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Mergers and Acquisitions in Vietnam: Domestic Players Lead Trends
Mergers and Acquisitions (M&A) provides a solution to several obstacles foreign investors face when they want to enter Vietnam’s market. During the pandemic, many partnerships were formed through M&As with domestic companies taking initiative in the market.
M&A activities were disrupted in 2020 by the COVID-19 pandemic, with total value dropping by 50 percent to about US$3.9 billion. However, in the first nine months of the year, M&A deals with total disclosed value have already totaled US$3 billion as per White & Case.
Upon facing economic and social challenges due to COVID-19, many businesses have identified M&A as an optimal solution to restructure, expand their ecosystems, and create value chains.
In the last six months of 2019 and 2020, the market witnessed notable acquisitions or restructuring of private corporations. The pandemic has resulted in a shift in the market trend towards more acquisitions than mergers.
Accordingly, from 2019 to 2021, more than 80 percent were purchases of shares for takeover and 9 percent were joint ventures while only 11 percent of M&A deals were mergers.
According to a 2021 report by White & Case, the top three sectors by most deals for M&A activity were industrials and chemicals, consumer goods, and real estate. The industrial and chemicals sector generated a total of seven deals during the first three quarters of 2021. In the real estate market, M&A remains the quickest solution for foreign developers to enter the country and for local developers to expand their land portfolio.
As for the housing real estate market, in 2021 there is a trend of developers seeking land funds via M&A deals in the suburban districts of Hanoi and Ho Chi Minh City. Neighboring provinces with good connections to Ho Chi Minh City, such as Binh Duong and Dong Nai, still have land to develop urban areas and megacities that can become the focus of the M&A market. Such provinces have been attracting investors from Japan, Singapore, and South Korea.
According to a survey by the CMAC Institute, industries expected to have the most active M&A activities in the coming years include consumer goods manufacturing, industry (energy), real estate, retail, ICT, and logistics.
Manufacturing, one of the sectors significantly impacted by COVID-19, continues to attract foreign investors given Vietnam’s low labor costs, strategic location, and many seaports nationwide. The trend of multinational corporations shifting investment from China to Vietnam will continue due to the influence of the US-China trade war, resulting in more potential relocations of manufacturing hubs to Vietnam.
In 2020, the US$240 million acquisition of Thipha Cable and Dovina Metal, two large Vietnamese electric cable manufacturers, by Thailand’s Stark Corporation was reported as the largest inbound private sector industrial transaction in Vietnam in the last three years.
This article was first published by VietnamBriefing which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to [email protected].
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