The latest report by the Euromonitor Market Research Group on the merger and acquisition (M&A) index has rated Vietnam as the market with the most dynamic and potential M&A activity globally this year, with a score of 102, only behind the US with 108.9 points. At the same time, it forecasts that Vietnam will continue to hold second place in the top 20 countries with the highest M&A investment index in 2021.
In the context that the global M&A market has been greatly affected by the Covid-19 pandemic and the US-China trade war, despite a sharp decline of the M&A market of Vietnam this year (M&A value is estimated at US$3.5 billion, equal to 48.6 percent of last year, while the global market dropped by 52 percent), there are still bright spots with many large M&A deals.
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In the period from June 2019 to October 2020, the industries mainly attracting M&A deals in Vietnam were real estate, finance – banking, industry, retail, logistics, agriculture, pharmaceutical – healthcare, and construction. The remarkable highlight in recent years is that private economic groups of Vietnam have carried out the restructuring and expansion of business cooperation with many domestic and foreign partners. Several large-scale deals have been carried out by Vingroup, Vinamilk, Gelex, REE, Thaco, and PAN Group. Recently, in early October this year, Masan MEATLife Joint Stock Company under the Masan Group announced an investment of VND613 billion to buy back a 51 percent stake in 3F Viet Company, officially expanding into the field of poultry meat production.
Meanwhile, the M&A market continues to be led by foreign investors from Japan, Korea, Thailand, and Singapore. Especially, since the beginning of this year until now, Japanese investors have carried out 19 deals. Noticeably, Mitsubishi Corporation and Nomura Real Estate acquired 80 percent of Vingroup’s Grand Park project. Aozora Bank bought a 15 percent stake in Orient Commercial Joint Stock Bank; Haseko Real Estate Group purchased a 36 percent stake in Ecoba Construction Company; ASKA Pharmaceutical Company obtained a 24.9 percent stake in Ha Tay Pharmaceutical Company.
In 2021, the M&A market is expected to continue to face obstacles when the Covid-19 pandemic has not had an effective vaccine, and the prospect of a global economic recovery will take place slowly. Meanwhile, trade tensions, protectionism, and political upheaval in countries will continue to increase, directly affecting highly open economies like Vietnam. A decline in global investment capital will affect the general M&A market.
However, according to Euromonitor, many factors show that the M&A market in Vietnam will recover from mid-2021 and accelerate in 2022. The first factor is the start of a new government term in Vietnam. Investors expect that this event will be the driving force to promote the divestment and equitization process faster.
Euromonitor forecasts that under favorable political conditions, along with the recovery of the global economy, the value of M&A market in Vietnam may reach $7 billion in 2022.
Another factor assessed to also positively impact the recovery of the M&A market comes from free trade agreements, namely the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the EU-Vietnam Free Trade Agreement, with the strong wave of M&A in the retail industry. The third factor is the documents guiding the implementation of the Law on Securities, the Investment Law, and the Law on Enterprises, which are recognized as important milestones, contributing to the simplification and synchronization of administrative procedures, as well as related legal procedures in Vietnam. The next factor is the shift of production from other countries to Vietnam.
Recently, 126 large corporations are moving and want to invest in Vietnam. Or recently, 15 Japanese enterprises have also chosen to invest in Vietnam in the manufacturing sector. These are proof of this trend. Opportunities for the M&A market when shifting production will not only be limited to industrial real estate but also expand to other fields, such as production chains, services, and finance.
The Ministry of Planning and Investment forecasts that in the coming time, the M&A trend will increase sharply. And the worrying thing is not in the past months, but that in the coming time, when the enterprises pass their tolerance levels, they will have to sell themselves. In Ho Chi Minh City, the investment trend through capital contribution and purchase of shares continues to outperform the form of foreign direct investment.
The Department of Planning and Investment of Ho Chi Minh City said that in the past five months, there was $1.6 billion of FDI capital registered to invest in the city. Of these, investment through capital contribution and purchase of shares is 1,923 times, with a value of up to $1.23 billion, accounting for nearly 77 percent of total foreign investment in the city, according to the Saigon Giai Phong Newspaper.
By Le Dung, Ai Van – Translated by Thuy Doan