Mergers and Acquisitions (M&A) provide a solution to several obstacles foreign investors face when trying to enter the Vietnamese market. During the pandemic, many partnerships were forged through mergers and acquisitions with domestic companies that took the initiative in the market.
M&A activity was disrupted in 2020 by the COVID-19 pandemic, with the total value falling 50 percent to about $ 3.9 billion. In the first nine months of the year, however, M&A deals with the total disclosed value were already $ 3 billion, according to White & Case.
Given the economic and social challenges posed by COVID-19, many companies have identified M&A as the optimal solution for restructuring, expanding their ecosystems and creating value chains.
There have been notable acquisitions or restructurings of private companies in the market in the last six months of 2019 and 2020. The pandemic has shifted the market trend towards more acquisitions than mergers.
Accordingly, from 2019 to 2021 more than 80 percent were share purchases for takeovers and 9 percent were joint ventures, while only 11 percent of M&A deals were mergers.
Industry and chemicals, consumer goods and real estate were the top three sectors in most transactions for M&A activity, according to a 2021 report by White & Case. The industrial and chemical sector generated a total of seven deals in the first three quarters of 2021. In the real estate market, M&A remains the fastest solution for foreign developers entering the country and for local developers to expand their property portfolio.
As for the residential real estate market, there is a trend in 2021 for developers in the suburbs of Hanoi and Ho Chi Minh City to look for real estate funds through M&A deals. 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 be the focus of the M&A market. Such provinces have attracted investors from Japan, Singapore, and South Korea.
According to a survey by the CMAC Institute, consumer goods manufacturing, industry (energy), real estate, retail, ICT and logistics are expected to be the most active M&A activities in the coming years.
Manufacturing, one of the sectors heavily affected by COVID-19, continues to attract foreign investors given Vietnam’s low labor costs, strategic location and many nationwide seaports. The trend of multinational corporations to relocate investment from China to Vietnam will continue due to the influence of the US-China trade war, which will lead to further potential relocations of manufacturing centers to Vietnam.
In 2020, the $ 240 million acquisition of Thipha Cable and Dovina Metal, two major Vietnamese electrical cable manufacturers, by Thai Stark Corporation was reported as the largest inbound private sector industrial transaction in Vietnam in the past three years.
This article was first published by VietnamBriefing, which is produced by Dezan Shira & Associates. The company supports overseas investors across Asia from offices around the world including China, Hong Kong, Vietnam, Singapore, India and Russia. Readers can write to [email protected]