Vietnam to move up in M&A global rankings

Veteran experts claim that Vietnam’s ongoing reforms have made it an attractive market for global M&A deals

According to the Institution of Mergers, Acquisitions and Alliances (IMAA) estimate, Vietnam’s mergers and acquisitions (M&A) market is expected to reach a total value of approximately $3.8 billion, with more than 400 deals signed this year.

“Given that Vietnam ranks 55th by GDP according to the International Monetary Fund as of 2014, this is an outstanding M&A ranking,” said IMAA president Christopher Kummer, refering to Vietnam’s 20th position in the global M&A market in 2015, up four places against last year.

Kummer also reported that this year had seen 219 deals with Vietnamese participation announced so far.

In terms of transaction value, Vietnam has taken the 41st place this year, with more than $2 billion.

“If this trend continues, this number may reach $3.8 billion, compared to that of last year, with 55th place and $2.8 billion, respectively,” he added.

According to research by the annual M&A Forum 2015 held in Ho Chi Minh City last week by VIR and AVM Vietnam, the total M&A transaction value in Vietnam almost hit $4 billion in 2014, an increase of about 20 per cent on the previous year.

The average value of a transaction also rose from between $5 - 8 million three years ago, to around $11 million in 2014. Most of the big deals involved foreign investments ranging from $20 million to more than $100 million.

The value of M&As is expected to jump drastically to approximately $20 billion by 2018, compared to just under $5 billion in the 2012-2014 period.

Dang Huy Dong, Deputy Minister of Planning and Investment, told the M&A Forum 2015, themed “Countdown to the Next Market Boom”, that M&As were expanding in Vietnam thanks to the country’s ongoing economic restructuring, active integration into the global economy, an investor-friendly environment and domestic investment encouragement.

“The implementation of revised laws and policies has created a more sustainable and comprehensive legal framework to improve the investment environment. Accordingly, M&A has become a much more attractive investment channel for domestic and international investors,” Dong told the forum’s more than 500 participants who were domestic and international experts, investors, bankers, insurers, consultants and agencies.

Dr. Nguyen Anh Tuan, VIR editor-in-chief, observed that M&As in Vietnam would continue to benefit from the favourable environment of a recovering economy.

“The country has sped up its institutional reform, and the legal framework for M&As has been completed with a series of important laws relating to investment activities amended, such as the laws on Investment, Enterprises, Housing, and Real Estate Business,” he said.

John Ditty, head of Deal Advisory from KPMG, added that the government’s recently issued Decree 60 which allowed a higher foreign ownership limit in listed companies, had been highly favoured by both domestic and foreign investor communities.

“The process of bank restructuring and non-core divestment, as well as the acceleration of the equitisation process of state-owned enterprises, with a large number of corporations and large-scale enterprises being equitised this year and in the next five years, will open up more opportunities for bigger M&A deals,” he said.

“We are now in a wave of M&As. The recent upswing in the last six to eight months of the year is not a trend, but the reasonable result of a long legal reform process,” he said.

Retail, consumer goods, real estate, banking, and finance remain the top sectors in terms of M&A transactions in the last few years.

Meanwhile, human resources, services and the digital economy are also sectors of growing interest, according to Seck Yee Chung, a partner at Baker & McKenzie (Vietnam).

“Vietnam has a dynamic and robust young population. With more and more international companies flowing into Vietnam, along with the growth of domestic companies, there will be huge demand for human resources and a digital economy in the future,” Chung said.

Masakata Yoshida, CEO of the Japanese M&A advisory service provider Recof Corp, said that Vietnam was emerging as an attractive M&A target for Japanese companies, especially in the fields of retail, hospitality, fast moving consumer goods, healthcare, and e-commerce.

By the end of 2015, Recof is expected to conclude around 30 M&A deals in Vietnam for its clients, an increase from 20 in 2013.

“There have already been 12 transactions completed in the first half of the year. The service-related sector is currently attracting the largest amount of capital, most of it from Japan,” Yoshida said.