Going against the trend in Southeast Asia, Vietnam’s mergers and acquisitions (M&A) market is gradually recovering this year and is forecast to improve in 2025.
A report released by auditing firm KPMG at the Vietnam Mergers and Acquisitions Forum 2024 organized by Investment Newspaper on the afternoon of November 27 said that the total transaction value of the Vietnamese M&A market in the first 9 months of the year reached 3.2 billion USD in the first 9 months of 2024, an increase of 45.9% over the same period last year.
Meanwhile, the Southeast Asian market remains generally gloomy. The total transaction value of Thailand, Indonesia, Malaysia, Singapore, and the Philippines decreased by 11.3% in the same period. Dr. Nguyen Cong Ai, Deputy General Director of KPMG Vietnam, commented that the Vietnamese market has grown positively, partly due to the low base level.
“We predict that in the fourth quarter, there may be a few more deals, bringing the full-year growth of Vietnam’s M&A value this year to about 10-20%,” he said.
In the first 9 months, the average value of a deal in Vietnam was 56.3 million USD and the highest was 982 million USD. 88% of the transaction value came from the real estate, consumer staples, and industrial sectors. Domestic investors played a major role, accounting for 53% of the total announced transaction value.
This also shows that foreign investors are still cautious. According to the Ministry of Planning and Investment, in the past 10 months, there were only 2,669 capital contribution and share purchase transactions by foreign investors, with a total value of more than 3.68 billion USD, a decrease of 10.4% in number of transactions and a decrease of 29% in value compared to the same period.
“This slump is only a temporary issue due to the general trend of the global market, the world economy has not yet fully recovered from the pandemic and geopolitical fluctuations in the world,” said Mr. Nguyen Duc Tam, Deputy Minister of Planning and Investment.
Experts at the forum predicted that the M&A market will continue to thrive thanks to good fundamentals. According to Mr. Tam, the GDP growth target for 2025 is 6.5-7%, striving to reach 7-7.5% or more.
The Ministry of Planning and Investment will continue to improve institutions and policies, and submit to the National Assembly draft laws on public investment (amended) and amended laws related to investment, planning, bidding and PPP. These draft laws bring new management thinking, shifting from “pre-inspection” to “post-inspection”, increasing decentralization and delegation of power.
Experts discuss at M&A Vietnam Forum 2024. Photo: Investment Newspaper
Ms. Vo Ha Duyen, Chairman of VILAF Law Firm, assessed that Vietnam is going through a dynamic period in legal reform related to investment processes, taxes, and the development of policies specific to industries.
For example, the Telecommunications Law is more investor-friendly in developing data centers and Internet telecommunications services. The implementation of the CPTPP makes foreign capital more accessible to the video game and retail industries. The direct electricity trading mechanism helps raise expectations for new renewable energy projects.
Mr. Nguyen Cong Ai said that the Vietnamese M&A market in 2025 could “bloom”. Real estate, consumption, and manufacturing will continue to be the leading industries. At the same time, technology may be “hot”, finance may be re-focused, and healthcare and education may also be in the spotlight. Mr. Oh Hsiu-Hau, Managing Partner of Allen & Gledhill, predicted that real estate, renewable energy, and healthcare will be the three industries that will attract.
Next year may also see the return of foreign investors such as Japan, Singapore and the rise of the US and China. In the first 9 months, the market was absent of Japanese investors. “Korean investors are also returning, placing more trust and increasing demand,” said Mr. Dinh The Anh, Executive Member, Head of Corporate Finance Advisory Department of KPMG Vietnam.
However, the M&A market still faces some challenges. According to Nguyen Cong Ai, the global market continues to be affected by geopolitics, and the new administration of Donald Trump risks increasing inflation, which means slowing down the process of reducing interest rates by the US Federal Reserve (Fed). “It will be more difficult for funds to transfer capital abroad for investment,” he said.
The intrinsic attractiveness, according to the ESB (Environment – Buyer – Seller) formula, is also problematic, according to Dragon Capital Chairman Dominic Scriven. For the Environment, 3.5 billion USD was withdrawn from the capital market in the first 9 months of the year, the cumulative figure over the past 3 years is 6 billion USD. “This is a crazy number, there is no clear basis, it is just a matter of weak trust,” he said.
The Seller side has a rather old supply structure. The three largest sectors in the capital market are banking, real estate and consumption, respectively, because businesses that want to list must be profitable. Therefore, although Vietnam talks a lot about 4.0, green, energy transition or e-commerce, these sectors are new, businesses are still losing money so they cannot list, making the capital market structure not diverse. Finally, the Buyer side has not seen enough policies to create great motivation.
Mr. Oh Hsiu-Hau, Managing Partner of Allen & Gledhill, recommends that there be more decrees and circulars to guide the newly issued laws. “There are still gray areas that need to be regulated in detail. However, the legal corridor has created a new playing field, showing the clear desire of the government to reform, so it can resonate in the M&A market and attract investment in the future,” he said.
For businesses that want to sell, Nguyen Cong Ai recommends focusing on ESG criteria (Environmental, Social and Governance) from the beginning because this is an important factor that most domestic and foreign investors are interested in. ESG not only helps increase attractiveness but also directly impacts the long-term value of the business in the eyes of investors. In addition, consider applying artificial intelligence (AI) because it is the key to increasing productivity, optimizing operations and ensuring sustainable development.
Newspaper: Vnexpress
