M&A in Vietnam: Strong Flow from Thailand

It is expected to have a strong capital flow from Thailand to Vietnam in the coming time to through M&A activities.

According to a research, the main trend of the M&A market Vietnam in the period of 2015 – 2016 and subsequent years have been focusing on some key sectors: retail, consumer goods, real estate, finance – banking. Notably, in the coming time, investors from Thailand will become “dual key” in its role as the acquisition of the project, and incorporation in Vietnam.

Not until now, it has been realized that Thai is serious rival in the M&A market. From the period of 2010 – 2011 till now, the Thai people through their corporations like Charoen Pokphand, TCC Group, PTT, Siam Cement (SCG), BJC, Central Group… by the way of M&A or direct investment have quietly entered in  Vietnam’s retailing, building materials, gas sectors.

M&A Trend from Thai Investors in Vietnam

In 2012, SCG has spent 240 million USD to acquire 85% stake in Prime Group. Currently, SCG has nearly 20 subsidiaries and associated companies in Vietnam. As of June 30^th 2015, the total asset value of SCG in Vietnam reached approximately 716 million USD… In the next 5 years, SCG will spend 6-8 billion USD for countries in the region, in which a large part will be poured into Vietnam.

At the end of 2014, Berli Jucker Pcl (BJC) announced to spend 879 million USD to acquire Metro Cash & Carry Vietnam. Earlier, in 2013, BJC has acquired 60 stores of Family Mart and buy 65% ​​stake in Thai An Group, who owns a network of 200 distributors, 2,500 wholesalers and thousands of retailers in traditional markets.

In 2014, F&N Dairy Investments Pte Ltd (F&N), a subsidiary of BJC bought shares of Vinamilk, raising the percentage of ownership in Vinamilk to 11.04%, reaching a value of about 591 million USD. The owner of BJC also offered to hold 40% stake in Sabeco and pricing SABECO at approximately 2.4 billion USD.

In addition, the Central Group through its subsidiaries – Power Buy bought 49% stake in NKT technology development and new solution JSC – the owner of Nguyen Kim Trading Company, which was priced at 200 million USD.

According to a statistics from HSBC Thailand, the Thai companies were involved in at least 377 projects in Vietnam with a total registered capital of 6.7 billion USD, becoming the 10^th largest investors in Vietnam market and their ranking are improved quickly. In particular, Vietnam and Thailand have set a target of raising bilateral trade to 15 billion USD by 2020.

The M&A trend of Thai corporations are clearly showed in 2014 – 2015 with the typical deals of PowerBuy – Nguyen Kim and BJC – Metro. Through M&A activities in the retail sector, Thai investors want to reach and grasp the distribution market of Vietnam.

M&A in Retail, Consumer Goods, and Distribution Services in Vietnam

The areas interested by Thai investors from 2011 to now are the retail and consumer goods sectors. The reason is Vietnam is a vast potential market for the retail sector and consumers goods. According to the research from Statista (Germany), Vietnam’s retail market sales could reach 100 billion USD/year in 2016.

The wave of M&A from Thai investors to acquire retail and consumer goods sector are to capture the opportunities when Vietnam participated in the agreements of free trade, as well as the formation of the ASEAN Economic Community (AEC) at the end of 2015.

Thai investors are increasingly buying supermarket chains, making every effort to catch the opportunities brought by AEC when Thailand goods imported into Vietnam with the tax rate equal 0%.

According to CEO of HSBC in Vietnam, in the next 5 years, major corporations of Thailand will turn Vietnam into a production center for re-export of Thai products to other countries because Vietnam has a cheap and skilled labor force.

It can be seen that Vietnam has welcomed a strong capital flow coming from large corporations of Thailand with fast and powerful acquisition speed. Thai investors show no sign of stopage. In addition to the retail and consumer goods sectors, some other sectors are also getting the attention of investors from Thailand as oil and gas, infrastructure, transportation, agriculture…

These signals indicate that Vietnam is still an attractive destination for the capital inflow from Thailand. In the short term, M&A market will continue to witness the M&A activities that Thai investors continued to act as the purchaser.  M&A due diligence assessment on Vietnam targets will be needed to ensure the success post-merger intergration.

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