by Apra Law

For the past three years, the specter of COVID-19 has been leaving a heavy aftershock to the world economy. That period saw many countries around the world achieve negative GDP growth, and are still suffering from persistent effects from the epidemic. In this difficult context, Vietnam emerged as a bright star with positive GDP growth although the growth rate was somewhat reduced. Vietnam’s economic stability is largely due to effective measures from the Government in controlling the spread of the disease, accompanied by efforts to attract foreign investment and strong consumption from the domestic demand.

Average transaction value tends to increase

Along with the development of the economy, the M&A market in Vietnam shows high stability, even strong growth in 2021 – the year of the strongest outbreak of COVID-19. In the first 10 months of 2021, the M&A market attracted US$8.8 billion, an increase of 17.9% compared to 2020 and 13.7% compared to the year before the epidemic, 2019. Meanwhile, the number of transactions decreased slightly.

The increasing attraction of M&A investment in Vietnam is clearly demonstrated not only by the growth of the total transaction value but also by the average value per transaction. Average value per transaction increased from 28.1 million USD in 2019 to 42.8 million USD, statistics until October 2021. More and more deals are worth over 100 million US dollars are recorded. There were 22 transactions conducted in just the first 10 months of 2021 compared to 19 transactions in the whole of 2019. Similar deals are expected to continue in the near future.

Main M&A industries

According to KPMG’s data and analysis, the industries: Consumer essentials, Finance and Real Estate are the industries that attract the most M&A, accounting for 55%-60% of the total transaction value in recent years and it is likely that this trend will continue in the future. These industries benefit greatly from high demand for housing, financial services and convenience goods, fueled by large populations, a growing middle class and rapid urbanization. It is not surprising that since the beginning of the year, the biggest deals have been from companies operating in these fields, including the deal that Sumitomo Mitsui Financial Group invested US$1.3 billion in FE Credit, SK South East Asia Fund invested US$410 million in Vincommerce, and Baring and Alibaba invested US$400 million in CrownX, all in the first half of 2021.

Besides the three industries mentioned above, the Technology industry is also on a strong rise, receiving more and more attention from investors. In the first 10 months of 2021, the technology-related M&A market recorded a remarkable increase in both value and quantity. The number of deals doubled while the total value grew more than three times compared to the whole year of 2020, reaching nearly US$1 billion, even exceeding the level before the epidemic occurred. The main driving factor comes from the need to invest in technology infrastructure as well as to meet the need to use alternative online services in the context of the ongoing epidemic.

In addition to financial technology, e-commerce and blockchain, other industries also show potential with notable deals. Worth mentioning is Mekong Capital’s recent investment in medical technology startup Gene Solutions – a pioneer in the field of genetics in Vietnam. We have favorable conditions to become a technology startup hub in Southeast Asia. In recent years, the startup ecosystem in Vietnam has made great progress, which is an environment that encourages the startup community to go up. The large technology human resources associated with the entrepreneurial mindset and the Government’s supportive policies play an important role in that development trend. More and more investments are expected to flow in to anticipate opportunities arising in this sector.

M&A market outlook in 2022

Large domestic corporations such as Nova Group and Masan share an optimistic view of Vietnam’s M&A market in 2022. The main focus is on the development and strengthening of business value chains, diversifying businesses source of revenue and profit to cope with fluctuations in the domestic market. In fact, M&A is becoming a popular choice for domestic corporations because this strategy helps them quickly access new business areas, expand market share, and add talent. as well as expertise after successful transactions.

Domestic buyers have certain advantages in carrying out M&A deals during the COVID-19 period. In recent M&A deals, domestic investors have shown that they are not inferior to foreign investors in terms of bringing value to partners. Acquired or invested companies benefit from the group’s ecosystem, the diversification of products and services, and the potential of upstream and downstream markets. Besides, domestic corporations also bring value to invested companies through orientation and building effective business strategies.

In the past, Vietnamese companies did not have enough resources to carry out large M&A deals. This gap has now been narrowed with the emergence of large-scale corporations in the country and the development of the domestic financial market. In addition, domestic investors are also familiar with the practices and processes for conducting M&A transactions. The most important factors when choosing an M&A target are the ability to increase market share, market coverage, the ability to understand and absorb business ideas, cultural harmony and strategic direction.

Entering 2022, although there are still certain risks in the context of Covid-19 and its impact on the macro-economy, the Vietnamese market is still expected to maintain a good growth momentum.


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