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Merger and acquisition (M&A) transactions are gathering pace in Vietnam. In 2017, M&A deals in Vietnam reached a record of US$ 10.2 billion, and foreign investors accounted for more than 90% of all the transactions.
In this article, you will see an overview of Vietnam’s current M&A market and the most significant deals in 2018 as well as learn what to keep in mind when planning an M&A deal yourself.
Vietnam’s M&A market
A population of close to 100 million people and the nation’s increasing affluence, combined with the rising demand for consumer goods, are the main contributors to the success of Vietnam’s M&A field.
Investors from Japan, South Korea, Singapore, and Thailand are the leaders of Vietnam’s M&A market, with the first three also being the top sources of foreign investment in Vietnam.
|
Top foreign investors in Vietnam January 1-November 20 2018 |
Investment capital |
|
Japan |
US$ 8 billion |
|
South Korea |
US$ 6.8 billion |
|
Singapore |
US$ 4.1 billion |
|
The British Virgin Islands |
US$ 1.8 billion |
|
China |
US$ 1.8 billion |
|
Hong Kong |
US$ 1.7 billion |
|
Taiwan |
US$ 1 billion |
Source: Ministry of Planning and Investment
Largest M&A deals in Vietnam in 2018
One of the most significant M&A transactions in Vietnam in 2017 was when Thai Beverage PCL, Thailand’s largest beverage company, purchased 54% of the stakes of Vietnam’s largest brewer Sabeco (Saigon Alcohol Beer and Beverages Corporation).
ThaiBev bought the majority shares of Sabeco, which was then under the authority of Vietnam’s Ministry of Trade and Industry, for US$4.8 billion.
Below are some of the most outstanding M&A deals in Vietnam in 2018.
|
M&A deal |
Share purchase |
Source of funding |
|
GIC Pte Ltd bought shares in real estate firm Vinhomes JSC |
US$ 853 million (GIC’s total investment in Vingroup and its subsidiaries is said to reach US$ 1.3 billion) |
Singapore |
|
Warburg Pincus acquired shares in Techcombank, one of Vietnam’s largest private banks |
US$ 370 million |
United States of America |
|
Jardine Cycle & Carriage (JC&C) purchased additional shares in Vinamilk |
US$ 105.7 million |
Singapore |
|
Sojitz Corporation bought over 95% of shares in Saigon Paper Corporation |
US$ 91.2 million |
Japan |
|
Creador acquired 35% of Mobile World Investment JSC shares |
US$ 43 million |
Kuala Lumpur, Malaysia |
Most popular sectors for M&A in Vietnam
In 2017, the industries that investors were most interested in were consumer goods, real estate, finance-banking, and chemicals.
In the first seven months of 2018, however, the following sectors accounted for the highest value of M&A deals in Vietnam.
|
Leading M&A sectors in the first seven months of 2018 |
The total value of deals |
|
Processing and manufacturing |
US$ 1.2 billion |
|
Retail and wholesale |
US$ 1.06 billion |
|
Construction |
US$ 702.5 million |
|
Science and technology |
US$ 620.6 million |
Source: Vietnam Foreign Investment Agency
What to keep in mind when planning an M&A deal in Vietnam
If you’re considering an M&A deal in Vietnam, there are several steps you need to take beforehand to realize the deal’s full potential and to reduce the risk of unforeseen difficulties and pitfalls such as:
- Merging companies with incompatible business cultures and corporate strategies
- Insufficient knowledge of the market situation, its growth potential, and perils
- Thinking that one approach works for every integration
#1 Understand how the M&A process works in Vietnam
Before embarking on any transactions, make sure you first familiarize yourself with the M&A regulations in Vietnam. Better yet, find a trustworthy local advisor who would walk you through the process.
Mergers in Vietnam
There are three types of mergers available in Vietnam:
When a locally-owned company merges with a foreign company, the foreign-owned company needs to fully comply with the local regulations to ensure that the company’s activities will not stop.
For instance, a foreign company may not have the necessary trading license for all the product categories like the local trading company, and thus will have to apply for a new permit before imports could begin.
Acquisitions in Vietnam
Acquisition can be a shortcut to the Vietnamese market, and there are two options – a foreign-owned company acquiring another foreign-owned company, or a foreign-owned company acquiring a local company.
To learn more about M&A in Vietnam, read our previous article explaining the need-to-know facts about mergers and acquisitions in Vietnam.
#2 Check your investment opportunities
Investors who are interested in Vietnam have further reason to rejoice because, with the government’s plans to sell shares in state firms, they will now be able to invest in many major companies.
In August 2017, the government released Decision No.1232/2017/QD-TTg approving a list of 406 state-owned enterprises open to divestments during 2017-2020.
This decision opened several opportunities for foreign investors to enter the Vietnamese market in major industries, including:
- telecommunications
- aviation
- food and beverage
- shipping
- retail
Below are some examples of state-invested enterprises to be divested in the following years.
|
Divestment of state-invested enterprises in 2017-2020 |
The minimum ratio of funds to charter capital to be divested |
|
35.16% in 2019 |
|
|
20% in 2018, 10.4% 2019 |
|
|
Vietnam National Petroleum Group (Petrolimex) |
24.86% in 2018 |
|
Vietnam Pharmaceutical Corporation (Vinapharm) |
29.98% in 2018 |
|
Vietnam Industrial Construction Corporation (Vinaincon) |
46.75% in 2018, 36% in 2019 |
Source: Decision No.1232/2017/QD-TTg
To learn more about investment opportunities in Vietnam, reach out to our consultants via [email protected].
#3 Carry out background research
An indispensable step of transacting with any new business partners, especially in emerging markets, is to conduct comprehensive due diligence and market research to find out more about the company with whom you are going to deal in and the market you are going to enter.
The more pre-transaction intel you gather, the better you assess risks that could endanger your future business.
Engage a professional to look for all the necessary information such as:
- current status and legal representative of the company
- transaction history
- capital and assets and Articles of Association
Emerhub’s company registry in Vietnam retrieves data from the respective government institutions and gives you all the necessary information in one single report.
Visit our company registry to download a sample report to see the type of information you’ll receive:
#4 Consider setting up a newly-licensed company
Besides the M&A mode of market entry, you should also consider whether it would be a better option to invest in Vietnam by setting up a new company instead.
The most common types of entities available to foreign investors include a Limited Liability Company (LLC) and a Joint-Stock Company (JSC).
The incorporation process is generally the same for LLCs and JSCs and takes approximately one to three months.
If you’re unable to decide whether to set up a new legal entity or embark on an M&A deal, read our thorough guide to company registration in Vietnam to map out the pros and cons of each.
Planning an M&A deal in Vietnam?
With Vietnam being one of the fastest-growing markets in the world, it’s an exciting era for foreign investors, be it for setting up a new company or choosing to enter the market via the M&A route.
Emerhub can be your partner in entering Vietnam and fine-tune your market entry strategy to help you stay ahead of the competition. Contact our consultants via the form below to get started.
