Vietnam is going strong in the global M&A market this year. According to the Institute of Mergers, Acquisitions and Alliances (IMAA), the Vietnamese M&A market is predicted to be worth $3.8billion with around 400 deals expected to be announced in 2015.
This makes Vietnam ranked 20thglobally for M&A activity and this is a high figure considering Vietnam’s position of 55th in global GDP. This also represents a significant increase from 2014 where total deals concluded were valued at $2.8billion. Not only has the total amount increased, the average value per deal has increased from around $5-$8m in 2011 to $11m in 2014, with a number of deals now in the regions of $20-$100m. Recent major deals include Ocean Retails acquisition of 70% stake of Vingroup – Vietnam’s largest privately owned firm, Mondelez International’s acquisition of 80% stake of Kinh Do for $370m, and Standard Chartered Private Equity’s $90m acquisition of An Gian Plan Protection.
Vietnam’s Deputy Minister of Planning and Investment Dang Huy Dong recently spoke at an M&A Forum titled “Countdown to the Next Market Boom” held at the country’s capital, Ho Chi Min City. He mentioned that the economic restructuring that involves creating a more friendly environment for foreign and domestic investment is a key factor behind this boom. Indeed, there have been institutional and financial reforms, privatisations, and international integration carried out with many investment, corporate and property laws being amended in the process.
For example, previously, foreign firms were required to apply in order to acquire even a 1% stake of a Vietnamese firm; new regulations implemented now allow them to own up to 49% freely, encouraging more investors to buy Vietnamese firms. In addition to what is stipulated as law, the government is prepared to being more open to these firms with high foreign ownership. Previously, a pharmaceutical company was refused to register a new medicine due to the fact that 4.3% of the company’s stake was owned by foreign capital. As well as M&A, this also creates a possibility for joint ventures which could bring foreign expertise to Vietnam more easily.
In addition, of 432 state-owned enterprises, 176 have been privatised so far. Also, eight years after joining the World Trade Organisation, Vietnam is now actively opening its economic doors, recently engaging in the Trans-Pacific Partnership (TPP) and EU-Vietnam Free Trade Agreement (FTA). Favourable economic conditions has also been a significant contributing factor behind the M&A boom in Vietnam. GDP has grown at 6.28% in the first six months of 2015 – an increase from 5.98% in 2014 and record since 2009. Meanwhile, inflation has remained at stable rate of 3%.
In the past few years, most M&A deals in Vietnam has been in the retail, consumer goods, financial and real estate industry. With Vietnam’s youthful demographic, it is predicted that industries based on these human capital, such as service and IT, would attract more and more foreign companies to move in. This is likely to be a force to continue Vietnam’s M&A surge, rather than ending in a surprise boom.
Source: http://themarketmogul.com/
Key words: The M&A, boom, in Vietnam
