M&A market waiting for big deals

An electronic component production line of the Japanese-invested INOAC Vietnam Co Ltd in the Quang Minh Industrial Park of Hà Nội. — Photo VNA

 HÀ NỘI — After a booming period, foreign investment flows into Việt Nam via mergers and acquisitions (M&A) have slowed down over the past few years, and the market is still waiting for big deals. 

In the first seven months of 2024, foreign investment channeled into new and existing projects increased sharply compared to the same period last year, by 35.6 per cent to US$10.8 billion and 19.4 per cent to nearly $5 billion, respectively. 

However, investment via capital contributions and share purchases was still on a downward trend. There were 1,795 capital contributions and share purchase transactions totalling nearly $2.27 billion during the period, respectively falling 3.1 per cent and 45.2 per cent year on year, according to the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment. 

In the last five years, 2019 witnessed a boom in this form of investment. 

Statistics showed that foreign investors conducted 9,842 transactions valued at $15.47 billion in 2019, surging 56.4 per cent from a year earlier. However, investment via capital contributions and share purchases has dropped since then. 

The value stood at $7.47 billion in 2020, $6.9 billion in 2021, and $5.15 billion in 2022, respectively down 51.7 per cent, 7.7 per cent, and 25.2 per cent. It reached $8.5 billion in 2023, soaring 65.7 per cent from 2022, but was equivalent to just over half of the peak of $15.47 billion seen in 2019. 

Impacts during three years of the COVID-19 pandemic, plus geopolitical uncertainties, have led to a plunge in M&A deals worldwide. 

Data from the London Stock Exchange Group (LSEG) revealed that the global M&A market recorded only $2.9 trillion in transaction value in 2023, down 17 per cent year on year. That was the first time since the 2008-2009 global financial crisis the world’s M&A market had contracted by over 10 per cent in two consecutive years. The market in Asia-Pacific alone shrank by 25 per cent. 

Đầu Tư (Vietnam Investment Review) cited Lê Xuân Đồng, Director of EY Parthenon Strategy at EY Consulting Vietnam JSC, as saying that the M&A market in Southeast Asia has tended to decline in terms of both transaction number and value, and Việt Nam is not an exception. 

Although there haven’t been large deals since the start of 2024, a recent report by Savills Vietnam pointed out several notable transactions. For example, Kim Oanh Group recently teamed up with NTT Urban Development, Sumitomo Forestry, and Kumagai Gumi Co Ltd of Japan to develop The One World, a 50-ha residential area in the southern province of Bình Dương. Nishi Nippon Railroad of Japan bought a 50 per cent stake in the 45.5-ha Paragon Dai Phuoc project for about $26 million from Nam Long Group. 

Particularly, Tripod Technology Corporation of Taiwan (China) purchased an 18ha industrial land lot in the southern province of Bà Rịa-Vũng Tàu from Sonadezi Châu Đức. It has spent $250 million on building an electronic component factory there, like many other Taiwanese firms who are continually pouring capital into this field in Việt Nam. 

Troy Griffiths, Deputy Managing Director at Savills Vietnam, held that industrial real estate will witness stable demand, supported by the foreign investment inflow and infrastructure development. M&A deals in this field are forecast to bounce back. 

Economists perceived that the entry into force of real estate-related laws, namely the 2024 Land Law, the 2023 Housing Law, and the 2023 Law on Real Estate Business, from August 1 will give a boost to M&A activities in this area. 

However, the market is still waiting for major transactions, not only in real estate but also in retail, manufacturing, and finance-banking, like what used to be made. 

Data from the FIA indicate that during January-July this year, Japan, with nearly $595 million, still ranked first among countries and territories investing in Việt Nam via capital contributions and share purchases. It was followed by Singapore ($500 million) and South Korea ($323 million). Investors from Taiwan poured $160 million, the Cayman Islands $184 million, and mainland China $124 million. 

These are also the investors that have conducted large M&A deals in Việt Nam in recent years, and the market is waiting for them to spend big in the time ahead. — VNS