Second Round of M&A Activity Expected in Vietnam as Investors’ Interest Grows
HANOI – Vietnam is awaiting a second wave of M&A activity, with the total value of deals expected to reach US$20 billion between 2014 and 2018.
The first wave of M&A started in 2008 and slowed down in 2013 due to economic stagnation. However, experts still believe the M&A market will be more dynamic in the next five years with strong growth in both the number of transactions and total value. Some driving forces include: economic recovery, SOE equitization, stronger institutional reforms and rising interest of foreign investors in the Vietnamese market.
According to the Ministey of Planning and Investment, the government has approved an equitization scheme for 432 SOEs to initiate IPOs in 2014 and 2015. This will provide both domestic and foreign investors with great M&A opportunities. Additional stake sales of PV Gas, the IPO of MobiFone, Vietnam National Textile and Garment Group (Vinatex) and Vietnam Airlines are projected to be major national M&A transactions in the next two years.
Consumer goods, real estate, information technology, transport and logistics sectors have all begun to attract a lot of attention in recent times as Vietnam anticipates participation in the Trans-Pacific Partnership and completion of the Vietnam-EU FTA. The formation of the ASEAN Economic Community (AEC) between late 2015 and early 2016 will also draw strong capital investment from foreign investors during this period.
Vietnam is expected to increase its GDP by more than 28.4 percent upon successful ratification of the TPP, with export value projected to rise more than 35.7 percent.
Many foreign investors are looking to get involved in companies and industries with high growth potential as strategic investors, not just shareholders in the market, and view M&A as the most effective way to achieve these goals.
According to Andy Ho, managing director and chief investment officer of VinaCapital, Vietnam is at its best to attract foreign investors. The country currently has over 700 listed firms with a total market capitalization of around US$52 billion, equal to 32 percent of the country’s GDP. The Vietnam Index has also increased by over 15 percent year-to-date, with daily turnover up by 58 percent compared to the same period last year. Vietnam is one of the best ten performing markets in the world, but still remains one of the most undervalued emerging markets.
Foreign investors are drawn to Vietnam by its abundant, young and cheap labor force as well as preferable tax incentives. Japanese investors are the major players in this game and have favored M&A activity; since 2010, there have been 69 M&A transactions between Japan and Vietnam.
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