Jul. 29 – Merger and acquisition (M&A) activity in Vietnam is expected to remain high in the coming years according to a Vietnam M&A Forum research group. Transaction activity is projected to grow at a rate of 25 to 30 percent per year over the next five years, with total value reaching US$4 billion by the end of this year.
The market for M&As in Vietnam has seen rapid growth as both domestic and international investors have sought new opportunities following the global financial slowdown in 2008. From 2009 to 2012, M&A activity increased 65 percent per year, totaling US$14.8 billion during that time.
Vietnamese companies involved in these transactions average US$2-5 million per project. International investors, however, who accounted for 66 percent of total transaction value during 2009-2012, have pursued larger M&A deals with an average value of US$10-30 million per project.
The consumer goods and financial sectors have seen the greatest share of M&A activity, accounting for over a quarter of all transactions.
A recent survey conducted by KPMH found that international companies have increased M&A activity in order to expand their operations into high-growth emerging markets. Japanese firms make up the largest percentage of international companies using M&A to accomplish this in Vietnam, completing US$1.5 billion in transactions during 2011-12.
“Japanese companies have been searching for places to invest in addition to China. This trend is likely to continue for the next five to ten years,” said Toru Nishihama, economist at Dai-Ichi Life Research Institute.
These transactions have been facilitated by the Japanese government, which has worked tirelessly to implement pro-growth policies since Prime Minister Abe came into office last year.
“The Japanese government is very proactive… It has become enticing for Japanese businesses to invest in Southeast Asia with government-affiliated financial institutions,” Mr. Nishihama further remarked.
Vietnam’s ASEAN partners have also participated in the M&A boom as companies look to leverage Vietnam’s cost-efficient and large labor force. Inter-ASEAN transactions accounted for 23 percent of cross-border M&A deals executed last year.
Local officials have greeted the increased activity of M&A deals in Vietnam favorably. The Foreign Investment Agency’s official representative Do Van Su said the completed M&A deals were a good sign for the country and would result in greater operational efficiency for firms within Vietnam.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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