Vietnam, along with Singapore, Indonesia and Malaysia, has been named one of the four most dynamic private equity markets in Southeast Asia in 2018, with over US$1.6 billion poured into the country’s private equity sector, up 285% year-on-year, according to Moody’s analytics company Bureau Van Dijk.
Source: Bureau Van Dijk.
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A sharp increase in value of private equity deals in Vietnam stood in stark contrast to that in the ASEAN region.
In 2018, the combined amount of private equity deals in ASEAN-5 (comprising Malaysia, Singapore, Thailand, Indonesia and the Philippines) declined by 62% year-on-year with US$4.7 billion, while the number of deals increased by 18%, stated Bureau Van Dijk in its Global M&A Review 2018 report.
Of the 38 deals reported in Vietnam in 2018, investors targeted startups in 27 cases, accounting for 71% of total deals and up 56% year-on-year.
Notably, domestic equity funds were dominant with 17 deals, equivalent to 36% of total private equity deals, of which technological startups received the highest capital concentration in 40% of those deals.
Additionally, 34% of investors surveyed in Bureau Van Dijk’s report suggested Vietnam the most attractive investment destination in Southeast Asia.
International experts expected the private sector to be one of the four pillars driving Vietnam’s economic growth in 2019, particularly with strong growth in startups.
In Vietnam, technological startup is fast becoming a trend, according to Tuoi Tre Newspaper, including fintech, e-commerce, online education and travel tech.
Meanwhile, the government has been providing support policies and encouraging the development of the private sector.
Nevertheless, 87% of investors expressed concern over the inconsistency in regulations and investment protocol, as well as the corruption issue, while 76% considered lack of transparency in enterprises’ information the main reason leading to failure in reaching deal.
Around 37% of Vietnamese sought capital through bank lending, which is one of the most simple and conventional way for private companies to mobilize capital.
Followed by raising funds from private equity and venture capital funds, the emergence of new domestic and international funds have diversified the options for private companies in Vietnam.
In addition to capital, local companies could have access to rich expertise and strong network from investors through these investment funds.
Meanwhile, only 5% of private companies chose initial public offering (IPO) to raise fund.
