We are pleased to bring to you the Vietnam M&A Research Report 2017 (Issue 7). In addition to the M&A data mining, we also focus on M&A opportunities by featuring some industries where we think investment opportunities will be arising given its new dynamics and regulatory developments. We also reviewed latest status of SOE IPOs and divestments of State capitals in equitized SOEs.

Our report is empowered by the most comprehensive M&A database with over 7 years of historical data in Vietnam. In addition to data analysis, the report also relies on the authors extensive knowledge and experience in advising deals in Vietnam.

We strongly believe that this report will be valuable to institutional investors, investment companies and foreign players who are considering M&A as a strategy to set a foothold or to expand their businesses in Vietnam.

Below are the most critical findings from our 7^th issue:

1)     New record high was set in Vietnam M&A 2016, however the momentum slows down in 1H2017: Despite lower deal number (308 deals in 2016 compared to 332 deals in 2015), M&A activities in Vietnam set new record high with a big jump in total deal value to US$10.16bn in 2016, increasing by almost 95% compared to the previous year. The momentum cools in 1H2017 in terms of volume and value. Particularly, there are 102 deals in 1H2017 with total deal value of US$1.628bn.

2)     Big and mega deals drive M&A 2016. Mega deals (M&A transactions with deal value from more than US$100mn) contributed up to approximately 70% of total deal value in 2016, equivalent to US$7.07bn which is 2.6 times larger than this figure in 2015.

3)     Inbound M&A deals into Vietnam stayed high for 2016 and still busy for 1H2017: Inbound M&A deals into Vietnam totaled US$4.91bn with 97 transactions concluded in 2016, which is comparable to the previous year in terms of deal number and the proportion over total annual M&A deal value in 2015. However, absolute inbound deal value doubles its level in 2015 and is equivalent to total value in two previous year 2014 & 2015

4)     Asian peers including Thailand, Japan, Singapore are still the most active players in Vietnam M&A. Thai investors were the most active players in acquiring Vietnam domiciled enterprises with total transaction value of US$2.28bn, accounting for 46.6% of total inbound deal value in 2016. On average, Thai players paid US$381mn per deal, proving their activeness and aggressiveness when penetrating Vietnam market. Singapore and Japan followed Thailand to be ranked in 2nd and 3rd place, respectively in terms of deal value in 2016.

5)     M&A Valuation tends to be more expensive thanks to prudent performance of domestic firms. From our detailed review of selected transaction, the average deal valuation was at 29.0x of earnings (P/E) and 1.6x book value (P/B). On average, M&A bidders paid 50% higher than the stock market.

6)     State capital divestment is expected to be potential for foreign investors thanks to the Government’s new moves. Particularly, total state capital in public companies stays at US$20.13bn as of July 2017 with big names with the market cap of over US$1bn including “big 4” banks, Vinamilk, Sabeco, Vietnam Airlines and Bao Viet. In other words, state still holds 36% ownership in public companies. Given MOF’s draft on SOEs equitization and divestment process including new method called book building, state divestment is expected to draw foreign investor’s attention.

7)     Besides “consumerism” industries, Renewable Energy, Agribusiness and Utilities are expected to be busier in the upcoming time. According to our estimation, total required investment in renewable energy until 2025 reaches US$5.1 – 6.7 billion, which appears to be potential opportunities for global & regional investment funds and energy-specialized funds to tap on, especially with positive development in regulatory framework such as MOF’s proposal to increase electricity tariff for wind and solar power in December 2016

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