIR, “The 2018 statistic was low, but by the first quarter of 2021, nearly 49 per cent of buyers were Vietnamese groups. There is an increasing number of Vietnamese corporations proactively engaging in takeover landscape as buyer sides, which is a positive sign for a stronger local force.”

On the flip side, Alex Crane, managing director at Crane & Co., Real Estate Consulting cautioned that most deals, either from foreign or local firms, fail because of either time constraints or because certain information is unclear. “In my experience, falling through is better than hanging onto an unclear deal and just hoping it will work out. Over-prepare, present well, be realistic, and if the partner does not feel right, move on; there will be others,” Crane told VIR. “To harmonise conflicts post-M&A, it is necessary to take all the pain in due diligence. Agreements must be watertight and achievable goals must be understood. There is a balance to be found while not rushing in to implement changes aggressively yet managing that change efficiently around the key agreed structure.”

Experts believe that local purchasers could gain an upper hand and have certain benefits in carrying out M&A transactions in the pandemic era. Acquired companies benefit from the corporation’s ecosystem, diversification of business products, and both upstream and downstream market potentials. Besides that, local corporations also bring values to invested companies through orienting and aligning effective strategies and business plans.