|Vietnam’s consumer goods and retail will be the target for foreign investors.
Foreign investors are continually stepping up mergers and acquisitions (M&A) activities in the Vietnamese market, buoyed by the country’s growth momentum and the government’s strong commitments.
The domestic market has recently seen the biggest-ever M&A deal with foreign involvement in the history of the Vietnamese banking sector: the Republic of Korea’s KEB Hana Bank - a subsidiary of Hana Financial Group - closed a US$885 million deal to acquire a 15 percent stake in Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV).
Deals led by South Korean companies are also forecast to continue to grow in the future. Under a recent event to introduce overseas M&A information for South Korean companies held by the Korea Trade-Investment Promotion Agency and the Korea Financial Investment Association in Seoul, 32 out of the 42 companies subject to sale or equity investment were located in Southeast Asia.
Vietnam tops the list with 20 potential target companies, followed by Indonesia, Malaysia and China.
In fact, foreign investor demands for outbound M&A are mainly concentrated in Vietnam, especially as Vietnam is rapidly emerging as an alternative for export in the ¬region amid the escalation of the US-China trade war.
Besides Korean investors, Japanese firms are also among the most active buyers in the Vietnamese market. Mitsui & Co Ltd has agreed to acquire a 35.1 percent equity interest of with Minh Phu Seafood JSC, the world’s biggest shrimp producer.
Meanwhile, Taisho Pharmaceutical Co Ltd has spent an additional VND3.4 trillion (US$147.8 million) to buy almost 67 percent of Vietnam’s DHG Pharmaceutical JSC.
Data from Vietnam’s Foreign Investment Agency showed that Japanese investors made 585 transactions to contribute capital and purchase shares of local companies last year. Meanwhile, there were nearly 430 Japanese-invested projects.
Other enthusiastic investors from Singapore are also active in Vietnam’s M&A space. The largest initial public offering last year was that of luxury residential property ¬developer Vinhomes, in which Singapore’s sovereign wealth fund GIC Pte Ltd recently acquired a stake.
Sectors of interest
Foreign investors are keen on Vietnamese firms that operate in many sectors, from banking, finance, consumer goods, food, textile and realty to pharmacy, IT and education. The most attractive sectors to M&A investment are those that enable such investors to get better access to the large population of Vietnam, such as consumer goods and retail.
On the back of stable economic growth and signing of many free trade agreements, real estate is also attracting great attention among domestic and foreign investors, especially those from Japan, the Republic of Korea, and Singapore who are betting on M&A deals to gain higher and stable profit in almost all segments, including housing, offices, hotels, and industrial parks.
According to experts, to create major forward motion for the M&A market, stronger actions are needed to improve the business climate in order to unblock foreign investment amid complicated global changes, as well as local barriers related to state-owned enterprise (SOE) privatization, attraction of the economy, and legal frameworks.
Deputy Minister of Planning and Investment Vo Thanh Thong said that the Vietnamese government is on track to improve the business climate with more concrete actions focusing on, restructuring the economy, and renewing the growth model towards increasing efficiency and national competitiveness. Accordingly, the country is determined to sell more stakes in SOEs, even in profitable ones.
Moreover, together with the enforcement of FTAs, the government is promoting the new economic model, meaning cross-border investment without capital contribution. These factors will open more M&A opportunities and create a big push, Thong added.