Pwc vietna

The Hanoitimes – Covid-19 accelerates deals activity for digital and technology assets in a highly competitive market.

While the market has adopted a cautious approach so far, Vietnam’s M&A activity is in a strong position for recovery as the country started 2021 with a positive economic outlook.

Ong Tiong Hooi, Partner of Transaction Services, PwC Vietnam gave his assessment following the launch of PwC’s latest Global M&A Industry Trends analysis.

Global Deal Volumes and Values.

Covering the last six months of 2020, the analysis examines global deals activity and incorporates insights from PwC’s deals industry specialists to identify the key trends driving M&A activity, and anticipated investment hotspots in 2021.

In spite of the uncertainty created by Covid-19, the second half of 2020 saw a surge in M&A activity.

Deal-making jumped in the second half of the year with total global deal volumes and values increasing by 18% and 94%, respectively compared to the first half of the year. In addition, both deal volumes and deal values increased compared to the last six months of 2019.

The technology and telecom sub-sectors saw the highest growth in deal volumes and values in the second half of 2020, with technology deal volumes up 34% and values up 118%. Telecom deal volumes were up 15% and values significantly rose by almost 300% due to three telecom megadeals.

Deal Volume and Value in Asia Pacific.

On a regional basis, deal volumes increased by 20% in the Americas, 17% in Europe, the Middle East and Asia, and 17% in Asia Pacific between the first and second half of 2020. The Americas saw the biggest growth in deal values of over 200%, primarily due to some significant megadeals in the second half of the year.

“Reflecting the global trend, the Vietnam M&A landscape is likely to remain active this year,” stated Mr. Ong.

“Furthermore, pent-up demand is likely to kick in as investor and consumer confidence increases in light of the news on the Covid-19 vaccine development,” he noted.

Sharing the view, Brian Levy, PwC’s Global Deals Industries Leader said Covid-19 gave companies a rare glimpse into their future.

“An acceleration of digitalization and transformation of their businesses instantly became a top priority, with M&A the fastest way to make that happen — creating a highly competitive landscape for the right deals,” stated Mr. Levy.

Mr. Ong Tiong Hooi commented: “The new circumstances and challenges caused by Covid-19 have created particular demand and opportunities for digital services and the underlying technology that help our societies and businesses function. Thus, the ongoing acceleration of all things digital has become essential across industries. And it is at the speed that demand has grown favors a buy-versus-build strategy for many companies. This increases the competition to acquire the necessary business infrastructure and forces premium valuations.”

By comparison, assets in sectors that have been hardest hit by the pandemic like industrial manufacturing or those being shaped by factors such as the transformation to net zero carbon emissions are creating structural changes that companies will need to address. Where the future viability of their business models is challenged, companies may look to distressed M&A opportunities or restructuring to preserve value.

Deal makers turn to non-traditional sources

Non-traditional sources of value creation such as the impact of environmental, social and governance factors (ESG) are increasingly being considered by deal makers and factored into strategic decision-making and due diligence, as they focus on protecting and maximizing returns from high valuations and fierce demand.

Last year, the combined M&A transaction value in Vietnam was estimated to decline by 51.4% year-on-year to US$3.5 billion. A strong economic rebound in 2021 could help M&A activities in Vietnam recover from mid-2021 and take the market size to the pre-Covid-19 level of around US$5 billion per year.

The Hanoitimes – Covid-19 has revealed, and even deepened the skills gaps between the current skills and what required to deliver an agile fit-for-the-future business strategy, stated a PwC Vietnam senior executive.

To build resilience and emerge stronger through this health crisis, businesses in Vietnam need to rethink business structure, embrace digitalisation, and engage the workforce in a more sustainable way, according to Dinh Thi Quynh Van, general director of PwC Vietnam.

Dinh Thi Quynh Van, general director of PwC Vietnam.

Ms. Van made the suggestion at the Vietnam Business Summit (VBS), one of Vietnam’s largest international business events organized annually by the Vietnam Chamber of Commerce and Industry (VCCI) on November 12.

Under the theme “Digitized Vietnam: Toward Resilient Responsive and Sustainable Development”, the summit provided a platform for leaders from both the public and private sectors to engage in an open dialog on the development of key sectors, share experiences of businesses who have found success in Vietnam, and discuss investment opportunities in the digital era. This year the event received participation of around 300 representatives from the business community in Vietnam and foreign investors.

Against the backdrop of Covid-19, the summit program covered three key areas: Vietnam’s investment climate and opportunities, smart logistics to enhance its position in the global value chain, and the advancement of high-tech agriculture.

Overview of the discussion session at the VBS 2020.

Vietnam economic resilience in the spotlight

Although Vietnam is not immune to the global economic downturn, the country has managed a rare growth of 2.9% in 2020 as projected by the World Bank’s report in August — making it the only economy in ASEAN that can hold on to a positive growth rate this year, stated Ms. Van, adding this could be largely attributable to some very early and concerted actions taken by the government and the ensuing effective relief measures.

