M&A Vietnam – “Hot” Investment Channel

In recent years, foreign investors spent approximately 3 billion USD to buy shares in more than 3,000 enterprises in Vietnam, in which most of them purchased over 50% of the shares. It indicates that investment trends through the model of merger and acquisition (M&A) are booming strongly in the market.

According to the report from the Foreign Investment Department under the Ministry of Planning and Investment, from July 1^st 2015 to July 1^st 2016, there were 3,141 companies in Vietnam are acquired by foreign investors in the form of buying shares. The total value of those deals is 2,948 billion USD. This is the first time the Foreign Investment Department showed the statistics on foreign investment flows into Vietnam through M&A activities. It shows that the trend of investment into Vietnam through M&A is increasing greatly.

As reported by the IMAA, a foreign research institute on M&A, the total value of M&A in Vietnam in 2015 reached 4.3 billion USD, 40% higher than in 2014 and surpassing the record level of 4.2 billion USD in 2012. It is expected that the value of M&A deals in Vietnam in 2016 is likely to break the record of 2015 and reached 6 billion USD.

Many analysts are predicting that the food, logistics, retail and real estate industries will still be targeted by foreign investors. The main reason is that the potential of Vietnamese consumers is growing due to young population and growing economy.

Among more than 3,000 M&A deals that are statistically by Foreign Investment Department, there were 1,894 deals valued at 1.8 billion USD that are invested by foreign investors to hold dominant share of over 50% . It means more than half of M&A deals in the past year are made with long-term investment objectives.

There has been more active involvement of the Private Equity fund (PE). Previously, if the PE funds often take part in the purchase of shares which is not dominant, but now, the PE fund is ready to invest at a higher percentage to increase profit and reduce competition. In addition, the increase in ownership percentage will also help to increase the PE funds’ intervention in business activities of enterprises to create surplus value.

When the inflow of foreign investment into Vietnam through M&A increases, it will create opportunities for domestic enterprises to mobilize capital, improve enterprise management skills and competitiveness. One of the examples is the case that Vietnam Airlines sold 8.8% of shares to ANA Holding, the largest airline corporation in Japan.

In fact, many other businesses also consider M&A as an effective channel for capital mobilization. Therefore, after the Vietnam Government allowed to increase the percentage of capital held by foreign investors at the company listing on the stock market to 100%, many companies have decided to open “room” to welcome this new capital flows. Many examples are Hoang Quan Real Estate Company, Thu Duc Housing, An Phat Plastic and TNG Garment. Even Vinamilk, one of the most successful dairy enterprises in Vietnam, also have to think about loosening “room” to 100% to attract foreign investment through M&A activities.

ANT Consulting is here to assist you from the outset; providing corporate intelligence, risk advisory, management consulting services that assist market entrance, and ensure efficient business start-up operation. 

We strive to save your cost by guiding you towards economical solutions that comply with local legislation and procedures. We support you through early logistic solutions and carry you through as your business grows.  We aim to bridge the gap between international best practices and local cultures and assist foreign companies and organizations entering Vietnam market to overcome commercial and regulatory issues.

We could be reached at email: ant@antconsult.vn or tel: +848 3520 2779 .  To learn more about us, please visit www.antconsult.vn

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Japan Increases Investment in Vietnam in Finance and Services

Japanese investors have switched from setting up business in Vietnam in manufacturing into financial investment, retail.

Till end of Jan 2015, Japan is the second largest foreign investors in Vietnam in direct investment form with 2,494 projects, and total registered capital of nearly 36.9 billion USD however there have been changes in the structure of the investment capital in Vietnam.  In particular, the manufacturing sector once accounted for the largest proportion of investment in Vietnam drops 30% from nearly $ 1.2 billion in 2013 to nearly 830 million 2014.  In fact, the projects in the manufacturing sector often require huge capital during a long-term investment.  In the context that Japan’s economy faces difficulties as well as the global economy is not bright, the reduction of investment in the manufacturing sector is also understandable.

In indirect foreign investment in Vietnam, Japan ranks sixth in the list of countries conducting M&A in Vietnam with more focus on small or medium but long-term and potential large area.  The field of production only accounts for 10% of the total value.

However, the recent survey has shown there is a new wave of Japanese investment in other sectors such as construction, real estate, transportation or financial investment.  The report of The Japan External Trade Organization, or JETRO, a Japanese government-related organization that promotes trade and investment reflects the proportion of new investment projects in the construction, real estate increased from 3% in 2013 to 6% in 2014, while the capital had risen to 13%, compared with 2 % of a year ago.

In real estate sector, Tokyu Corporation has joined invested with Becamex IDC to develop Tokyu Binh Duong Garden City in an area of ​​over 110 hectares with a total investment of about USD 1.2 billion. Daibiru Corporation also acquired the office building Corner Stone in Hanoi with value of the deal at USD 60.1 mil.  These are example that Japanese investors recognizing the potential development of Vietnam’s changes in real estate market as the land ownership have been approved and effective from Jul 2015. As reported, M&A deals in real estate in 2014 accounted for 61% of M&A deals.

