M&A deals in 2018 and 2019 have focused on the consumer goods production and real estate sectors

The value of M&A deals in Vietnam may hit 6.7 billion USD in 2019, equivalent to 88.16 percent of the figure last year, according to organisers of the Vietnam M&A Forum 2019.

Meanwhile, foreign investors spent 2.82 billion USD on purchasing shares of domestic companies in the first seventh months of 2019, data of the Foreign Investment Agency under the Ministry of Planning and Investment show.

Economists said there have been several signs of stagnation in the Vietnamese M&A market.

However, the recent policy moves are expected to open up big opportunities for Vietnam to attract more foreign investment, including through M&As.

They include draft amendments and supplements to the Law on Investment, the Law on Enterprises and the Law on Securities; a resolution on foreign investment attraction set to be issued for the first time by the Politburo; and the signing of new-generation free trade agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the deal with the EU (EVFTA).

Michael DC Choi, Deputy Director of the Korea M&A Centre at the Korea Trade-Investment Promotion Agency, said many banks and investors from the Republic of Korea are planning to invest in Vietnam directly as well as through M&As. Therefore, the M&A capital flow from the country into Vietnam is likely to increase in the time ahead.

Apart from advantages, the local M&A market is also facing challenges posed by external and internal factors, he said, pointing to the trade policy changes of the US and China, problems in the equitisation of and divestment of State capital from State-owned enterprises (SOEs), the low quality of local businesses, and the size of the economy not attractive enough.

The fact that policy barriers relating to foreign investment, real estate and SOE equitisation haven’t been removed has also affected M&A deals.

Echoing this, Dang Xuan Minh, Director General of the AVM Vietnam – an organiser of the Vietnam M&A Forum 2019, said the too big State ownership at SOEs has hampered investors.

The lack of transparency in businesses’ financial reports, the time-consuming M&A process, and firms’ overestimation of their value are also problems.

To help the local M&A market thrive in the time ahead, insiders recommended the Government and relevant parties to make stronger changes to further improve the investment and business climate and facilitate the domestic and foreign capital flow into this field.

They also called on the State to divest its capital from SOEs more strongly while promoting the participation of private firms in M&As.