Vietnam ranks second on M&A potential list

The construction industry is among the most attractive fields for M&As in Vietnam (Photo: cafef.vn)

Hanoi - Vietnam has been ranked second after the US on a list of the world's most active, dynamic and potential markets for merger and acquisition (M&A) deals this year.

According to the latest M&A Investment Index compiled by research firm Euromonitor, Vietnam's standing had increased from last year.

Vietnam was listed among a group of countries with positive M&A prospects together with China, the Philippines, Taiwan and Saudi Arabia.

Euromonitor forecast that Vietnam would retain its position in the top 20 countries with the highest investment M&A index in 2021, surpassing China and Indonesia.

According to the report, Vietnam was also in the top five markets with the fastest M&A growth performance in the world, behind Singapore, Ireland, the Philippines and Qatar.

The driving force behind M&A deals in Vietnam and other countries in Southeast Asia was a result of foreign investments shifting from China to avoid the risks posed by the US-China trade war.

At the same as time, due to the COVID-19 pandemic, many Western governments have lowered their interest rates to reduce borrowing costs.

The region’s low borrowing costs and depressed asset values would present acquisition opportunities for businesses from the US and Western Europe, said the research firm.

Joao Luiz Paschoal, consulting practice manager for investor services at Euromonitor International, said: “Countries such as India, the Philippines and Vietnam are forecast to grow rapidly at a total of 26 percent in industries including interactive media services, distribution networks, and sustainable alternatives in packaged food.”

Euromonitor believed the most attractive fields for M&As included construction, distribution networks, manufacturing and public infrastructure. The firm said from 2015-2019, China and the US had been the two most dynamic M&A markets in the world.

However, the report said the global economic landscape was changing because of their trade dispute and reforms made to local economies and politics in Southeast Asia would enable growth in regional investment, making it an attractive destination for M&A activities.

As ASEAN’s M&A environment has changed over the past five years, deals have seen a shift in structure and industries, while the number of global M&A deals decreased by more than 20 percent in the same period.

According to Euromonitor, North America was the most vibrant destination for M&A deals from 2015-2020, followed by Western Europe and Asia-Pacific. The firm also forecast that from 2020-2021, South America would lead M&A growth with 13.7 percent, followed by Asia Pacific with 8.2 percent.

The Ministry of Planning and Investment (MPI), reported the total value of M&A transactions reached about US$10 billion in 2018, up 60 percent over the previous year. Last year, M&A deals reached $15.6 billion in value, an increase of 54 percent from 2018.

The MPI’s data showed the two industries with the strongest M&A activities in 2018 and 2019 were consumer goods production and real estate. Other key industries included consumer finance, retail, fisheries, logistics and education.

The ministry also said investors from Korea, Japan and Singapore played a very important role in the country's M&A market in 2018 and 2019 with an impressive volume of transactions completed.

The European Business Association in Vietnam recently forecast that M&As would continue to grow strongly in 2020 as foreign investors sought entry into the local market, adding that Vietnam should also take full advantage of the benefits provided by free trade agreements, including the EU-Vietnam Free Trade Agreement (EVFTA).

Nguyen Mai, Chairman of the Association of Foreign Investment Enterprises, told Vietnam News: “There is no way to stop the wave of M&As, even during the COVID-19 pandemic, because businesses are facing difficulties and need to call for investment from external sources to rescue themselves."

“The M&A phenomenon will become stronger and stronger, especially while Vietnam is still in the process of equitisation,” Mai added.

Euromonitor International’s Financial and Investment Services practice developed the M&A Investment Index, reflecting the expected level of investment, activity and attractiveness of the global M&A market amid macroeconomic and financial shocks. The model covers a total of 314,002 M&A deals from 50 countries and over 150 industries worldwide between 2015 and 2020.