Vietnam - Current factors back up M&A market

by lexie Sat Sep 24, 2011 1:14 pm

Sept.24,2011

Current factors back up M&A market

The merger and acquisition (M&A) has been increasing in scale with the total turnover in the first nine months of the year reaching 2.67 billion dollars, far exceeding the 1.75 billion level obtained in 2010. Meanwhile, the market scale is expected to be double by the end of the year.

The current factors are backing up the M&A market , while a lot of business fields have become the aiming points for foreign investors, according to report released by StoxPlus, the analysis team belonging to Nexus Group.

M&A, together with FDI, brings more capital

The total transaction value came from over 60 big affairs. If not counting on the transactions among foreign enterprises, it is estimated that nearly 2 billion dollars have entered Vietnam through M&A deals so far this year, thus helping balance the monetary payment of Vietnam. If the two affairs relating to Vietinbank and Vietcombank succeed, the market scale would reach 3 billion dollars this year.

M&A deals have been made mostly with the participation of foreign groups, which accounted for more than 81 percent of the total deals. The foreign portfolio investment (FPI), after decreasing continuously in 2008 and 2009, has increased again, a part of which has been flowing into Vietnam through the M&A channel.

Analysts believe that the M&A would continue growing in 2012 thanks to many factors. A lot of foreign groups have also revealed their plans to penetrate the Vietnamese market through M&A instead of foreign direct investment (FDI).

Though the FDI capital flow to Vietnam would continue seeing stable growth, analysts believe that a part of foreign investors’ capital would be funneled under the mode of M&A in 2012. A lot of foreign investors choose M&A instead of FDI because M&A can help them take a shortcut to the Vietnamese market. After buying existing legal entities, they can use the existing networks and labor force.

The M&A potentials from Japan and hot business fields

Japan remains the biggest foreign investor in Vietnam through M&A, with 236 million dollars worth of value of the M&A transactions in the first nine months of the year.

According to StoxPlus, Japanese groups have been trying to purchase controlling stakes in the consumer goods production, mostly in food processing, in telecommunication services, finance and industries.

The sharp increase in the investments of Japanese investors in Vietnam has been explained by the fact that the investors tend to be relocating their production bases from Japan to South East Asia.

Of the 11 countries which had M&A deals in Vietnam in the first nine months of the year, there was only one affair made by Chinese investors, but this was the biggest one. Under which CP Pokphand bought 70.8 percent of stakes of CP Vietnam. However, the money from the deal would not be used for the enterprises in Vietnam. The second position followed to the US-based international institutions.

However, if considering the cash flow to Vietnam, the groups from Japan are leading with the total value of the affairs reaching 236 million dollars. If the affair worth 560 million dollars between Japanese Mizuho and Vietcombank succeeds, this would make a record in the Japanese cash flow to Vietnam.

The investment fields interested by Japanese groups are also the ones which most of the foreign partners are eyeing. The top six business fields eyed by foreign partners for M&A deals include food and drink; consumer goods; retail; pharmacy; storage and logistics; construction and materials.

Meanwhile, analysts believe that M&A deals in the time to come would also focus on Internet and e-commerce.

A lot of business fields still cannot attract the attention from foreign investors. These include real estate, steel, seafood, fund management and securities companies. Therefore, the successful M&A deals in the fields were mostly the ones among domestic enterprises.
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