Uphill prospects in M&A activity through to 2022

April 28, 2021 | 16:20
A new government, potential to reopen borders, and faster approval process for long-delayed projects by local authorities are some of the factors leading to more vibrant movement in mergers and acquisitions for the rest of the year.
1541 p17 uphill prospects in ma activity through to 2022
Uphill prospects in M&A activity through to 2022

According to partner from Mazars Jack Nguyen, mergers and acquisitions (M&A) will be active for the remainder of 2021 as the Vietnamese market prepares itself to open up to both travellers and investors once stringent procedures are approved.

And with a new government also in place, there is anticipation among investors already here that more construction and development projects will soon get approval.

“M&A deals between local buyers and sellers, as a result, will also pick up and be even more active for the rest of the year,” Nguyen said.

Vietnam’s real estate M&A transactions have indeed been tantalising for a number of reasons, with the pandemic creating some opportunities for investors with deep pockets, according to Nguyen.

“They are now seeing investment possibilities for projects at more reasonable valuations. Current project owners/investors who are struggling during the pandemic are more inclined to exit projects at lower valuations, hence enabling more transactions,” he said.

“As well as that, M&As between Vietnamese are occurring more often because they truly understand the market and they are inclined to require fewer conditions to complete a transaction; foreign investors will ensure a more careful due diligence process and set more stringent conditions before they carry out an acquisition,” he added.

Meanwhile Kim Ngoc, head of valuation and advisory at Colliers International Vietnam, said that the revised laws on investment, securities, and enterprises are expected to help M&A activities in the real estate market over the next 12 months or so.

“With the success in 2020 of controlling the pandemic and stabilising the economy, Vietnam has a good foundation to launch M&A activities, helping the M&A market quickly recover,” said Ngoc.

Real estate, together with retail and consumer goods, will continue to be on the radar of business leaders. Especially, M&A deals this year may see increased interest in manufacturing and logistics with the intentions of foreign investors to enter the sectors already increasing.

A range of free trade agreements are also attracting many new investors into the country.

As for the housing real estate market, in 2021 there is a trend of developers seeking land fund via M&A deals in the suburban districts of Hanoi and Ho Chi Minh City. For example, Novaland Group has closed a deal for 286 hectares in the southern province of Dong Nai and projects in other provinces with a total value of $1 billion.

Nam Long Group meanwhile has reserved around $86.9 million for M&A land plots with the Mekong Delta province of Long An which is not being the preferred destination.

Neighbouring provinces with good connections with Ho Chi Minh City still have plenty of land to develop urban areas, and even megacities can become the focus of the M&A market and attract investors from such places as Japan, Singapore, and South Korea.

Satellite provinces becoming hotspots in land acquisition include Binh Duong, Dong Nai, and Long An in the south, as well as Bac Ninh, Haiphong, Bac Giang, and Vinh Phuc in the neighbouring areas of Hanoi.

According to BIDV Securities, except for Khang Dien and Vingroup which are maintaining more than 50 per cent of their large land fund in the two cities, the rest of the market owns at least 80 per cent of the land fund located in sub-regional areas, demonstrating the investment strategy towards outskirt and neighbouring areas for real estate developers.

VNDirect also believes that the trend of migration to neighbouring provinces of Ho Chi Minh City and Hanoi will continue to increase until the end of 2021 and even beyond, mainly because the selling prices in these areas are still lower, equivalent to the selling prices in the cities’ central business districts 4-5 years ago.

M&A - The Emerging Local Forces

Aiming to reach a more practical outlook over M&A activities by Vietnamese companies to restructure and expand their ecosystem, Vietnam Investment Review and Novaland Group will jointly hold a workshop titled “M&A – The Emerging Local Forces” on May 7.

The event is expected to see the participation of more than 250 guests from state management agencies and investment funds, as well as domestic and international consulting firms, among others.

The Vietnamese economy has been turning heads around the world in recent years with major names of private corporations like Vingroup, Sun Group, T&T Group, THACO, Vietjet, TH Group, Masan, Novaland Group, and others. Vietnamese companies have made great strides by appearing on the buyer’s side in major M&A deals, breaking the long-standing domination of foreign investors. As the ongoing pandemic continues to disrupt international trade in 2021, Vietnamese companies stand to make tremendous gains with large-scale M&A deals.

By Bich Ngoc

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