M&A activities signal promising fortunes
Although merger and acquisition levels dropped in 2020 across Vietnam, the prospect for such activities remain bright for next year as overseas investors look to local businesses in order to improve market access.
M&A activities signal promising fortunes.
Herbert Yum, research manager at London-based market research company Euromonitor International, told VIR that Vietnam is one of the most attractive markets in Asia-Pacific. Based on the group’s merger and acquisition (M&A) Investment Index, high GDP growth and manufacturing output both indicate market growth. Along with production activities in mining, manufacturing, electricity, and water, the combined factors are making Vietnam one of the most robust M&A markets in the world.
The Vietnamese government announcement of removal of the 49 per cent foreign ownership cap on listed companies in 2018 released a strong signal to international financiers. Such a move is opening business opportunities and releasing a strong signal to capital flow in the region, with companies seeking fast-growing economies willing to link up with capitalised western economies, according to Yum.
While macroeconomic factors light up the Vietnamese market, microeconomic factors associated with the relatively young population, expected fast-growing spending power, and rapidly improving social status is expected to support the growth of economies in the longer-term, he added. “Hence, the Vietnamese market is expected to be one of the most attractive markets for foreign investors’ hot money,” Yum said.
According to data from the Vietnamese General Statistics Office, for the full year of 2019 the total value of stake acquisitions by foreign investors hit $15.5 billion, up 56.4 per cent on-year.
In the first nine months of 2020, a total of 5,172 cases were involved in foreign investors’ capital contribution and stake acquisition, valued at $5.7 billion, down 44.9 per cent on-year.
From January to September, between Japan and Vietnam there were 19 transactions publicly announced. The interest from Japanese investors towards Vietnam continues to be strong in the pandemic situation.
Some notable transactions in the first period include Mitsubishi Corporation and Nomura Real Estate jointly acquiring 80 per cent in the second phase of the Grand Park project of Vingroup. Aozora Bank Ltd. also purchased a 15 per cent stake in Vietnam’s Orient Commercial Joint Stock Bank.
World Mode Holdings Co., Ltd, a Tokyo-based total solutions company specialised in fashion and cosmetics, acquired People Link JSC, a leading human resources company. Japan’s listed real estate group Haseko purchased a 36 per cent stake in construction company Ecoba, while Tokyo-based ASKA Pharmaceutical Company received a 24.9 per cent stake in domestic counterpart Ha Tay.
Masataka Sam Yoshida, head of the Cross-border Division and CEO of Vietnam RECOF Corporation, told VIR that Southeast Asia is a promising destination for M&A globally, and among various countries in this region, Vietnam is the most attractive country to enter for foreign investors. It is also considered one of the most successful nations in responding to COVID-19.
While other countries experienced negative growth rate in the first nine months of 2020, Vietnam’s GDP increased 2.12 per cent. The rate is forecast to be still positive at 2.5 per cent for the whole year 2020 and expected to rebound to 6.7 per cent in 2021.
In addition, the EU-Vietnam Free Trade Agreement will also contribute to the future growth of the economy.
“The above factors support the positive outlook of Vietnam’s M&A market in the coming years,” Yoshida said, noting that the slowdown of M&A activities will continue due to entry restrictions over the last six months. The M&A process generally takes from six months to over a year to complete, and recently-announced M&A transactions were initiated before the pandemic situation arose.
“We recognise that many transactions are still on hold due to restrictions. Recently Vietnam has lifted 14-day quarantine for investors entering the country for less than 14 days and we expect Vietnam’s M&A activities will grow robustly in 2021 if the pandemic is controlled this year,” he said.
South Korean investors are also active in Vietnam’s M&A scene. Some remarkable deals in the first nine months of 2020 include SK Investment III, a subsidiary of SK Group, which received more than 12 million shares, equivalent to nearly 25 per cent of Imexpharm Corporation’s stocks. SK Lubricants also acquired a 49 per cent stake in Mekong Petrochemical JSC for ₩50 billion ($42.1 million).
Lotte Chemical, a unit of Lotte Group, has also acquired Vietnamese high-tech material company VinaPolytech. Most recently, GS Caltex spent VND39 billion (nearly $1.7 million) picking up a 16.7 per cent stake in VI Automotive Service, a parent company of VietWash. VIR
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