Vietnam needs investment funds that back M&As

The 2017 M&A market closed with the historic deal in which Vietnam Beverage acquired a 53 percent Sabeco stake, worth $5 billion. Prior to that, The Gioi Di Dong acquired Tran Anh, a home appliance distribution chain, and Phuc An Khang, a drugstore chain.

The value of the deals made by foreign investors accounted for 77 percent of total M&A value.

The years 2016 and 2017 witnessed a series of takeover affairs with buyers from overseas. SCG took over the Vietnam Building Material Company, CJ Group took over Cau Tre Food, Earth Chemical bought A My Gia, and Daesang bought Duc Viet Food. 

Swiss Lafarge Holcim and Siam City Cement acquired a 65 percent stake in Holcim Vietnam cement joint venture worth 867 million franc, or VND19.9 trillion.

According to the Institution of Mergers, Acquisitions and Alliances (IMAA), the total M&A value in 2016 in Vietnam reached a record high of $5.8 billion, an increase of 11.92 percent over 2015. However, despite the high growth rate, the Vietnamese market is only a medium sized one in South East Asia.

IMAA (the Institute for Mergers, Acquisitions and Alliances (IMAA) reported that the M&A value of the Singaporean market in 2016 reached $62.3 billion while the Vietnamese M&A market value was far below that of the Philippines, at $6.8 billion.

In the first half of 2017, the total M&A value in Vietnam was relatively low, roughly $1 billion. 

At that time, analysts all predicted that the M&A value in 2017 would not gain 2016’s growth rate, commenting that the Vietnamese market has small transactions worth $3-4 million. Small deals account for 64 percent in terms of value and 90 percent in number of deals.

Financial capability

Seck Yee Chung from Baker & McKenzie is optimistic about the performance of the Vietnamese M&A market in 2017-2018. 

He said the advantages in the business environment and the policies encouraging foreign investors are helping Vietnam become the most attractive M&A market in the region.

The fields with the highest potential are food processing, industries, textiles & garments, energy, FMCG and building materials.

However, Nguyen Quoc Viet, deputy CEO of AVM Vietnam, commented that Vietnamese investors are less competitive than foreigners because of limited financial capability.

“The support of Vietnamese banks in M&A deals remains very weak,” he said.

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Kim Chi