Vietnam hospital market opens up to investors

Healthcare assets in Vietnam’s market of 100 million people are attracting attention from investors looking to expand in or enter the market.

Although Vietnam’s merger and acquisition (M&A) transactions have slowed, with 35% lower transaction value in 2022 compared to 2021, healthcare may buck the trend this year.

PwC, in its “2023 Global M&A Industry Trends Outlook” has predicted that healthcare will be one of a handful of the top sectors drawing FDI to Vietnam this year.

Thomson Medical Group, a Singapore-based healthcare company, has confirmed with Singapore newspaper Business Times that it is in advanced talks to buy a controlling stake in French-backed FV Hospital in Ho Chi Minh City after a Bloomberg report on Thursday about the discussions.

The healthcare company, backed by tycoon Peter Lim, has surpassed other interested candidates to remain in the bidding and is working with a financial adviser on the potential acquisition, according to the report, which says the process is private.

In 2017, Quadria Capital, an Asian healthcare-focused private equity firm, announced it had bought a stake in FV Hospital for an undisclosed amount. Other investors who joined the investment included funds managed by Neuberger Berman Private Equity and DEG – the German development finance institution under KfW, a German state-owned investment and development bank. In 2022, Bloomberg reported that Quadria Capital was exploring the sale of its stake in FV, which could fetch around $300 million to $400 million.

FV opened in HCMC in 2003, and the general hospital’s current resources include 220 beds and around 950 staff.

Vietnam's leading investment management group VinaCapital is exploring the sale of its minority stake in Thu Cuc Medical System TCI in a deal that could value the Hanoi private hospital operator at between $150 million and $200 million, Reuters reported on Tuesday, citing two sources with direct knowledge of the matter.

The process is also private, and the sources declined to be named. The two added that VinaCapital is in talks with at least one financial investor on the potential sale of its roughly 30% stake in Thu Cuc Medical.

A VinaCapital-led consortium paid $26.7 million for the stake in 2020, one of the sources told Reuters. "Because TCI is well-managed and highly regarded, we have, over time, received a number of inquiries from parties interested in acquiring our stake," a VinaCapital spokesperson said in an email to Reuters.

Thu Cuc Medical did not respond to a request for comment from Reuters, the international news service agency said.

It added investors are now betting on the Vietnamese hospital and healthcare sector's ability to weather a challenging economic environment.

Thu Cuc Medical was founded in 2011 and now operates a general hospital in Hanoi's Tay Ho district and three other clinics in the Vietnamese capital.

At present, VinaCapital has more than $3.9 billion of assets under management, including a closed-end fund listed on the London Stock Exchange.

Clear growth opportunities

Vietnam’s healthcare sector is opening up to investors. The EU-Vietnam Free Trade Agreement (EVFTA), that took effect in 2020, has eliminated tariffs for around 71% of pharmaceutical products, and the remaining tariffs will be gradually phased out upon the full implementation of the agreement.

As part of the agreement, Vietnam has committed to allowing EU-invested enterprises to import pharmaceuticals into Vietnam and to establish 100%-foreign owned companies in the pharmaceuticals sector. This could boost the availability of high-quality medications for Vietnamese consumers while increasing the profitability of EU firms in the industry.

Vietnam’s hospital market is anticipated to witness a steady compound annual growth rate (CAGR) of 6.2% and reach some $11.23 billion by 2028, according to the “Vietnam Hospital Market Insights Report 2023” by the global market research company Research and Markets.

The study, released on Thursday, said that the hospital market has witnessed significant growth over the past few years due to several factors that have contributed to the proliferation of the healthcare industry in the country.

“The growing middle class is becoming more health-conscious, leading to an increase in demand for healthcare services. Additionally, the country's healthcare infrastructure is expanding, resulting in better access to healthcare services,” the report said.

Meanwhile, Vietnam's population is aging, with the number of people aged 60 and above expected to increase from 12.5 million in 2020 to 25 million by 2050. This demographic shift has led to an increase in demand for healthcare services, particularly for chronic diseases that are more prevalent among older adults.

The study notes that Vietnam is rapidly urbanizing, with the proportion of the population living in urban areas expected to increase from 35% in 2020 to 50% by 2030. Urbanization is associated with lifestyle changes, such as a shift towards more sedentary jobs, which has contributed to an increase in chronic diseases such as obesity, diabetes, and hypertension.

Another factor that is luring investors is that Vietnam's government has been actively promoting the development of its healthcare industry in recent years. The government has recognized the importance of a robust healthcare system in improving the country's overall well-being and supporting its growing economy.

Research and Markets also mentions increasing medical tourism in Vietnam.

“Vietnam has emerged as one of the leading medical tourism destinations in Southeast Asia. The country's healthcare industry has been growing rapidly, thanks to its government's initiatives to improve healthcare infrastructure and promote medical tourism."

The reasons behind the increasing popularity of medical tourism in Vietnam include high-quality healthcare services.

“Vietnamese hospitals are equipped with state-of-the-art medical equipment, and the country's healthcare professionals are highly trained and skilled. This has led to an increasing number of patients from other countries coming to Vietnam for medical treatment,” the study added.