In financial investment, in 2014, Daiwa PI Partners and Vietnam Opportunity Fund of Vina Capital invested USD 45 million in the International Dairy Joint Stock Company, making foreign ownership increase to 70%.

In retail sector, Vietnam is also considered as an attractive market with growing mid-income consumer group. The largest retailer Aeon Japan after years of market research has poured more than USD 500 million for two commercial centers were opened in Ho Chi Minh City, Binh Duong and a new center in Long Bien (Hanoi).  The group also plans to expand through acquiring shares of two local supermarket being Fivimart and Citimart.

It appears that Japan is holding strong among the leading investors in Vietnam, together with Korea and Singapore.

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Vietnam: Banking M&A Booming in 2015

The market for M&A transaction in Vietnam is expected to boom in 2015 with many M&A activities in banking industry.

According to experts, there will be new capital flowing into the M&A market of Vietnam with a total forecasting value up to 20 billion USD over the period from 2014 – 2018.

Particularly in 2014, according to an incomplete statistics of the M&A Forum team (MAF), the value of M&A in Vietnam reached 4.2 billion USD.

According to Prof. Dr. Christopher Kummer, Chairman of the Institute for Mergers, Acquisitions and Alliances (IMAA), Vietnam has made progress in the ranking of the global M&A activity when rising to the 20th position.

The main trend of the Vietnam M&A market during 2015 – 2016 and the following years has focused on a number of key industries such as retail, consumer goods, real estate, finance and banking.

Currently, investors from Japan, South Korea and Thailand are the main customers who acquire projects, enterprises of Vietnam.

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M&A Services in Vietnam

M&A Trend in Vietnam

The foreign investors have been taking a number of corporate intelligence  research, background check and M&A due diligence in Vietnam before taking a closer look into the targets for M&A.  The investors from Thailand, Singapore focus mainly on the field of consumer goods and retail; investors from Japan, South Korea eye real estate and industrial real estate projects.

In fact, there have been cooperations between Vietnam companies with foreign investors as Hoang Quan Real Estate has received capital from GEM investment fund (US); Sao Mai An Giang group is also negotiating for capital grants from a major investment fund from US; Nam Long, Thanh Dong, An Gia, Khang Dien… cooperate with Japan; Sacomreal and Thanh Thanh Cong Group cooperate with Gamuda Land from Malaysia.

Vietnam Policy Open-up Creating Positive Impact

The changing in the policies recently had a tremendous impact on the investment and business activities of enterprises, particularly place strong impact on the M&A activity in the future.

For example, many important laws aimed at innovating and improving the economic institutions such as the Public Investment Law, the Investment Law (revised), Business Law (revised), the Law on management and use of state capital in production – business, Housing Law (revised), Law on Real Estate Business (revised), which allows to ease room for foreign investors in many sectors are contributing to improve the legal environment for business investment activities in general and M&A market in particular.

Vietnam Bank Restructuring

Besides, the process of restructuring the commercial banking system and divest non-core investments of the state-owned enterprises under the policy of the Government is also contributing to make the M&A market more diverse.

2015 is the year to thoroughly handle weak banks, gather small banks to form large-scale banks, meet the international standards.

It is clear that the M&A activities are just starting to heat up since 2007, when Vietnam joined the World Trade Organization (WTO). The value of M&A increased gradually until 2012, a record year with more than 4.1 billion USD of total value.

Entering 2014, with stronger action by the Government on the process of equitization of state-owned enterprises, reform some laws related to business and investment, improve administrative procedures and keep a stable macroeconomic environment, along with better growth rate have encourage domestic and foreign enterprises to acquire.

The year of 2014 was a year marking the revival of M&A transactions in Vietnam, after this operation dropped more than 50% in value in 2013. According to statistics, Vietnam has witnessed 313 M&A transactions in 2014, increase slightly compared with the previous year. This figure includes transaction between Vietnam companies with each other, foreign enterprises purchase domestic enterprises and Vietnam enterprises go to buy assets abroad.

According to the State Bank of Vietnam (SBV), in 2015, there will be approximately 6 M&A transactions. Hence, not only large banks but small banks are actively looking for M&A partners in order to survive.

The first M&A transaction will be the merger of Southern in Sacombank, then asking many other weak banks to merge with large banks. With the goal that in 2015 the banking industry will have the 2nd restructuring, consolidating of banks to form the large-scale bank with international standards.

Currently, the SBV has approved the merger of Sacombank and Southern Bank, Maritime Bank and Mekong Bank. Although the conversion rate between Southern Bank shares into shares of Sacombank or Mekong Bank to Maritime Bank is still unknown, but two banks have a large difference in size and profitability especially in recent years.

Other M&A transaction in banking industry: Vietcombank will merge with Saigonbank. Vietcombank is currently the largest shareholder of Saigonbank with stake holding of over 8.2%.

In addition, BIDV will also merge with MHB. VietinBank merges with a small bank, which had been identified as PGBank.

In recent days, information about Nam A Bank will merge with another bank with a larger scale is interested by the market. The policy and direction of SBV to accelerate the restructuring in banking industry is crucial, therefore in the future, M&A transactions in the financial – banking sector will be very busy.

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