Vietnam's M&A market charms Japanese, Chinese investors

Japanese and Chinese investors are showing a robust interest in acquiring stakes in Vietnamese firms, according to experts at a workshop held Tuesday in Ho Chi Minh City.

“M&As will remain vibrant in 2024 because investors will seek enterprises with stable and long-term product investment strategies in the agriculture and food sectors," Dr. Nguyen Tuan Anh from RMIT University Vietnam told the workshop on M&A trends in the consumer goods and distribution sectors.

Anh said that Japanese companies have played a significant role in M&A transactions in Vietnam in recent years. Typically, Japan's Sojitz has acquired the largest food distribution company in Vietnam, Dai Tan Viet JSC (New Viet Dairy), via Sojitz Asia Pte.Ltd. and Sojitz Vietnam Co., Ltd.

"As the yen depreciates, Japanese enterprises are trying to invest abroad, which is still a better option, and this trend will continue in the near future," he added.

According to lawyer Dao Tien Phong, head of consultancy firm InvestPush, Chinese investors are interested in M&As in Vietnam, and their preference is for producers who already have orders from the U.S. and Europe.

"In the south, investors prefer M&As over direct investments to avoid wasting time building factories and meeting environmental and fire prevention conditions," Phong said.

However, to attract foreign investment, particularly from long-term investors, Anh of RMIT noted that Vietnam's policy climate must be more conducive to divestment. Another issue to consider is how to expedite the transaction.

For example, an M&A transaction in the Japanese market can be completed within three months, while it takes about six months in overseas markets that are favored by Japanese investors. However, the same transactions in the Vietnamese market might take more than a year due to accounting system constraints and sellers' high valuation expectations, according to Anh.

Seeking foreign funding a major trend among Vietnamese firms

Not only do foreign investors want to invest in Vietnamese businesses, but so do domestic firms. Economist Pham Chi Lan argued that Vietnamese enterprises are increasingly seeking outside funding.

"Domestic capital expenses are higher than in neighboring countries, and even if finance is available, mobilizing capital for Vietnamese firms is still tough. In addition to finance, businesses have additional considerations when attracting international investors through M&A deals, such as technology, skills, management, market, and taking advantage of Vietnam's FTAs," she told the workshop.

Huynh Thanh Binh Minh, director of TAEL Partners Investment Fund in Vietnam, emphasized that when considering raising capital and implementing M&A transactions, businesses must answer two questions: what does the company need to raise capital for, and what are the consequences of that capital's participation?