M&A Vietnam – “Hot” Investment Channel

In recent years, foreign investors spent approximately 3 billion USD to buy shares in more than 3,000 enterprises in Vietnam, in which most of them purchased over 50% of the shares. It indicates that investment trends through the model of merger and acquisition (M&A) are booming strongly in the market.

According to the report from the Foreign Investment Department under the Ministry of Planning and Investment, from July 1^st 2015 to July 1^st 2016, there were 3,141 companies in Vietnam are acquired by foreign investors in the form of buying shares. The total value of those deals is 2,948 billion USD. This is the first time the Foreign Investment Department showed the statistics on foreign investment flows into Vietnam through M&A activities. It shows that the trend of investment into Vietnam through M&A is increasing greatly.

As reported by the IMAA, a foreign research institute on M&A, the total value of M&A in Vietnam in 2015 reached 4.3 billion USD, 40% higher than in 2014 and surpassing the record level of 4.2 billion USD in 2012. It is expected that the value of M&A deals in Vietnam in 2016 is likely to break the record of 2015 and reached 6 billion USD.

Many analysts are predicting that the food, logistics, retail and real estate industries will still be targeted by foreign investors. The main reason is that the potential of Vietnamese consumers is growing due to young population and growing economy.

Among more than 3,000 M&A deals that are statistically by Foreign Investment Department, there were 1,894 deals valued at 1.8 billion USD that are invested by foreign investors to hold dominant share of over 50% . It means more than half of M&A deals in the past year are made with long-term investment objectives.

There has been more active involvement of the Private Equity fund (PE). Previously, if the PE funds often take part in the purchase of shares which is not dominant, but now, the PE fund is ready to invest at a higher percentage to increase profit and reduce competition. In addition, the increase in ownership percentage will also help to increase the PE funds’ intervention in business activities of enterprises to create surplus value.

When the inflow of foreign investment into Vietnam through M&A increases, it will create opportunities for domestic enterprises to mobilize capital, improve enterprise management skills and competitiveness. One of the examples is the case that Vietnam Airlines sold 8.8% of shares to ANA Holding, the largest airline corporation in Japan.

In fact, many other businesses also consider M&A as an effective channel for capital mobilization. Therefore, after the Vietnam Government allowed to increase the percentage of capital held by foreign investors at the company listing on the stock market to 100%, many companies have decided to open “room” to welcome this new capital flows. Many examples are Hoang Quan Real Estate Company, Thu Duc Housing, An Phat Plastic and TNG Garment. Even Vinamilk, one of the most successful dairy enterprises in Vietnam, also have to think about loosening “room” to 100% to attract foreign investment through M&A activities.

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