Vietnam's M&A activity bounces back in Q1

After a rather gloomy 2023, merger & acquisition (M&A) activity in Vietnam recorded a significant recovery in the first quarter of 2024.

Experts believe that economic uncertainties are still hindering the M&A market, but reduced interest rates and attractive valuations will become the driving force for the sector.

Vibrant again

According to the latest data from financial markets platform Dealogic, the total value of M&A deals globally increased by about 30% to $755.1 billion in Q1. Transactions worth more than $10 billion numbered 14, much higher than five recorded in the same period last year.

Some prominent deals in the U.S. included Capital One Bank's acquisition of financial services company Discover Financial for $35.3 billion, Synopsys's acquisition of design software rival Ansys for $35 billion, and the $26 billion merger between energy companies Diamondback Energy and Endeavor Energy.

In Vietnam, the M&A market has also become more vibrant with many large deals announced. Mobile World Investment Corporation, listed on the Ho Chi Minh Stock Exchange (HoSE) as MWG, in early April revealed the successful sale of a 50% stake in Bach Hoa Xanh Technology and Investment JSC - the owner of the Bach Hoa Xanh consumer goods retail chain - to Chinese investment fund CDH Investments.

The value of the deal has not been disclosed. According to Reuters, in February, Bach Hoa Xanh's valuation was $1.7 billion, so the deal could have been worth over VND2 trillion ($78.9 million).

Thanh Cong Textile-Garment Investment Trading JSC (HoSE: TCM) announced that it spent about VND468 billion or $18.47 million (excluding VAT) to buy SY Vina Textile and Garment Co., Ltd. from E-Land Group, a major shareholder owning 47% of TCM’s charter capital. SY Vina, covering nearly 7.5 hectares in the Nhon Trach II Industrial Park, the southern province of Dong Nai, has weaving, dyeing and sewing factories.

TCM chairman Tran Nhu Tung said that the SY Vina acquisition would help his firm take advantage of the production chain with the three stages it plans to expand. TCM is also relocating its factory to Tan Phu district after Ho Chi Minh City launched a policy to relocate manufacturing factories out of the inner city for residential and office complex projects, he added.

Previously, the company planned to expand through investing in its Vinh Long 3 and 4 factories. However, the Covid-19 pandemic and low demand postponed the plan, he said, adding the board of directors recognized that it was not as effective as the SY Vina acquisition.

At the beginning of the year, Coteccons Construction Joint Stock Company (HoSE: CTD) announced the completion of procedures to acquire 100% of the capital contributions of two companies: Sinh Nam Metal (Vietnam) Co., Ltd. and UG M&E Vietnam Co., Ltd. However, the value of the deal was not disclosed. The acquisition is consistent with the company's development orientation, said its leadership.

CEO Vo Hoang Lam said that Coteccons now owns 100% of the charter capital in Unicons, the leading unit in factory and hotel products, and a 42.4% stake in FCC, a company specializing in infrastructure development. It also established a subsidiary in the U.S., with an office in Florida.

BCG Energy Joint Stock Company, a member of Bamboo Capital Group (HoSE: BCG), declared that it had signed an in-principle contract on share purchase and sale with Tam Sinh Nghia Investment and Development Joint Stock Company, which operates a waste treatment, classification and incineration factory in Ho Chi Minh City, Long An and Kien Giang.

Pham Minh Tuan, vice chairman of Bamboo Capital, shared that after more than a year of market research and policy analysis, the group decided to invest in waste-to-power plants through M&As by approaching licensed projects. It plans to deploy waste-to-energy projects in four provinces and cities in Vietnam.

Another major deal announced in Q1/2024 was that Home Credit Group had signed a conditional framework agreement to transfer 100% of its capital contribution in Home Credit Vietnam Finance Company Limited to Siam Commercial Bank Public Company Limited (SCB), a member of Thailand’s SCBX Public Company Limited (SCBX). The transfer agreement is worth about €800 million ($855.72 million) and the transfer process is expected to be completed in the first half of 2025, after approval from Vietnamese and Thai authorities.

Attractive valuations support M&A activity

Although the M&A market in Q1 was relatively vibrant, many experts noted that “we should not be too optimistic”. Nguyen Cong Ai, deputy general director of KPMG Vietnam, said that the M&A market is indeed warming and this situation is hoped to last for a long time. However, this warming is very slow with an array of difficulties. Therefore, the expert predicted that this year will continue to be a difficult year for M&As.

Similarly, Dinh Quang Hoan, deputy general director of Vietcap Securities (HoSE: VCI), held that initial public offerings (IPO) and M&A activities this year will not see many positive changes as the economy still faces challenges. However, falling interest rates and attractive valuations will help the capital market in 2024 to prosper better than in 2023.

In fact, many businesses with financial potential are preparing resources to expand their business activities, with M&As considered a cost-saving solution.

Haxaco, a Mercedes-Benz distributor, announced a budget of about VND200 billion ($7.89 million) to contribute capital or buy shares in its subsidiaries and companies with the same industry and development potential during 2024-2025, aiming to optimize its business efficiency. At Haxaco’s 2024 AGM, chairman Do Tien Dung mentioned the possibility of acquiring a business in the passenger transportation segment to take advantage of the used car business system.

Real estate developer An Gia Group (HoSE: AGG) said that with its sustainable financial situation, it will continuously increase clean land funds to deploy projects in the future, anticipating a new development cycle for the market. The company aims to expand its land banks in District 8, Thu Duc city and Binh Chanh district of HCMC, and neighboring Binh Duong province, which are evaluated by experts as having great potential to meet the demand for affordable housing products.

Nguyen Trong Thong, chairman of another property developer Ha Do Group (HoSE: HDG), reaffirmed the strategy of focusing on the real estate and energy sectors. In the previous period, the group acquired energy projects and this activity will continue to be promoted this year. In the real estate segment, in addition to implementing M&As for urban area projects, it will increase investment in industrial park projects in northern provinces such as Hung Yen, Thai Binh, Nam Dinh and Quang Ninh, and expand its business areas, creating growth momentum.

According to Deputy Minister of Planning and Investment Tran Duy Dong, the current difficult period is the right time for many domestic businesses to reconsider their strategies, seek new growth models, and focus on restructuring production and business activities in a longer-term and more sustainable direction. Many enterprises have developed systematic strategies and plans to find partners to join hands for development, and M&As are the preferred choice, he added.