Vietnamese merger and acquisition ma market

The Hanoitimes – This year, due to the Covid-19 pandemic, the M&A value may decrease 51.4% year-on-year to US$3.5 billion.

While the Covid-19 pandemic has severely impacted Vietnam’s mergers and acquisitions (M&A) market, it is set to stage a V-shaped recovery to around US$4.5 – 5 bilion in 2021 and jump to US$7 billion in 2022, according to General Director of AVM Dang Xuan Minh.

Editor-in-Chief of Dau Tu Newspaper Le Trong Minh at the press conference. Photo: Truong Huyen.

After a decade of strong growth of M&A market with thousands of transactions and a total value of nearly US$50 billion, the market has now entered a new phase of development with both opportunities and challenges, stated Mr. Minh at a press briefing on the Vietnam M&A 2020 Forum themed “Upsurging in the new normal” on November 5.

In Vietnam, the number of M&A value in 2019 reached US$7.2 billion, representing a decline of 5.3% against the previous year. This year, due to the Covid-19, the figure may further decrease to US$3.5 billion, or down 51.4% year-on-year, he added.

These figures are tracking the global trend as the Covid-19 pandemic and a new normal are affecting the world’s economy. In this context, investors and enterprises are adjusting their investment strategies and looking for restructuring current operations, Mr. Minh stated.

The economic crisis has led to growing number of enterprises looking for sale, but buyers are also more cautious before making the purchase decision, he continued.

Mr. Minh referred to CMAC’s data, which are collected from MergerMarket and HSF, that total M&A value globally in the first six months of 2020 stood at US$901.7 billion in 6,943 deals, 52% lower in value and 32% in number compared to the same period last year.

M&A market to boom in coming time

In the case of Vietnam, the slow pace of privatization and divestment of state capital at state-owned enterprises in 2019 and the first nine months of 2020 has also been a factor behind such a poor performance of the M&A market. The market is expecting large-scale divestment deals in the coming time, he said.

Covid-19 and the lockdown adopted by many countries around the world are slowing down the M&A processes in Vietnam. But in the long term, Mr. Minh expected the market would boom with a surge from both supply and demand sides.

During the last six months of 2019 and in 2020, there are still notable M&A deals, which came as a result of restructuring processes or stake acquisition of private corporations, he added.

Foreign investors, especially those from Singapore, Thailand, South Korea and Japan, are still active in the market, Mr. Minh asserted.

Editor-in-Chief of Dau Tu newspaper and Head of the M&A Forum Organization Board Le Trong Minh said M&A activities in Vietnam over the past 11 years have become an efficient channel of capital mobilization for the Vietnamese economy, serving as a factor to facilitate the economic restructuring process and speed up privatization of state firms.

Moreover, M&As have been one of the driving forces to enhance corporate governance capabilities and competitiveness of Vietnamese enterprises, he added.

While the Covid-19 pandemic is having negative impacts on M&A activities, the Editor-in Chief shared the view of Mr. Minh from AVM that the market would soon recover, particularly as Vietnam has managed to put the pandemic under control.

The Hanoitimes – The country is set to score 102 and 94.6 out of the maximum of 250 in 2020 and 2021, staying behind only the US with its respective scores of 108.9 and 112.5.

Vietnam ranked second out of 50 economies in the mergers and acquisitions (M&A) Investment Index, which reflects the expected level of investment, activity and attractiveness of the global M&A market amid macroeconomic and financial shocks, according to market research firm Euromonitor.

The country is set to score 102 and 94.6 out of the maximum of 250 in 2020 and 2021, staying behind only the US with its respective scores of 108.9 and 112.5. Other countries in Euromonitor’s top 5 included China, India and Israel.

The score is divided into four groups, with 100+ indicating high M&A activity, 75 – 100: moderate to high M&A activity, 50 – 75: moderate to low M&A activity, <50: low M&A activity.

In terms of the score growth, Vietnam is predicted to be the fifth in the raking with an expansion rate of 23.67% in the 2020 – 2021, behind countries such as Singapore, Ireland, the Philippines and Qatar.

According to the report, turmoil caused by Covid-19 in global markets severely impacted the M&A markets, while political and economic disputes between China and the US impacted both markets considerably in 2020.

In the first half of 2020, the number of M&A deals globally declined by 25% year-on-year due to the Covid-19 pandemic.

As Western economies diversify their supply and value chain strategies away from China, Southeast Asian economies like Vietnam are forecast to grow in investment and is an area for growing M&A activity, stated Euromonitor.

Vietnam’s momentum has been driven up in parallel as the 49% foreign ownership cap on listed companies by 2019 has been removed, which adds to the positive outlook of the country.

Euromonitor’s M&A Investment Index covers a total of 314,002 M&A deals from 50 countries and over 150 industries worldwide between 2015–2020.

The long process of project approval from competent government agencies and the serious impact of COVID-19 have helped mergers and acquisitions in real estate sector become more active.

