Vietnam’s M&A market forecast to thrive in 2019

Merger and acquisition (M&A) value in Vietnam is forecast to reach US$4.1 billion in 2019, given the government’s reforms to further facilitate foreign investment and the ratification of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), experts forecast. “Notwithstanding a solid domestic economy, Vietnam still sees some cooling in M&A deals during 2018, and we now expect completed M&A deals to come in at under US$3 billion for the year. But a number of deals announced in 2018 will be completed in the coming year, indicating that M&A deal numbers will rebound in 2019,” multinational law firm Baker McKenzie wrote in its Global Transactions Forecast Report released recently.
According to the report, with reforms to further facilitate foreign investment now underway and with the ratification of the CPTPP, inbound investment in particular is expected to accelerate through 2019-2021.
“M&As in Vietnam and India will benefit from important policy reforms, which should make inbound investment more attractive,” the report wrote.
According to the report, moving into 2019, underlying conditions for M&As appear solid, with most emerging Asia-Pacific economies being better insulated against US Fed rate hikes than in the past, though they remain vulnerable to US protectionism. Japan is set for an economic rebound and Australia is expected to enjoy robust growth.
“We forecast total M&As in the region to rise to $751 billion in 2019. But as in other parts of the world, growth is slowing, meaning equity markets and deals are likely to take a pause in 2020. A modest upturn in growth in 2021 and the stabilization of global liquidity conditions point to a cyclical deal upturn the following year,” Baker McKenzie analysts said.
Taking big steps
According to Minister of Planning and Investment Nguyen Chi Dung, Vietnam will become much more selective about M&A inflows from overseas in the time to come. Specifically, foreign investors should be willing to help with Vietnam’s environmental preservation plans and protecting Vietnam’s natural resources.
“We’d like to attract foreign investors that can connect well with Vietnam’s domestic companies. Technology transfer and co-operation is also key, as it is the basis of sustainable growth in the Industry 4.0 era,” Dung said.
Dung said he is upbeat about the future of M&A in Vietnam, which he considers a more flexible process than direct investment.
According to experts, in the following years, Vietnam’s M&A deals are expected to continue focusing on consumer goods, retail and real estate. In addition, the fields of telecommunications, energy, infrastructure, pharmaceutical and education will also be on the radar of investors.
To prepare for the M&A inflows next years, the government is taking some big steps. First, there are 140 state-owned enterprises (SOEs) slated to be sold between now and 2020.
Decision No.1232/2017/QD-TTg, for the first time ever, has specified the name of these SOEs, as well as the anticipated amount and timeline of state withdrawals.
At the same time, the government is nurturing the stock market and striving towards emerging market status, providing investors with a liquid and transparent environment for both M&A inflows and exits.
Chairman of the State Securities Commission Nguyen Van Dung noted that the Securities Law is slated for revision in 2019, and regulators are pushing to implement the book-building method to sell SOEs. This demand-based sale method is crucial to attract foreign investors in the new era.
Data showed that more than 4,350 M&A deals totaling US$48.8 billion have been executed in Vietnam in the 2009-2018 period.