M&A market waiting for big deals

In the first seven months of 2024, foreign investment channeled into new and existing projects increased sharply compared to the same period last year, by 35.6% to US$10.8 billion and 19.4% to nearly US$5 billion, respectively.

However, investment via capital contributions and share purchases was still on the downward trend. There were 1,795 capital contribution and share purchase transactions totalling nearly US$2.27 billion during the period, respectively falling 3.1% and 45.2% year on year, according to the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment.

In the last five years, 2019 witnessed a boom in this form of investment.

Statistics showed that foreign investors conducted 9,842 transactions valued at US$15.47 billion in 2019, surging 56.4% from a year earlier. However, investment via capital contributions and share purchases has dropped since then.

The value stood at US$7.47 billion in 2020, US$6.9 billion in 2021, and US$5.15 billion in 2022, respectively down 51.7%, 7.7%, and 25.2%. It reached US$8.5 billion in 2023, soaring 65.7% from 2022, but was equivalent to just over half of the peak of US$15.47 billion seen in 2019.

Impacts during three years of the COVID-19 pandemic, plus geopolitical uncertainties, have led to a plunge in M&A deals worldwide.

Data from London Stock Exchange Group (LSEG) revealed that the global M&A market recorded only US$2.9 trillion in transaction value in 2023, down 17% year on year. That was the first time since the 2008-2009 global financial crisis the world’s M&A market had contracted by over 10% in two consecutive years. The market in Asia-Pacific alone shrank by 25%.

Dau tu (Vietnam Investment Review) cited Le Xuan Dong, Director of EY Parthenon Strategy at EY Consulting Vietnam JSC, as saying that the M&A market in Southeast Asia has tended to decline in terms of both transaction number and value, and Vietnam is not an exception.

Although there haven’t been large deals since the start of 2024, a recent report by Savills Vietnam pointed out several notable transactions. For example, Kim Oanh Group recently teamed up with NTT Urban Development, Sumitomo Forestry, and Kumagai Gumi Co. Ltd of Japan to develop The One World, a 50ha residential area in the southern province of Binh Duong. Nishi Nippon Railroad of Japan bought a 50% stake in the 45.5ha Paragon Dai Phuoc project for about US$26 million from Nam Long Group.

Particularly, Tripod Technology Corporation of Taiwan (China) purchased an 18ha industrial land lot in the southern province of Ba Ria - Vung Tau from Sonadezi Chau Duc. It has spent US$250 million on building an electronic component factory there, like many other Taiwanese firms who are continually pouring capital into this field in Vietnam.

Troy Griffiths, Deputy Managing Director at Savills Vietnam, held that industrial real estate will witness stable demand, supported by the foreign investment inflow and infrastructure development. M&A deals in this field are forecast to bounce back.

Economists perceived that the entry into force of real estate-related laws, namely the 2024 Land Law, the 2023 Housing Law, and the 2023 Law on Real Estate Business, from August 1 will give a boost to M&A activities in this area.

However, the market is still waiting for major transactions, not only in real estate but also retail, manufacturing, and finance - banking, like what used to be made.

Data from the FIA indicate that during January-July this year, Japan, with nearly US$595 million, still ranked first among countries and territories investing in Vietnam via capital contributions and share purchases. It was followed by Singapore (US$500 million) and the Republic of Korea (US$323 million). Investors from Taiwan (China) poured US$160 million, the Cayman Islands US$184 million, and China US$124 million.

These are also the investors that have conducted large M&A deals in Vietnam in recent years, and the market is waiting for them to spend big in the time ahead.