Vietnam’s merger and acquisition (M&A) market could turn the corner heading into 2023, with many domestic and foreign companies across sectors in a position to tap opportunities.
“As one of the focal points attracting the attention of many international investors, Vietnam’s M&A market is expected to ignite new opportunities,” Le Trong Minh, chairman of the Vietnam M&A Forum organizing committee, said at the event in HCMC Wednesday.
Mentioning both headwinds and tailwinds including global uncertainties and Vietnam’s economic resilience, he said data showed hundreds of billions of U.S. dollars made available by private equity (PE) firms worldwide to invest in different lucrative sectors in Vietnam. The sectors include clean energy, consumer goods, retail, technology, real estate, digital assets, fintech and start-ups.
According to a Bain & Company report, PE firms have up to $650 billion in the pipeline for Asia, Minh noted, adding that PE and venture capital inflows into Vietnam rose significantly early this year.
Dragon Capital chairman Dominic Scriven told the forum that Vietnam’s economic resilience has been recognized internationally.
“There are opportunities in a crisis,” he said, implying that current global uncertainties could mean opportunities for Vietnam, which offers political stability and has emerged as a production hub in the global supply chain.
“Southeast Asia, including Vietnam, is a real locomotive for the global economy,” the veteran investor said, adding that the world was seeing the rise of Asia at present. “Vietnam in particular and Southeast Asia in general are absorbing production shifts from China.”
“Investors love the business environment in Vietnam. We know that the development pace of the private sector is quick, and this is important for economic growth,” he said.
KPMG data shows that the total value of M&A in Vietnam reached $5.7 billion in the first 10 months of 2022, down more than 35% compared to the same period last year.
The data also showed that renewable energy was becoming an attractive sector for investors with investments of nearly $600 million, almost six-fold the amount registered in the whole of 2021.
Advances despite headwinds
KPMG Vietnam partner Nguyen Cong Ai said in a video clip shown at the forum that the Vietnamese M&A landscape would continue to face headwinds in the coming time, but investors with strong capital sources would continue to step into the market.
Data from top Vietnamese securities broker VNDirect shows that Vietnam is among the top 20 countries worldwide with the largest renewable energy capacity and a leader in Southeast Asia, with 16 GW of solar power and about 5 GW of wind power.
The data also shows the private sector has become prominent in the race to put projects into commercial operation.
Vietnam’s policies to promote renewable energy have attracted many enterprises to the market over the past two years, the forum heard.
VNDirect said Vietnamese private enterprises played a leading role in this development initially, but foreign enterprises have since become far more prominent and active in acquiring projects.
Singapore-based EDPR Sunseap recently spent $284 million buying two solar power projects of Vietnamese corporation Xuan Thien. The Vietnam M&A Forum ranked this deal at ninth on the list of top 10 M&A deals in Vietnam in 2021 and 2022.
EDPR, the world’s fourth-largest renewable energy producer, is owned by Energias de Portugal, the biggest utility firm in Portugal. EDPR bought a 91% stake in Sunseap this January for $1.1 billion, renaming it EDPR Sunseap. The firm said it would continue to invest in renewable energy in Vietnam and the Asia-Pacific region.
According to KPMG, from 2016 to 2021, the M&A landscape in Vietnam for the energy sector has improved steadily, with a combined annual growth rate (CAGR) of 10.7% in transaction value and 17.1% in transaction volume.
Vietnam targets carbon neutrality by 2050 by boosting cleaner and renewable energy.
Consumption growth
KPMG Vietnam and Cambodia chairman Warrick Cleine said at the forum that the consumer sector would also continue to attract more investments.
“Vietnamese are opening more bank accounts. They love e-commerce and online shopping more, and are increasing spending on education and healthcare. The consumer market will continue to develop, even with inflation,” he said.
KPMG expects to see M&A activities in Vietnam recover from the second half of 2023 onwards.
“When this trend resumes, digital transformation, shift toward clean energy, huge consumer market and rising ESG (environmental, social and governance) awareness will continue to be the key themes for future M&A in Vietnam,” the major corporate services provider said in a document handed out at the forum.
John Ditty, head of ESG at KPMG Vietnam, underlined the importance of ESG in deal making. He said the failure to understand and assess ESG-related risks can result in deals being incorrectly priced.
“ESG in deal making should not be optional. It is no longer a nice extra, it is absolutely essential to the success of the contemplated transaction,” he stressed.
The forum organizing committee noted that the Vietnamese landscape has deals in which domestic companies are buyers, not just international buyers.
One notable deal was the multi-business group Thaco’s acquisition of Emart Vietnam Ltd. from Korean retail giant Emart; the deal was completed in late 2021 but its transfer price was not disclosed.
The Korean retailer opened its first Emart store in the country late 2015 in Ho Chi Minh City. It was the firm’s only store in the country until the takeover deal was completed.
Thaco opened the second Emart hypermarket early this month, also in HCMC, and plans to launch at least 20 Emart stores across the country by 2026.
Thaco’s acquisition ranked seventh in the list of top 10 deals in 2021 and 2022.