Strong M&As spur infrastructure development
Le Trong Minh, Editor in Chief of the Vietnam Investment Review, speaks at the annual Vietnam M&A Forum on August 10, 2017 in HCM City (Photo: tinnhanhchungkhoan.vn)
Increased merger and acquisition (M&A) activities can
spur infrastructure development in Vietnam, a current growth imperative,
Planning and Investment Minister Nguyen Chi Dung said on August 10.
an M&A forum in Hanoi that the sector has entered a new chapter in the 2014
to 2018 period, riding what experts have called the second wave of investment.
The capital inflow from foreign investors during this period is expected to
reach 20 billion USD, 25 percent of which could happen this year.
largely driven by equitisation commitments of major State owned enterprises,
the rise of private sector and steady investment from foreign economic entities.
The Ministry of Planning and Investment (MPI) has
concluded that in order to catalyse growth, investment in the form of M&As
in the infrastructure sector needs to increase and expand across many branches
of the economy.
The projects would include upgrading roads,
railways, airports and seaports to global standards, as well as establishing a
stable network of real estate and retail conglomerates.
Prime Minister Nguyen Xuan Phuc also emphasised this during his official visit
to the US and Japan last June, informing hosts that Vietnam was pushing for
M&A activities involving divestments in key sectors of the economy such as
construction, retail, tourism or communications by State owned enterprises.
Minh, Editor in Chief of the Vietnam Investment Review (VIR) and head of the
forum’s organising committee, said he was hopeful that as more and more major
enterprises’ make initial public offerings, State divestments increase and
administrative policy frameworks are geared towards accommodating foreign
investors, the future of M&A sector is bright.
deals in Vietnam hit an all-time high of 5.8 billion USD in 2016, a growth of
11.92 percent from 2015, according to a report released at the press conference
last month announcing the 2017 Vietnam M&A Forum.
retail and real estate sectors were the most attractive areas for M&A
activities in 2016.
Tran Vinh Du, Deputy Director of M&A Counselling
at Ernst and Young Vietnam, said that the period between 2017 and 2018 would be
optimal for foreign enterprises and funds to divest, spurring M&A
units have been present in Vietnam before 2010, purchasing large stakes for low
prices during the 2010 economic stagnancy.
the market has experienced a slowdown since the latter half of 2016 with fewer
stellar deals. And the total value of M&A deals was just 1.1 billion USD in
the first quarter this year, down 24.4 percent from last year.
As such, the Vietnamese M&A market would most
likely not surpass 2016’s peak without an extra surge from foreign investors,
especially in the real estate and retail sectors.
M&A trend in the real estates and retail sectors is expected to intensify
in the remaining months of this year, with the participation of foreign
investors, mainly from Japan, Hong Kong, the Republic of Korea, Thailand and
At the end of June 2017, Japanese Hankyu Hanshin
Holdings Inc met with the Ho Chi Minh City Real Estate Association (HoREA) to
discuss the former’s involvement in 197 projects in the form of private public
partnerships and 120 other key national real estate projects in need of
investment within HCM City alone.
seen as a spark that could light up country’s M&A sector, as Japanese
investors rarely get involved in unstable deals.
Vietnamese real estate enterprises like Vingroup, Sun Group, FLC, Bitexco and
Novaland have successfully concluded M&A deals over the past five years.
The sector has seen hundreds of private M&A deals as well as real estate
development projects worth billions of dollars.
to 2015 alone, Vingroup spent 1 billion USD acquiring other enterprises and
projects in the market, extending their operations into retail, agriculture,
education, and construction materials via M&A deals.
retail sector, another deal that attracted much public attention in late 2016
was the purchase of 78.38 million shares of the Vietnam Dairy Products Joint
Stock Company (Vinamilk) by Singaporean food and beverage firm Fraser &
Neave (F&N) at 11.3 trillion VND (over 500 million USD).
large M&A deal in 2016 was Thai group Singha becoming a strategic partner
of Masan Group by buying 25 percent and 33 percent stakes in Masan Consumer
Holdings and Masan Brewery, respectively, at 1.1 billion USD.
Minh, head of the Vietnam M&A Forum’s research group, said that retail and
consumer goods M&A targeted at entering and expanding the market was the
most noteworthy trend in 2016.
to the group, M&A value in 2016 broke the record of 5.2 billion USD set the
number of foreign retailers entering Vietnam and the opening of foreign-owned
retail outlets through M&As had increased over the last three years, Minh said.
though Vietnam M&A market value is small in comparison with other ASEAN
countries such as Singapore (62.3 billion USD in 2016); Indonesia, Thailand and
Malaysia (11 USD to 16 billion USD on average), the country has an advantage in
terms of its dynamism, according to Duong Thuy Dung, Senior Director, National
Head of Professional Services at CBRE Vietnam.
explained that with the Vietnamese government on board with M&A growth, the
market could see more foreign investors looking to partner with domestic firms.
The annual M&A Forum, in its ninth edition, is
one of the most prestigious meeting grounds for investors interested in mergers
and acquisitions in the country and abroad. It helps connect domestic
businesses with foreign investors and firms for better investment opportunities
It was jointly organised by the VIR and the AVM
Vietnam Company. It was held at the GEM Conference Centre in HCM City. Around
400 senior officials, experts and analysts from the Government, investment
funds, international and local consultancy firms, State owned corporations, and
private sector companies listened to and interacted with 20 guest speakers from
Vietnam and other countries.-VNA