Thứ Hai, 25 tháng 7, 2016

Great results for Vietnam’s M&A market

Following a successful 2015 and a promising first half of 2016, the Vietnamese mergers and acquisitions scene is poised to extend its momentum for the foreseeable future.
The Vietnamese mergers and acquisitions market in 2015 totalled $5.2 billion and in the first half of 2016, it has already reached $3 billion Photo: Le Toan.
A look back at 2015 and early 2016
2015 has been a positive year for mergers and acquisitions (M&A) worldwide, according to the American law firm WilmerHale. In the Asia Pacific region, the total value of M&A activities have jumped by 39 per cent to reach $980.4 billion.
Specifically, the Vietnamese M&A market  recorded $5.2 billion worth of deals in 2015 and $3 billion in the first half of 2016, rising 28 per cent year-on-year.
The MAF Research Team, including experts from the Institute of Mergers, Acquisitions and Alliances, Vietnam National University  of Hanoi, and others, noted that investment waves from countries in the region have triggered M&A transactions in Vietnam. The most active foreign investors in 2015 and early 2016 are from Japan, Singapore, and Thailand.
“The Vietnamese government has shown great determination to equitise its state-owned enterprises (SOEs), as well as launch progressive laws to welcome foreign investment and improve the business environment. Moreover, Vietnamese macro-economics figures have been quite stable, luring overseas investors to the domestic M&A scene,” noted the MAF researchers.
Foreign buyers were also buoyed by Vietnam’s bright prospects following the historic Trans-Pacific Partnership agreement, signed in February, and the ASEAN Economic Community, established in January. 
Small-to-medium-sized deals, which accounted for 60 per cent of the Vietnamese M&A market last year, took place mostly among domestic companies. In contrast, the majority of foreign investors participated in deals worth $30 million and above, especially in mega-deals of over $1 billion. 
Researchers also pointed out a recent trend in Vietnam-based M&As, in which foreign corporations purchased large stakes from investment funds. Funds usually divest from firms after a few years to reap their profits, thus they can act as a catalyst for M&A deals. For example, Taisho Pharmaceutical Company from Japan recently bought shares from various investment funds to take up 24 per cent of DHG Pharma JSC’s stakes.
Notable industries
The most sought after industry for M&A deals in Vietnam is consumer goods and retail. According to the MAF Research Team, transactions in this industry alone have accounted for 38.4 per cent of the total M&A value in 2015 and the first half of 2016. This staggering percentage shows that foreign investors are particularly excited about Vietnam’s young population of 90 million-plus consumers.
Sizeable deals include Vingroup’s acquisition of domestic retailers Ocean Mart and Maximark, Thailand-based Berli Jucker Corporation’s takeover of Metro Vietnam, and Japanese Aeon Group’s investment in Citimart and Fivimart.
The most significant transaction in consumer goods and retail is Central Group buying out Big C Vietnam with $1.14 billion, together with Singha to become Masan Group’s strategic partner at $1.1 billion. These two deals are so huge that their value accounted for one-fourth of all M&A activities in 2015 and the first half of 2016. It is also notable that both deals have Thai investors on the buying end.
“The Vietnamese consumer goods and retail industry enjoys impressive growth potential. In the near future, investors will also regard M&A deals with Vietnamese firms as a gateway to ASEAN’s 600 million people,” said MAF researchers.
Many industry leaders, such as Vinamilk, Saigon Beer Alcohol Beverage Corporation and Tan Hiep Phat, are likely targets for overseas investors in the coming years. Notably, the dairy giant Vinamilk scrapped its foreign ownership limit in June, to welcome overseas investment capital.
Another industry that has lured many foreign M&A investors is real estate. Singaporeans are clearly the most active buyers in the first half of 2016, as Keppel Land took 40 per cent stakes in the $1.2-billion Empire City project and Mapletree bought out Kumho Asiana Plaza Saigon with $215 million. On the seller side, Low Keng Huat reaped $49 million from its Duxton Hotel Saigon divestment.
“The Vietnamese property industry has developed dramatically in recent years, leading to a shortage of prime locations in big cities and famous resort towns. As a result, M&A deals in property are expected to rise in the future, and buyers will need a solid financial background and strong determination to conquer the Vietnamese market,” read the MAF report.
Potential realty segments  for M&A are residential projects, hotels and resorts, logistics, and industrial zones. Investors from Singapore, South Korea, and Japan are the most likely to conduct large M&A transactions.
The third industry with  M&A potential is banking and financial services. Overseas deals to acquire Vietnamese commercial banks are rare, due to their 30 per cent foreign ownership cap, but foreign investors have been aggressive in buying finance companies. A notable example is the Credit Saison HDFinance deal.
Similarly, insurance deals have soared, with overseas groups like Chubb or FWD acquiring ACE Life Vietnam and Great Eastern Vietnam respectively. Experts forecast that banking and financial services are attractive for M&A in coming years, as the Vietnamese financial sector continues restructuring and retail banking becomes more popular with domestic consumers.
The rise of start-ups
Topica Founder Institute revealed that the number of Vietnamese start-ups receiving investments has jumped from 28 in 2014 to 67 in 2015. Investors were particularly keen on start-ups in e-commerce, financial technology (fintech), media, and educational technology.
Among these transactions, early seed capital accounted for 25.8 per cent. Four deals in series C, a term for investments in matured start-ups, were all above $10 million each. M&A transactions include Vietnammm taking over Foodpanda, buying Tappy,  and Yellow Mobile acquiring Clever Ads Corp and Websosanh.
Experts believe that Vietnamese start-ups are poised to burgeon in 2016, thanks to the fast adoption of the Internet and technology in the country, together with progressive laws to promote entrepreneurship.
For instance, the Vietnamese E-commerce Association predicted that e-commerce in Vietnam would grow by 30 per cent each year between 2016 and 2020. In 2020, online trading will reach $10 billion in value, taking up 5 per cent of the Vietnamese retail market. This attractive growth potential will give rise to more investments and M&A deals between domestic start-ups and foreign investors.
Despite their optimism about the Vietnamese M&A market, experts still warn of potential difficulties that may impede deals.
The MAF Research Team noted that the equitisation process of SOEs has been slow and the government still keeps the majority of shares in these companies. Some have even failed to find a strategic shareholder after many years. All of this is likely to discourage M&A investors in equitised SOEs.
Secondly, the legal system governing M&A activities needs improvements, as regulations on foreign ownership levels, planning, and taxes remain vague. Thirdly, equitised private firms, start-ups and SOEs should be transparent about their financial health and business plans to help investors reach a well-informed decision.
By Nam Phuong, VIR

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