February 28, 2020 07:42

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M&A Forecast 2020: Success expected to continue

16:14 | 20/01/2020

VCN- In 2019, the merger and acquisition (M&A) market in Vietnam has witnessed many deals with great value, as well asthe diverse presence of domestic and foreign investors and restructuring trends of large private corporations. By 2020, this trend is forecast to continue and become more active.

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Many domestic private corporations choose M&A to expand their business and restructure operations. Photo: H. Diu

"Terrible" deals

In November 2019, KEB Hana Bank (Korea) spent VND20,208 billion to buy 15 percent of charter capital of the Investment and Development Commercial Joint Stock Bank (BIDV) to become the second largest shareholder in BIDV. This wasthe most notable M&A deal in the banking and finance industry last year, especially with one of the four largest banks in Vietnam. Therefore, experts predict that this Korean investor is helping to start a wave of investment in finance and businesses in Vietnam, especially investors from South Korea and Japan.

This prediction is completely grounded, when in addition to the "terrible" deal mentioned above; many Korean and Japanese investors have invested in Vietnam in the past year. Typically, SK Group (Korea) invested about VND23,300 billion to buy Vingroup's shares and become a strategic partner of Vingroup. Previously, in 2018, the Group also poured capital to buy shares of Masan and PV Oil. Samsung SDS invested over VND848 billion to buy a 25 percent stake, becoming a strategic investor of CMC Group. For Japanese investors, there is the Mitsui deal to buy more than 35 percent of Minh Phu's shares, Taisho invested heavily in HauGiang Pharmaceutical, Sumitomo Life Insurance Company (Sumitomo Life) bought shares of Bao Viet Group.

The domestic M&A market in 2019 saw the merger and exchange of shares between VinCommerce and VinEco (Vingroup) and Masan Consumer (Masan Group) to establish a consumer-retail group. The deal value was not disclosed, but with more than 2,600 supermarkets and VinMart and VinMart + stores in 50 provinces and cities with millions of customers, as well as14 high-tech farms of VinEco, it is possible to estimate the very high value of this deal. In addition, there is also the deal between Vinamilk and GTN Foods (Moc Chau Milk). Accordingly, Vinamilk bought more than 79.5 million shares, increasing the ownership rate in GTNFoods to 75 percent or the Gelex deal buys nearly 40 million Viglacerashares.

These "handshakes" have shown the trend of restructuring and expanding business investment of large enterprises and private corporations in Vietnam. In fact, in the last few years, M&A activities between domestic private corporations were implemented such as the deal of Hung Vuong Seafood Company, Hoang Anh Gia Lai Group. This restructuring deal is not only to "save" businesses that have been operating in a sluggish manner, but also to help large corporations switch from a multi-disciplinary business strategy to focus on core business areas.

The scale can reach US$7-7.5 billion

MAF and CMAC (Vietnam M&A Forum Research Group and Mergers and Investment Research Center) forecast that M&A value in 2020 will continue at scale of US$7-7.5 billion equivalents to with M&A values in 2018 and 2019. Thus, in three consecutive years (2017-2019), the market size per year has reached an average of US$7 billion, higher than the period from 2014-2017 with a scale of US$5 billion. The group also forecasts that in comingyears, M&A deals will continue focusing on consumer goods, retail and real estate. In addition, telecommunications, energy, infrastructure, pharmaceuticals and education are expected to contribute significantly to M&A activities in Vietnam in the future.

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Moreover, in terms of partners, many experts believe that investors from Asia including Korea, Japan, Thailand and Singapore will continue to dominate. In particular, when there are divestments of large SOEs, there will be deeper and greater participation in the value of foreign investors. However, a survey by the Center for Investment and Mergers and Acquisitions (CMAC) shows that the obstacles to M&A activities including the state ownership of shares are too large, financial statements and information disclosure are not transparent, pricing is too high, and the time for the deal is too long. There are also other obstacles related to cultural factors, language and access to businesses.

Therefore, in order for the market to reach a new height, it is necessary to wait for big deals as well as waiting for stronger actions of the Government and businesses. However, Vietnam's M&A market has a lot of potential and will have many "brilliant" results in 2020. According to Mr. Dang Van Quang, Director of Jones Lang LaSalle (JLL) Vietnam, Vietnam is still one of the topdestinations for foreign investment flows in Southeast Asia. One of the reasons is that Vietnam has been proactively improving transparency in the market.

By Huong Diu/Ngoc Loan