Plenty of room for M&A activities in Vietnam to grow

	M&A activities increase and carry potential risks
	The M&A market has cooled down during the Covid period
	M&A market has cooled down during Covid-19 period

Top 10 enterprises with typical M&A and investment deals in 2019 - 2020

Grow in a new situation

Over the years, M&A has become an effective capital mobilisation channel, contributing to diversifying activities to attract investment resources for the economy, promoting the innovation process of growth model, restructuring the economy, and diversifying ownership forms of enterprises. M&A is also the shortest way for foreign firms to penetrate and expand their activities in the Vietnamese market with high efficiency and cost savings.

The EU-Vietnam Free Trade Agreement (EVFTA) is expected to attract investment from European businesses to Vietnam, along with investors from Singapore, Japan, South Korea and Thailand. In addition to investment, foreign investors also create pressure, forcing Vietnamese firms to improve their competitiveness to stand firmly in the domestic market.

Tran Quoc Phuong, Deputy Minister of Planning and Investment, said Vietnam's M&A market has developed strongly with thousands of transactions, reaching total value of nearly US$50 billion over the past decade. However, the Covid-19 pandemic has seriously affected investment activities and international trade. As a result, the value of M&A deals in Vietnam in 2020 has fallen, estimated at US$3.5 billion, equal to 48.6% compared to 2019.

However, according to Euromonitor International, M&A activities in Vietnam could recover from mid-2021, bringing the market size back to a normal level of US$5 billion. The positive reviews of international organisations are objective, based on the results and success Vietnam has achieved in the period 2016 - 2019 and in 2020 with impressive success. Vietnam has basically achieved the "dual goal" to both control the pandemic and to maintain and develop economic and social activities, to ensure social security.

Despite the difficult situation, many large M&A deals were conducted in 2019-2020 in Vietnam. The most prominent was the deal between KEB Hana Bank and BIDV worth US$878 million, and the purchase of Vinhomes shares of KKR & Temasek worth US$652 million in 2019. The most prominent mergers and acquisitions in 2019 - 2020 involved private Vietnamese corporations, typically Masan acquired VinCommerce with an estimated deal value of about VND5,400 billion; and the M&A deal of Vinamilk - GTNFoods with an estimated value of more than VND1,100 billion

Remove knot to develop

Assessing trends and opportunities for M&A activities in Vietnam in the future, Paul DiGiacomo, Senior Executive Director of BDA Partners, said since the beginning of 2020, there had been many segments with good growth in Vietnam, especially personal consumption spending when the number of home buyers was increasing. As a market with a young population and affordability, this is seen as the foundation to attract more strategic investors through M&A deals.

According to DiGiacomo, in the future, the trend of M&A in Vietnam will have larger value deals, more professional, and businesses are also more discerning in designing deals. At the same time, the M&A market in Vietnam is developing strongly, increasing transaction volume and participating units, especially investment funds, focusing more on health, education, infrastructure, transportation and many new industries to have more M&A trends.

According to experts, for this activity to develop perfectly, there should be many regulations to protect investors, which will facilitate booming M&A deals in Vietnam in the near future. Simultaneously, businesses need to overcome the limitations related to post-M&A issues such as legal, debt and labour. To be successful in M&A, the sellers, which are domestic enterprises that need to set the right price with real value.

Pham Duy Khuong, Director of ASL Law Company, said some unclear provisions of the Competition Law were considered a barrier for M&A deals in Vietnam. Deals aiming to hold 30-50% market share in a "relevant market" must be reported to the Vietnam Competition Authority (Ministry of Industry and Trade). Transactions resulting in combined market share of more than half are prohibited, except certain circumstances.

Information about enterprises that investors are interested in is limited and there is no useful search engine with reliable data for investors to collect necessary information. According to Khuong, firms that want to be merged or sold often hide unfavourable information, such as debts, disputes or litigation. This puts investors at risk when they do not know information from the company they intend to invest in.

To facilitate enterprises when entering the market, in 2020, the Ministry of Planning and Investment drafted and submitted to the Government and the National Assembly to approve the Law on Enterprises, the Law on Investment, and the Law on Investment under the public-private partnership (PPP) mode with many reforms in market entry procedures, facilitating firms in investment and business, including M&A activities. Furthermore, the Ministry of Planning and Investment is completing a strategy to attract FDI in the new period, with the aim of prioritising the attraction of projects using high technology, advanced technology, new technology, clean technology, and modern governance.

In addition, a group to promote foreign investment cooperation has been established to attract multinational corporations and large enterprises to invest and grasp investment cooperation opportunities in the new situation.