Merger and acquisition activity raises total FDI

Despite a decrease in newly-registered capital, the significant growth in the value of mergers and acquisitions became a key element in raising Vietnam’s foreign direct investment in the first five months of 2017.

merger and acquisition activity raises total fdi hinh 0

Vietnam attracted US$1.79 billion worth of acquisitions from foreign investors from January until May this year, up 116.2% on-year, according to the Ministry of Planning and Investment’s Foreign Investment Agency (FIA).

This is a remarkable increase, reflecting the obvious trend of growing interest in entering Vietnam’s market through mergers and acquisitions (M&A).

Last week, Bibo Mart JSC, the owner of the baby-and-mom chain of stores of the same name in Vietnam, announced that Japan’s ACA Investments, one of the best-performing fund managers in Asia, has acquired a 20% stake in the company.

Bibo Mart was only one among the many M&A deals reported in this year’s first five months. Another is the South Korean firm Taekwang’s interest in acquiring a stake in Gemadept, the largest Vietnamese logistics firm.

“Foreign direct investment (FDI) in a country is organized in two channels: Green-field investment and cross-border M&A. The majority of M&A cases have been cross-border deals and Vietnam is the selling partner,” said Nguyen Phuc Hao, vice head of Investment Banking at Viet Capital Securities.

With a stable economic growth and huge market potentials, the M&A trend has been appearing in many more diversified sectors, including textile and garment, agriculture, technology, infrastructure services, and logistics.

The value of these M&A deals contributed significantly to the country’s attractiveness for FDI.

Vietnam saw a slowdown in newly-registered foreign direct investment in the first five months of the year, when it attracted 939 new projects worth US$5.59 billion in total registered capital, equal to 73.9% of the total registered capital in the same period last year.

In spite of that, the country’s total FDI rose by 10.4% on-year to US$12.13 billion thanks to an 83% rise in expanded capital and acquisitions.

The country first witnessed the slowdown in FDI in late 2016, when it attracted US$15.18 billion worth of newly-registered capital, down 2.5% on-year. However, the situation reversed thanks to the acquisition value of US$3.42 billion, which increased the country’s total FDI for the year by 7.1% to US$24.37 billion.

Industry insiders say that the slowdown is just temporary as some costly build-operate-transfer power projects will be licensed in the near future. One power project alone can significantly increase the country’s total FDI.

“Despite a volatile global economy, with or without the Trans-Pacific Partnership (TPP), FDI inflows into Vietnam will continue to rise. With many important free trade agreements, Vietnam has advantages in attracting FDI,” noted Nguyen Noi, FIA’s deputy director.

Recently, 11 other TPP members agreed to revive the agreement without the US. Also, Prime Minister Nguyen Xuan Phuc’s visits to the US in late May and to Japan in early June will be a driving force for the country to boost trade and investment ties with the two countries-the two leading investment partners of Vietnam.

According to FIA, Vietnam’s FDI disbursement rose by 6% to US$6.15 billion in the first five months.

Phan Huu Thang, FIA’s former director, forecast that Vietnam’s FDI disbursement is likely to rise by 15% in 2017, while total FDI registered capital might increase by 10-15% to around US$22 billion.

VIR

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