“The impacts of the Covid-19 on both global and local scale are increasingly evident and making enduring changes to the economic landscape. Vietnam’s bright prospect for recovery can be considered remarkable in this context of global downturn. However, to get out of this crisis stronger and in better shape, Vietnam shall be ready to navigate new challenges and opportunities ahead,” she noted.

Engage in a more sustainable way to reinvent the future

In the recent global CEO Panel Survey by PwC in July 2020, two key themes emerged among global CEOs when being asked about their priorities in a Covid-19 world: the emphasis on digitalization and the future of more employee-oriented workforce. Specifically, 41% CEOs have top priority to make their companies more digital and virtual, and 26% CEOs plan to develop a more flexible and employee-oriented workforce.

These trends were also deeply reflected in the summit discussion.

“This is the time for businesses to look back at their business models, assess internal capabilities and make realistic plans for different scenarios ahead. To navigate this new world of uncertainties, businesses need to adopt new mindsets, embrace digitalization and proactively make changes to their businesses,” added Ms. Van.

Covid-19 is accelerating the digital economy, allowing companies who are ahead of the digital transformation journey to have major advantages. According to the same PwC CEO panel survey, 76% of CEOs believe the shift to automation will be enduring, meaning that there will need to be significant resources to facilitate digital transformation including upskilling their people. Going forward, a lot of focus will be placed on what companies need to do to improve the digital capabilities of the workforce.

“Covid-19 has revealed, and even deepened the skills gaps between the current skills and what required to deliver an agile fit-for-the-future business strategy. The need to upskill is an urgent yet complex problem that will require decision-makers — from both the government and businesses — to come together,” she concluded.

The Hanoitimes – For banks in Vietnam, data governance is an important step to realize the vision of becoming a leading data-driven bank, said a PwC expert.

Vietnam’s banking industry should aim at data governance to promote its growth, according to experts.

Dinh Hong Hanh, deputy general director of PwC Vietnam Consulting.

“Data governance can be considered as an opportunity to build a well-controlled environment, creating tangible benefits of business, saving capital, facilitating the development of digital banks,” said Dinh Hong Hanh, deputy general director of PwC Vietnam Consulting.

“For banks in Vietnam, data governance is an important step to realize the vision of becoming a leading data-driven business, using data as a development platform to meet the requirements of Circular 41, prescribing the capital adequacy ratios in line with Basel II standards, and Circular 13, stipulating the internal control systems, which includes the requirements for an Internal Capital Adequacy and Assessment Process (ICAAP) to implement Basel II’s pillar 2,” said Hanh at a workshop themed “Data Governance – powering control and growth of the data-enabled banking industry” on November 26 in Hanoi.

A quick on-site survey was conducted with workshop participants to assess the maturity level of data governance with 33 Bank’s management representatives. The result showed 88% of participants agreed that good data governance can help improve competitive capabilities through developing digital banking and advanced analytics.

However, most banks are still in the early stages of their enterprise data governance implementation journey.

Less than 50% of responses mentioned that their bank has implemented data governance or Data Governance Policies and Procedures as well as developed and determined the role of data stakeholders.

Meanwhile, over 66% answered that the bank has not operated the criteria establishment to measure data quality. Only 18% indicated that they have built a technology architecture (e.g. platform, tools, etc.) to support for managing bank-wide data.

Irene Liu, deputy general director of PwC Singapore Consulting, said data governance is often approached by banks with two main objectives. Some banks implement data governance to innovate and automate their business processes while the others expect data governance helps them promote compliance, improve effectiveness and efficiency.

“Over the past 2 years, data governance capabilities have rapidly grown in many financial institutions across the globe. However, it is important to note that the evolution of data governance has recently commenced and we are at a starting point of this journey,” said Liu.

When it comes to an overall data governance framework,  David Yakowitz, global leader of Basel committee’s BCBS 239 implementation and compliance, expressed: “The regulators increasingly focus on data governance in risk management and compliance reporting, reflected by the issuance of BCBS 239 in 2013.”

More importantly, the primary concentration in data governance is that  critical data elements (CDEs) need to be managed on the foundation of developing consistent enterprise-wide standards about data definition, data ownership, data quality. Hence, these issues must be specifically regulated in data governance policies and procedures. This is the key point that allows data governance to be applied widely, stated Yakowitz.

PwC Vietnam’s Hanh said she strongly believes that Vietnamese banks have sufficient capabilities to become data-driven organizations.

“It can be said that as obtained from specific case of ensuring data quality of risk reporting in the roadmap of implementing Basel II framework, the banks will be able to realize that data governance is necessary for innovation activities such as digital banking development, customer segmentation, product improvement through advanced analysis,” said Hanh.

A plan for collecting an emission-related fee in Vietnam will require the relevant ministries to speed up work.