Le Trong Minh, Editor in Chief of the Vietnam Investment Review, speaks at the annual Vietnam M&A Forum on August 10, 2017 in HCM City (Photo: tinnhanhchungkhoan.vn) He toldan M&A forum in Hanoi that the sector has entered a new chapter in the 2014to 2018 period, riding what experts have called the second wave of investment.The capital inflow from foreign investors during this period is expected toreach 20 billion USD, 25 percent of which could happen this year.
This islargely driven by equitisation commitments of major State owned enterprises,the rise of private sector and steady investment from foreign economic entities.
The Ministry of Planning and Investment (MPI) hasconcluded that in order to catalyse growth, investment in the form of M&Asin the infrastructure sector needs to increase and expand across many branchesof the economy.
The projects would include upgrading roads,railways, airports and seaports to global standards, as well as establishing astable network of real estate and retail conglomerates.
Prime Minister Nguyen Xuan Phuc also emphasised this during his official visitto the US and Japan last June, informing hosts that Vietnam was pushing forM&A activities involving divestments in key sectors of the economy such asconstruction, retail, tourism or communications by State owned enterprises.
Le TrongMinh, Editor in Chief of the Vietnam Investment Review (VIR) and head of theforum’s organising committee, said he was hopeful that as more and more majorenterprises’ make initial public offerings, State divestments increase andadministrative policy frameworks are geared towards accommodating foreigninvestors, the future of M&A sector is bright.
M&Adeals in Vietnam hit an all-time high of 5.8 billion USD in 2016, a growth of11.92 percent from 2015, according to a report released at the press conferencelast month announcing the 2017 Vietnam M&A Forum.
Theretail and real estate sectors were the most attractive areas for M&Aactivities in 2016.
Tran Vinh Du, Deputy Director of M&A Counsellingat Ernst and Young Vietnam, said that the period between 2017 and 2018 would beoptimal for foreign enterprises and funds to divest, spurring M&Aactivities.
Theseunits have been present in Vietnam before 2010, purchasing large stakes for lowprices during the 2010 economic stagnancy.
However,the market has experienced a slowdown since the latter half of 2016 with fewerstellar deals. And the total value of M&A deals was just 1.1 billion USD inthe first quarter this year, down 24.4 percent from last year.
As such, the Vietnamese M&A market would mostlikely not surpass 2016’s peak without an extra surge from foreign investors,especially in the real estate and retail sectors.
TheM&A trend in the real estates and retail sectors is expected to intensifyin the remaining months of this year, with the participation of foreigninvestors, mainly from Japan, Hong Kong, the Republic of Korea, Thailand andSingapore.
At the end of June 2017, Japanese Hankyu HanshinHoldings Inc met with the Ho Chi Minh City Real Estate Association (HoREA) todiscuss the former’s involvement in 197 projects in the form of private publicpartnerships and 120 other key national real estate projects in need ofinvestment within HCM City alone.
This isseen as a spark that could light up country’s M&A sector, as Japaneseinvestors rarely get involved in unstable deals.
NumerousVietnamese real estate enterprises like Vingroup, Sun Group, FLC, Bitexco andNovaland have successfully concluded M&A deals over the past five years.The sector has seen hundreds of private M&A deals as well as real estatedevelopment projects worth billions of dollars.
From 2014to 2015 alone, Vingroup spent 1 billion USD acquiring other enterprises andprojects in the market, extending their operations into retail, agriculture,education, and construction materials via M&A deals.
In theretail sector, another deal that attracted much public attention in late 2016was the purchase of 78.38 million shares of the Vietnam Dairy Products JointStock Company (Vinamilk) by Singaporean food and beverage firm Fraser &Neave (F&N) at 11.3 trillion VND (over 500 million USD).
Anotherlarge M&A deal in 2016 was Thai group Singha becoming a strategic partnerof Masan Group by buying 25 percent and 33 percent stakes in Masan ConsumerHoldings and Masan Brewery, respectively, at 1.1 billion USD.
Dang XuanMinh, head of the Vietnam M&A Forum’s research group, said that retail andconsumer goods M&A targeted at entering and expanding the market was themost noteworthy trend in 2016.
Accordingto the group, M&A value in 2016 broke the record of 5.2 billion USD set theprevious year.
Thenumber of foreign retailers entering Vietnam and the opening of foreign-ownedretail outlets through M&As had increased over the last three years, Minh said.
Eventhough Vietnam M&A market value is small in comparison with other ASEANcountries such as Singapore (62.3 billion USD in 2016); Indonesia, Thailand andMalaysia (11 USD to 16 billion USD on average), the country has an advantage interms of its dynamism, according to Duong Thuy Dung, Senior Director, NationalHead of Professional Services at CBRE Vietnam.
Dungexplained that with the Vietnamese government on board with M&A growth, themarket could see more foreign investors looking to partner with domestic firms.
The annual M&A Forum, in its ninth edition, isone of the most prestigious meeting grounds for investors interested in mergersand acquisitions in the country and abroad. It helps connect domesticbusinesses with foreign investors and firms for better investment opportunitiesand development.
It was jointly organised by the VIR and the AVMVietnam Company. It was held at the GEM Conference Centre in HCM City. Around400 senior officials, experts and analysts from the Government, investmentfunds, international and local consultancy firms, State owned corporations, andprivate sector companies listened to and interacted with 20 guest speakers fromVietnam and other countries.-VNA
VNA