Several Big C supermarkets have been renamed to Tops Market in Vietnam

Since March 1, three Big C supermarkets in Ho Chi Minh City (Big C An Phu, Big C Thao Dien, and Big C Au Co) were officially rebranded to Tops Market. Meanwhile, four Big C supermarkets in Hanoi (Big C The Garden, Big C Hadong, Big C Nguyen Xien, and Big C Le Trong Tan) will be renamed in the third quarter of this year.

Central Retail is also upgrading the shopping experience at its Tops Market chain

From December 2020 to January 2021, five Big C hypermarkets located in shopping malls have been rebranded to GO in Nha Trang, Di An, Can Tho, Halong, and Vinh Phuc.

Central Retail also switched to the GO! hypermarket brand to drive growth in Vietnam

In addition to the rebranding, Central Retail will also develop new GO! hypermarkets in My Tho, Ben Tre, Tra Vinh, Buon Ma Thuot, and Quang Ngai. The retailer has upgraded its retail space to bring a new and modern retail experience to customers.

Central Group is letting go of the Big C brand for its retail business in Vietnam

In 2016, Central Group became the new owner of Groupe Casino’s Big C Vietnam chain after forking out $1.14 billion. This was one of the mergers and acquisitions mega-deals shaping Vietnam’s retail space at the time.

Intentions to change the name of the outlets were first made known in 2017 but it has not been until now, five years after the takeover that the change is implemented.

The Hanoitimes – For the first time, the Vietnamese government would issue a list of sectors with limited market access for foreign investors under the negative list principle.

Mergers and acquisitions (M&A) is the shortest way for foreign firms to penetrate the market and expand their activities in Vietnam with high efficiency and significant cost savings, according to Vice Minister of Planning and Investment Tran Quoc Phuong.

Vice Minister of Planning and Investment Tran Quoc Phuong at the forum. Source: MPI.

Over the years, M&A has become an efficient capital mobilization channel and contributed to the ongoing restriction of economic activities, as well as the diversification of ownership types of enterprises, stated Mr. Phuong at the annual M&A Vietnam Forum held on November 24.

Mr. Phuong said in the past decade, Vietnam’s M&A market has grown strongly with thousands of transactions worth nearly US$50 billion.

This year, while the Covid-19 pandemic has severely impacted global trade and investment activities, the combined M&A transaction value in Vietnam is estimated to decline by 51.4% year-on-year to US$3.5 billion.

However, a report from Euromonitor International suggested Vietnam is one of the most dynamic and high potential M&A markets globally, with the country’s score in M&A Investment Index at 102, behind only the US with 108.9 score.

As such, M&A activities in Vietnam could start recovering from mid-2021 and take the market size to the pre-Covid-19 level of around US$5 billion per year.

Such a positive outlook is thanks to Vietnam’s rapid economic development during the 2016 – 2019 period and its successful efforts in containing the Covid-19 pandemic in 2020, noted Mr. Phuong.

Overall, Vietnam has successfully realized the dual target of both containing the pandemic and boosting economic recovery, he stressed.

Mr. Phuong referred to the International Monetary Fund (IMF) having recently revised up Vietnam’s growth forecast for 2020 to 2.4%, among the highest in the world. This, along with inflation rate under control, stable currency market and positive prospects of the stock market, has again solidified Vietnam’s status as one of the world’s most attractive and safe investment destinations for foreign investors, he suggested.

More positive factors to support M&A in future

According to Mr. Phuong, the Vietnamese government would continue to create favorable conditions for foreign investors, while perfecting legal frameworks for private companies to take a more active role in the privatization process of state-owned enterprises.

This would help form a strong value chain between private enterprises, including foreign ones, and state firms, he suggested.

At the same time, the government is willing to continue providing support for enterprises and investors in terms of infrastructure, land and human resources, as well as institutional reform and improvements in the business environment, Mr. Phuong added.

In 2020, the National Assembly has ratified the public-private partnership (PPP) law, providing reforms in market entry and creating more conveniences for enterprises in doing business or investing, including M&A.

Notably, for the first time a list of sectors with limited market access for foreign investors would be issued under the principle of negative list, in which, all sectors that are not listed there, by default, would be opened to foreign firms under the same conditions as for their domestic peers.

Moreover, the Ministry of Planning and Investment is finalizing a strategy for FDI attraction in the next development phase, with a focus on attracting hi-tech projects, which are of modern corporate governance, aiming to facilitate technology transfer and support local firms to further integrate into global value chains.

Meanwhile, the recently-signed Regional Comprehensive Economic Partnership (RCEP) would further boost Vietnam’s trading and investment activities, which have partly been impacted by the Covid-19 pandemic.

All these factors would contribute significantly to Vietnam’s M&A market in 2021 and subsequent years, he said.

The merger will make the race in the e-commerce market more exciting.