Paul Santos, managing partner of Wavemaker Partners, has made about 180 investments since 2012 and invests primarily in enterprise tech and sustainability. In Vietnam, it has funded companies such as Foodmap, Dat Bike, Vigo Retail, and MindX.
|Tech groups hope for boost via M&As, photo: Shutterstock |
“We’ve been more active in Vietnam recently. And we have a team on the ground in Vietnam to support our investments,” he said. “We’ve invested in places like the Philippines, Indonesia, and Malaysia as well. So for us, it really does not matter which market. What’s important is the founding team and what they’re trying to achieve, and then if we can buy into that.”
European companies are also keen on mergers and acquisitions (M&A) in the tech sector. According to Leif Schneider, vice-chairman of the Legal Sector Committee of the European Chamber of Commerce in Vietnam, the “green” label is still one of Europe’s strongest sales propositions when conquering new markets, especially in developing countries that are feeling growing pressure brought on by the effects of global warming. The reduction of environmental pollution and the promotion of public health are two other areas in which European investors have a lot of value to add to the country.
“Despite – or maybe because of – the strong synergies between the Vietnamese needs and the European solutions in terms of environmental protection, much of this collaboration takes place through foreign direct investment or through development assistance programmes funded by non-governmental organisations, international groups, or foreign governments in the form of bilateral aid initiatives,” he admitted.
“As European companies are renowned for their particular expertise around renewable energies – including related and patented technologies – there has been an uptick in M&A activity in the segment, particularly in offshore wind and photovoltaics,” he noted.
Nguyen Cong Ai, deputy director of KPMG Vietnam, added, “We have recently received requests from foreign investors, including those from South Korea and Japan who are interested in the internet economy, fintech, edutech, and media across Vietnam.”
He explained that Vietnam has potential to become a startup hub in Southeast Asia thanks to its favourable macroeconomic conditions, rising middle class, and growing interest in startups and the government’s supporting policies. In 2022, KPMG forecast investment in technology will increase by 150 per cent, possibly reaching $2 billion.
According to Nguyen Thanh Tuyen, deputy director of the IT Department under the Ministry of Information and Communications (MIC), M&A in the IT sector has great potential. “E-commerce, together with the development of payment intermediary applications and fintech are attracting most investment. Vietnam is projected to see a shift in the M&A trend in almost all fields,” he said.
Despite the high growth potential, Tuyen admitted that there are some shortcomings hindering a possible new boom in M&A activities in the tech sector. “For example, digital firms in Vietnam are still at an early stage. A majority of them are startups with new and good ideas but are incapable of developing into large-scale ones due to limitations in management and strategic planning, and financial capacity,” Tuyen said.
“Meanwhile, investors prefer putting money in firms that have a detailed plan to realise their ideas. Worse still, most products and services of Vietnam’s tech firms only targeted the domestic market. Few have products qualified for international and regional markets.”
While emphasising the importance of new tech, Yoo Dong Ho, partner at JIPYONG LLC, added that red tape within the regulatory framework could hinder M&A transactions in Vietnam going forward.
“For example, the effectiveness of the Law on Competition caused increased regulatory scrutiny in M&A transactions. The new legislation which imposes very low merger control thresholds largely requires that numerous types of M&A transactions across the board must go through the local authorities’ clearance, even when anticompetitive effect on the relevant market derived from the intended transaction is minimal at best. This may delay the closing of a transaction by months,” he explained.
According to the MIC, before 2015, M&A activities in Vietnam mainly focused on services and real estate. In the 2015-2018 period, the country witnessed some M&A deals in digital tech such as the $17 million acquisition of e-commerce platform Tiki by VNG and the buyout of Mundo Reader by Vingroup.
In 2019, VNLife successfully obtaining a commitment from Singaporean sovereign wealth fund GIC and Softbank Vision Fund to inject $300 million into its business.
Last year, major e-commerce player Tiki successfully called for $258 million in Series E funding from six investors, including AIA Group and STIC Investment.
That same year, Sky Mavis called for $152 million in a Series B funding round from investment firms including Andreessen Horowitz, Accel Partners, and Paradigm. And in 2022, SeaTown Private Capital Master Fund (a member of Singapore’s Temasek Holdings) invested $50 million into OnPoint, an e-commerce enabler behind big-name platforms such as Lazada, Tiki, and Shopee.