Asiatic buyers seek quality in M&A

Vietnam’s mergers-and-acquisitions market has the potential to draw more Asian investors to a growing pool, as they search for opportunities away from slowing domestic markets. However, there need to be more high-quality share offerings if Vietnam wants to spur them into action.

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An Asian thirst for M&A

2016 was an exciting year for mergers and acquisitions (M&A) in Vietnam. In the first few months, M&A deals reached $3 billion, up 28 per cent year-on-year. However, the quantity of deals lowered in later months, and the year-end figure ended up at $5.2 billion. This is a slight decrease from 2015.

According to experts, 60 per cent of the deals were carried out between Vietnamese partners, and the vast majority of these domestic transactions were smaller than $5 million in value. In contrast, deals involving foreign investors averaged $30-100 million, with some even exceeding $1 billion in value.

It is clear that Asian buyers were the most active participants in 2016. The Singaporeans and Japanese inked 20 and 17 deals respectively, topping the list of all foreign buyers. While Thai investors only made three transactions, the total value of which exceeded everyone else, standing at $1.197 billion.

There are also notable differences among investors from different Asian countries. Singaporeans seem to be mostly active in real estate around Ho Chi Minh City, as evidenced in New Life Real Estate’s sale of the Saigon Duxton Hotel and Keppel Land’s $93.3 million takeover of Empire City in District 2. Mapletree Investments also acquired Kumho Asiana Plaza in downtown District 1.

Meanwhile, Thai investors spent big bucks in the consumer goods and retail sector. Central Group bought out Big C supermarkets from the French firm Casino Group and Singha became a strategic shareholder at two Masan-related companies. TCC also finalised its purchase of wholesaler Metro Cash & Carry, which it initiated in 2014. Each of these mega-deals amounted to more than $1 billion.

Like the Thais, Koreans also negotiated a slew of deals in consumer goods. In particular, CJ bought out Cau Tre Food Processing Company while acquiring a minority stake in Vissan JSC, a major meat producer. In March, Daesang Corporation spent $33 million to take over Duc Viet Sausage Company.

Japanese firms looked to Vietnam’s energy and materials sectors in their M&As. JX Nippon Oil & Energy snapped up 8 per cent of Vietnam’s National Petroleum Group (Petrolimex), while Koizumi bought 23 per cent stake in steelmaker QH Plus. Japan’s biggest airline, ANA Group also became a strategic shareholder in Vietnam Airlines, buying an 8.77 per cent stake. 

Yearning for growth

Why are Asian investors so enthusiastic about M&A opportunities in Vietnam? According to experts at the upcoming Vietnam M&A Forum, these buyers want a slice of Vietnam’s booming economy, which expands by more than 6 per cent every year. And the growing consumer market is an ideal outlet for these investments.

“Asian investors, especially those from Thailand and Korea, bought out Vietnamese firms in consumer goods and retail in order to control the entire process from manufacturing to distribution. This is the first step to introducing more Thai and Korean goods to the growing Vietnamese market,” states a report by the forum’s experts.

Jacob Won, founding partner at Locus Capital Partners, echoed this viewpoint. He pointed out that the Korean economy is stagnating, which prompts Korean conglomerates to look elsewhere for growth. The most attractive destination for this capital flow is Vietnam, where demand for private consumption is soaring.

“Korean companies in general prefer to secure a deal with at least 50 per cent of ownership, if not 100 per cent,” Won said. “Where there is growth, foreign capital will flow in, and Vietnam is not an exception.” He expects this trend to continue in the near future.

It is also interesting to see foreign companies buying stakes from Vietnam-based investment funds. The funds, who poured capital into Vietnamese firms at an early stage, are happy to realise their profit by transferring shares to new investors. A prominent example is Japan’s Taisho Pharmaceutical Limited, which bought up 24 per cent of Duoc Hau Giang JSC from various funds like VinaCapital, Dragon Capital, Mekong Portfolio Investments, and Vietnam Holding.


Although investors are generally upbeat about the prospects of Vietnam’s M&A deals, there are lingering concerns. Most importantly, the overwhelming demand is not matched by supply. In 2016, there were only two major equitisations of state firms, the Airports Corporation of Vietnam (ACV) and Vissan JSC.

Besides the lack of large equitisations, only 8 per cent of these state firms’ shares were available to outside investors. The government, workers’ union, and related parties still retained the majority of their stakes, making it difficult to convince foreign investors.

Some big names also took a decade to list on the stock exchange after their equitisation, such as Petrolimex, Sabeco, and Habeco. All three of these firms are contemplating further state divestments to strategic shareholders and other external investors.   

“The government can consider selling shares in bulk to attract large institutional investors from overseas. The process should be transparent and advised by trustworthy consultants,” said experts from the Vietnam M&A Forum. Related legal issues such as tax also need to be addressed.

Similarly, Locus’ Won called for greater transparency in financial statements. According to Won, Korean investors often complained about discrepancies in Vietnamese firms’ financial results and the lack of general information about these companies’ business strategies.  

A recent lesson came when dairy giant Vinamilk tried to unload 9 per cent of its shares last December. Despite significant attention from foreign investors beforehand, this auction only attracted one buyer – Singaporean firm Fraser & Neave, which owned shares before the recent sale – and 40 per cent of the offered shares remained unsold.

Following the deal, experts pointed out that Vietnam should follow the international book-building process, attach a reasonable price quote, and announce the deal sooner to more overseas investors.


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