FiinGroup is pleased to present our intensive report of Vietnam M&A 2019, the 9th issue of this report. This report presents the extensive data mining of M&A deals in Vietnam in the reviewed period, as well as analysis by key investors and industries where we recognize potential investment opportunities in the near future.
The research provides latest information on market activities as well as competition landscape of M&A in Vietnam. Three main segments of M&A categories including (i) Inbound M&A, which is when a foreign company merges with or acquires a domestic company) (ii) Domestic M&A, which is when two domestic companies merge with or acquire other (iii) Outbound, which is when a domestic company merges with or acquires a foreign company.
In addition, we provide in-depth review for the 4 outstanding sectors: Real estate, Industrial goods & Services and Food & Beverage and banks and 3 trendy sectors: Health Care, Education and Utilities.
We also reviewed the key themes that shaped the overall M&A picture in Vietnam throughout 2018-1H2019 including Valuation of selected deals, Updates on progression of SOE IPOs and Divestments, FTAs and opportunities and notable regulatory changes that matter M&A.
Above all, we offer our perspectives on M&A activities in the reviewed period as well as the key trends to watch for the years ahead
Key financial figures on reviewed transactions are also included in the Appendices.
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- 2018 M&A activity plummeted in value by 44% to US$7.54 bn from the 2017’s record due to the shortage of megadeals and delay in SOE ‘s IPO and divestment. The market has stayed calm in the first 6 months of 2019. Both the number and value of deals fell by 22% and 55% on 1H2018 levels.
- Inbound deals in 2018 registered US$4.2bn, decreasing by 37% y-o-y compared to inbound value in 2017 without the mega SABECO deal. The inbound market remains quiet during the first half of 2019, but still accounted for 67% of total M&A value. 1H2019 only recorded US$1.45bn from 25 transactions, a 67% decrease compared to same period last year.
- Since 2018, investors from Singapore and South Korea escalated their investments in Vietnam and dominated the inbound market in terms of deal value. Meanwhile, despite the highest number of deals, Japanese investors usually contributed small and medium-sized deal. Meanwhile they key inbound investors from Thailand have reduced the size of their investments
- 2018 witnessed an upward in domestic M&A scale, recording US$3.26bn from 174 transactions, average deal size of nearly US$19mn which is significantly improved from 2017’s level of US$14mn. Half of domestic deal value in 2018 are made of mega deals in Real Estate, and Construction with active acquirors: Vingroup, Novaland, and An Quy Hung. Domestic M&A activities ended the first half with a modest performance. Although 1H2019’s deal volume is comparable to 1H2018’s. total deal value of US$700mn, equal to less than half of 1H2018’s.
- Outbound M&A, despite accounting for an insignificant portion of the total M&A value showed great prospects. The reviewed period 2018-1H2019 witnessed two big deals closed by Vietnamese companies oversea including FPT Corp’s acquisition of 90% stake in the US-based tech-advisory firm Intellinet Corp and the transaction made by Yeah 1 to acquire 100% of Youtube multi-channel network ScaleLab (although the deal value was later net off as Yeah 1 sold the acquired stake back to the previous owner).
- Real Estate continued to lead both the deal value and volume in 2018, followed by Banks, Industrial Goods and Services, F&B, and Construction Materials. The sectors that stood out most so far in 1H2019, capturing 94% of total deal value were Industrial Goods & Services, Health care, Construction & Materials, F&B, and Utilities.
- Migration of manufacturers from regional countries due to the ongoing trade war is expected boost the demand for industrial real estate, including warehouses and industrial parks. Shifting of foreign manufacturers to Vietnam due to FTAs and trade war will also boost the demand for Industrial Goods & Services with key sectors such as logistics and transportation services.
- SOE IPOs and Divestments are lagging far behind targets. The government issued Official Dispatch requesting 127 SOEs to complete IPOs and Decision No 1232/2017/ND-CP for divesting state capital in 406 SÓE between 2020, By the end of 1H2019, SOE IPOs achieved 26% of the plan for 2017-2020, while SOE divestments fulfilled only 10% of the initial plan. It seems infeasible to complete the given plans by 2020.
- 2019 saw the signing of the EU-Vietnam Free Trade Agreement (EVFTA), the EU-Vietnam Investment Promotion Agreement (EVIPA), and the entry into force Trans-Pacific Partnership (CPTPP). These signings is expected to stimulate foreign capital inflows and encourage foreign players to seek investment opportunities in Vietnam, given the increasing transparency and promising removal of 49% foreign ownership cap.
- The New Competition Law coming into force on 1 July 2019 and focusing on (1) competition-restraining agreements, (2) market dominance (3) economic concentration, and (4) unfair competitive practices is poised to matter M&A transactions with some notable changes, especially related to merger filing, merger control, the combined market share of deal participants and jurisdiction for competition-restraining acts and economic concentration