EXPERTS LINE UP TO EXTOL VIRTUES OF M&A

A variety of voices have explained how new models of collaboration between acquirers and acquirees have been created in a bid to facilitate a more well-rounded ecosystem, and maximise a solid pool of Vietnamese talents.

Speaking at last week’s M&A Forum, titled “Time to Strike” held by VIR, Deputy Minister of Planning and Investment (MPI) Tran Quoc Phuong, said that a handful of free trade agreements are helping to stimulate appetite for mergers and acquisitions (M&A) in Vietnam. “The MPI has continuously encouraged savvy acquirers to focus on digitally-led industries and cutting-edge technologies. We believe the explosion of M&A has yet to come, and 2022 onwards could be a prime time for both domestic and cross-border deals,” Phuong said.

In the first 10 months of the year, there were at least 500 M&A deals closed, generating $8.8 billion in total transaction value and reflecting a 17.9 per cent increase over the whole of 2020, and a 13 per cent increase over 2019.

The average deal size for a transaction with disclosed value has gone up from $28.1 million in 2019 to $42.8 million. More deals over $100 million were concluded over the review period, with 22 deals recorded in just the first 10 months of 2021 compared to 19 in 2019.

Consumer staples, finance, and real estate have been the most popular targets in recent years, accounting for up to 60 per cent of total value. They have reaped significant benefits from the brisk demand for housing, financial services, and convenience items that has resulted from a huge population with a growing middle class and a quick rate of urbanisation.

The year’s biggest M&A deals have involved companies primarily operating in these sectors, including Sumitomo Mitsui Financial Group’s $1.3 billion investment in VPBank’s FE Credit, SK South East Asia’s $410 million commitment in VinCommerce, and Baring and Alibaba’s $400 million investment in The CrownX, all in the first half of the year.

In recent times, Vietnam has seen a dealmaking renaissance as local management increased their expansion attempts, with M&A being one of the primary approaches.

“Vingroup, Masan Group, Hoa Phat, Vinamilk, and Nova Group are the top five most acquisitive purchasers in terms of both transaction value and volume in the previous two years,” said Warrick Cleine, chairman and CEO of KPMG in Vietnam and Cambodia. “The country clearly boasts great confidence as an alluring investment destination.”

These domestic behemoths, in particular, have disrupted the market with many blockbuster agreements as both buyers and sellers, resulting in a 5-fold rise in deal value from $248 million in 2019 to $1.21 billion in 2020, accounting for 53 per cent of total local M&A value.

Despite the lingering pandemic, the pack demonstrated a tenacious effort in the quest for attractive investments, closing 11 agreements totalling $1.13 billion during the first 10 months of 2021, representing 70 per cent of all domestic M&A transactions.

The enthusiasm in local M&A activity will stay intact for these firms since they not only have substantial financial reserves to hunt for excellent targets they also have a strong desire to pursue continual market expansion and profit margin enhancement.

Various speakers at the M&A Forum highlighted that forthcoming 5G technology would lay a concrete foundation for advanced technology in fintech, P2P lending, and in renewable energy, among others, and tie-up deals would benefit from these trends.

“Given Vietnam’s strong commitments towards reaching net-zero emissions and the increasing importance of environmental, social, and governance criteria, it can be confidently said that more landmark deals will be executed in environmentally-friendly sectors,” noted Le Khanh Lam, chairman of RSM Vietnam. “A strategic view of climate risks also unlocks vast potential for smart investment approaches.”

On the same boat, Thuong Pham, deputy general director and CFO of BCG Energy under Bamboo Capital Group, said that BCG has been monitoring the market since 2018 in order to identify investment opportunities – not only in renewable energy but also in the financial sector through M&A.

“The first prerequisite for domestic firms to be able to thrive in such agreements is transparency, mutual trust, and a talent pool to not only successfully complete deals but also encourage vigorous growth post-M&A,” Pham elaborated.

Bamboo Capital Group not only has operations in manufacturing, infrastructure, real estate, and renewable energy, but it has also recently entered the financial sector via an agreement with insurance firm AAA Group, with an ownership ratio of over 80 per cent.

Source: VIR