01:47 (GMT +7) - Friday 28/10/2016


Big M&A buys to continue

Released at: 14:27, 23/04/2016

Big M&A buys to continue

M&A in Vietnam posted strong growth over the past year and is expected to increase in the years to come, according to Mergermarket and Kroll.

Foreign direct investment (FDI) in Vietnam continues to gain ground, encouraged by positive economic prospects, political stability and government commitments to liberalize the economy. In 2015 FDI totaled $13 billion, a decline of 13 per cent from 2014 but a significant uptick from investment barely reaching the $2 billion mark in the early 2000s. Since September 2015 FDI caps in numerous industries have been lifted, allowing overseas investors to take up majority ownership or full ownership (100 per cent acquisition) in publicly-listed Vietnamese firms. The long awaited removal of investment caps for overseas investors in certain sectors is likely to see such figures increase in the year ahead.

Inbound M&A increases

According to the latest “Foreign Inbound M&A in Frontier Vietnam Sees Exponential Growth” report, released by Kroll, the global leader in risk mitigation and response solutions, which has teamed up with Mergermarket, inbound merger and acquisition (M&A) as a component of FDI has likewise posted strong growth over the past year. Inbound acquisition values totaled $3.5 billion in 2015, increasing 406 per cent from the $706 million in deal value in the prior year and accounting for 94 per cent of deal activity in the country.

As government efforts to attract foreign capital take root, inbound M&A in Vietnam remains dominated by acquirers. Regional bidders completed 77 per cent of inbound deals in 2015, accounting for 94 per cent of deal values. Vietnam is also gaining ground on its neighboring countries, recording the second-highest number of cross-border transactions into Southeast Asia and the third-largest by deal value for inbound deals, with significant year-on-year improvements in both areas.

Japan-based acquirers completed eight transactions worth $259 million in 2015 in an outbound trend with Japanese corporates searching for new market opportunities amid an increasingly crowded and competitive home market. Likewise, Japan’s aging and shrinking population means Japanese firms must capture new consumer bases, a problem that has seen increasing investment into emerging Southeast Asia.

While investment from North America was sparse, Vietnam’s participation in the landmark TPP could usher in further interest from regional and global investors. While boosting exports, the TPP will also help attract investment amid government efforts to prioritize investments into high-tech, consumer, and advanced manufacturing sectors over the traditionally targeted light industry space.

Investment sectors

Inbound M&A in Vietnam has focused predominantly on opportunities benefiting from the country’s able-bodied, low cost labor force and its burgeoning middle class. Of the approximate $3.5 billion in inbound deals, the manufacturing/industrials and consumer sectors accounted for a combined 47 per cent of deals and 85 per cent of M&A values. Business services and financial services also accounted for noticeable percentages of deal activity.


In 2015 manufacturing M&A totaled $1.3 billion (46 per cent of deal value) from eight transactions (27 per cent of deal volume), as rising wages in China positioned Vietnam to receive manufacturers looking for cheaper places to manage their operations. Already the country is home to production facilities for international manufacturers, including assembly facilities for automakers Ford Motors (US) and Toyota Motors (Japan). US electronics maker Intel has operated a $1 billion testing and assembling plant in Ho Chi Minh City since 2010 and South Korea’s Samsung plans to spend $3 billion upgrading a panel display plant near Hanoi through 2020. Investors keen on entering the manufacturing space must be mindful of the often complicated employment laws and ownership structures in the country.


Vietnam’s middle class is expected to double in size from 12 million to 33 million by 2020. Average per capita income is also set to increase over that time from $1,400 to $3,400, according to the American Chamber of Commerce in Vietnam. The noticeable growth in demand for consumer goods and services has already piqued overseas interest, with a consortium led by Warburg Pincus, the US private equity firm, announcing in June 2015 its plan to invest $100 million in Vietnam’s largest shopping mall operator, Vincom Retail, following $200 million in 2013 to build the retailer’s operations. In 2015, six deals in the consumer space (20 per cent of deal volume) worth a total of $1.1 billion (39 per cent of deal value) were completed.

Similar investments among Vietnamese retailers will be needed in the years ahead as Vietnam’s middle class not only grows but spreads out. Today, retailer and consumer goods companies can reach half of the country’s population by having business operations in Hanoi and Ho Chi Minh City.

Business and IT services

Vietnam’s business and IT services industry has been a hotbed for investment in recent years. Previously viewed as a base for low-skilled cheap labor, international companies such as Intel are now scrambling to capitalize on the country’s low cost, high value tech talent. Comparatively smaller than India and China, Vietnam has carved out a portion of the business services market and continues to grow as a provider of talent for complex IT development tasks, such as software development, data analytics, and to some extent indigenous innovation.

However promising, Vietnam’s IT services industry still faces significant hurdles. The pool of adequate talent is small and drying up as international investors continue to employ the limited talent that exists. At the same time, outdated higher education curricula are failing to prepare graduates for modern IT and tech jobs. Despite government promises to address the education gap, doubt remains as many wonder whether authorities will prioritize education over economic development.

Private equity: Cautious optimism

Private equity (PE) remained active in Vietnam in 2015, albeit at decreased levels of investment. Total investment dropped 74 per cent from $988 million in 2014 to $260 million last year - almost $1 billion short of totals in 2013. However, PE is expected to rebound in the year ahead on the heels of the loosened foreign ownership controls and fund managers increasing allocations to frontier markets. Overall, PE practitioners agree that Vietnam has all the right fundamentals and as a relatively under-penetrated market is ripe for investment.

Aside from the Warburg Pincus investment in Vingroup, TPG Capital has also made forays into Vietnam. The US-based PE firm purchased a 49 per cent stake in animal feed production company Hoa Muoi Gio in 2013 for $50 million. KKR has likewise been acquisitive, making two transactions in 2011 and 2013 for stakes in Masan Consumer Corporation for a total $359 million. More recently, the Hong Kong-based Welkin Capital completed a minority stake acquisition of food-chain operator Huy Vietnam for an undisclosed amount, and Singaporean firm CVC Capital Partners has expressed its interest in the country by hiring a former partner at Ho Chi Minh City-based Vietnam Investment Group to its own management team.

PE investment since 2011 has learned toward injections of growth capital to help Vietnamese firms expand. In 2015 venture capital saw some of the largest number of investments, accounting for 53 per cent of all PE activity. This is happening as start-ups and early stage investments take center stage amid increasing competition and a limited target base of mid-market Vietnamese firms with proven track records. 

  • TAGS
  • M&A
  • Mergermarket and Kroll
  • Vietnam

User comment (0)

Send comment