First session of Vietnam M&A Forum 2018 explores new drive for M&A

In the session, KPMG Vietnam provided an overview of the past 10 years in the Vietnamese M&A market. Deputy Prime Minister Vuong Dinh Hue shared his thoughts on the outlook of doing M&A, as well as the Vietnamese government’s efforts to push the economy forward in a sustainable manner.

The speech by Warrick Cleine, chairman and CEO of KPMG, pointed out challenges in the M&A market. He raised the question of what the government and the business community need to do to improve the M&A market in the new era.

Indeed, the Vietnamese M&A market is full of potential targets. According to Tran Vinh Tuyen, Deputy Chairman of the Ho Chi Minh City People’s Committee, M&A activities remain robust in Ho Chi Minh City with around 30 deals in the recent time. Also, another 39 companies will be equitised by 2020, especially in the fields of commerce and logistics. The city is looking to select reliable partners with high-technology, which will maximise the benefits for both businesses and the government.

Le Song Lai, deputy CEO of State Capital Investment Corporation, said that around 140 companies will be equitised by 2020, including big corporations like Vinamilk and FPT. If the equitisation process is successful, SCIC is expected to collect VND100 trillion ($4.3 billion) for the government, which will ultimately contribute to the improvement of the legal framework and the growth of the M&A market.

Vuong Dinh Hue-Deputy Prime Minister

Vietnam focuses on restructuring five areas of finance-banking, public sector, public investment, budgetary revenue, and public administrative units. For banking and finance, the government continues its efforts to resolve bad debts, which reduced from 10.8 per cent at the beginning of 2016 to 6.9 per cent in the first six months of 2018.

The government is also boosting M&A activities among commercial banks and credit institutions.

In 2017, the number of equitised companies has increased 6.5-times against 2016. The government has collected VND2.5 trillion ($107.5 million) in 2016-2017, which is double the figure of the previous period. The government will continue to speed up the equitisation and divestment process. On top of that, the government is committed to complete the legal framework, strengthening institutional reform as well as improving macroeconomic fundamentals with a view to facilitate M&A activities.

Nguyen Chi Dung - Minister of Planning and Investment

Vietnam is preparing to review 30 years of FDI attraction. The conference is scheduled to take place on October 4 in Hanoi with a view to summarise and evaluate the achievements after 30 years of FDI attraction as well as create a new FDI attraction strategy. Following the conference, the government will put forward solutions for sustainable and selective FDI attraction. The question is whether M&A will continue to grow in Vietnam and what should be done to drive the M&A market forward.

Indeed, M&A is shifting capital from low-efficiency sectors to more profitable fields. Investors assess and evaluate the growth of the economy, market potential, as well as relevant policies to strike deals. It is apparent that M&A deals are on the rise in Vietnam thanks to the high economic growth. M&A also offers a flexible approach for investors to expand in the market.

Warrick Cleine - Chairman and CEO, KPMG in Vietnam and Cambodia

The Vietnamese M&A market has enjoyed a compound annual growth rate of 17 per cent between 2007 and 2017. The number and value of M&A deals are on the uptrend. The largest M&A deal was the $4.9 billion deal between ThaiBev and Sabeco in 2017.

The main source of investment in the next three years is expected to come from Japan, South Korea, China, Thailand, Singapore, and Hong Kong. In particular, Chinese investors are expected to be more active due to the proposed Regional Comprehensive Economic Partnership (RCEP).

Vietnam has the highest economic growth rate in Southeast Asia, which is opening up opportunities for investors. The most promising sectors for M&A include food and beverage, pharmaceuticals, life sciences, and real estate.

However, there are some challenges during the due diligence process in Vietnam, including the quality of historical information, responsiveness, preparedness, willingness to share information, legal issues, tax issues or exposures as well as limited information flows.

Seck Yee Chung - Partner, Baker & McKenzie

Foreign investors are looking at the government’s efforts and commitments to opening the economy, improving the business environment, and attracting foreign direct investment. They hope to see harmony in the legal framework, learn about regulatory changes as well as the possibility of raising the foreign ownership limit further in the future.

The changes are indeed taking place and many M&A deals are in the making. New economic models are emerging in the Industry 4.0, including e-commerce and digital transactions. Hence, the government should have measures in place to support these new business models.

Dominic Scriven - Executive Chairman, Dragon Capital Group

In the past 10 years, Vietnam has witnessed significant changes in the M&A market. Moving forward, M&A will develop in line with demand. Particularly, investors will become more selective with a focus on internal forces. Investors look at the target companies, their competitiveness, scale, strategy, and successive leadership. However, there is a lack of potential targets for M&A.

At present, the scale of the Vietnamese M&A market is comparable to that of Malaysia and Indonesia, despite having a higher population than Malaysia and lower than Indonesia. The growth of M&A should be stronger.