Vietnam: Business mergers and acquisitions on the increase
In face of the economic crisis, finding cash flow to survive is of top priority for businesses. This has also led to the increasing tendency of M&A (mergers and acquisitions) of businesses.
The increasing tendency of M&A (mergers and acquisitions) of businesses such as project transfer, stock sales or asset sales has been taking place in most fields, especially in real estate, finance and banking.
Many huge deals
Given the financial hardship facing the real estate market, many businesses in this field can no longer afford to launch projects, as well as cover operating costs despite having been downsized. As a result, many of them have no choice but to sell part or all of their projects to pay off debts, raise capital, and avoid bankruptcy. Most recently, Nova F&B Company, a member of NovaGroup specializing in providing food services at projects developed by Nowland, was acquired by a Singaporean enterprise through the arrangement of VinaCapital. The acquisition was implemented in NovaGroup’s effort of business restructure in the face of the crisis.
Also recently, Keppel Group (Singapore) and Keppel Vietnam Investment Fund (collectively referred to as Keppel Consortium) announced to allocate more than VND3.18 trillion (US$135 million) to purchase shares of Emeria project (6ha) and Clarita project (5.8ha) in Thu Duc City (HCMC) from Khang Dien House Joint Stock Company. Meanwhile, according to Jones Lang Lasalle Group (JLL), it has been entrusted with exclusive consultancy for the selling party of 3 hotels in Southeast Asia, including 2 hotels in Vietnam, Ibis Saigon South and Capri by Fraser (District 7, Ho Chi Minh City). The deal, which marks the first hotel acquisition in the region in 2023, is worth $106.1 million, and the buying party is from Hong Kong (China).
Besides the real estate sector, many “huge” M&A deals in the financial sector have also taken place in the first months of 2023. In particular, the financial market witnessed an M&A deal worth about $1.5 billion, with VPBank selling a 15 percent stake to SMBC Bank (Japan). Similarly, UOB Singapore also completed the purchase of Citigroup’s consumer banking service in Vietnam; SHB transferred 50 percent of SHBFinance capital to Krungsri Bank (Thailand), earning about VND1.8 trillion ($ 76.5 million).
Efforts turn out in vain
According to economists, mergers and acquisitions can be viewed in a positive way as creating new factors, improving future supplies, and resulting in more quality and diversified products. In addition, this is also an opportunity for foreign enterprises to cooperate with domestic enterprises, utilizing their strengths, understanding business policies and procedures in Vietnam. In particular, Mr. Neil MacGregor, CEO of Savills Vietnam, considered the real estate market, despite the current difficulties, a “money spinner” in the future, thus attracting great interest of foreign investors.
Savills added that the company received many consultation requests from domestic real estate developers on setting deals and pricing transactions. This year’s M&A activities are forecast to be promoted more than last year. Sharing the same opinion, Mr. David Jackson, General Director of Colliers (Vietnam), said that Vietnam’s real estate market has the potential to grow in the long-term; therefore, many foreign investment groups are taking advantage of this vulnerable time to increase their market share in Vietnam.
However, the ongoing tendency shows that almost all M&A deals are single-sided devotions. To be specific, at the 23rd session of the National Assembly Standing Committee, Minister of Planning and Investment Nguyen Chi Dung revealed the startling fact that many large enterprises had to sell their properties at only 50 percent of the actual value and the buyer is a foreign enterprise. In the market economy, the merger and acquisition of enterprises is a norm, as the buyer still pays taxes, which contributes to national growth. However, it becomes worrying when many businesses have to bitterly sell the company at the price below the operation cost, sometimes only 50 percent of the actual value.
Dr. Nguyen Dinh Cung, former director of the Central Institute for Economic Management, said that a Vietnamese investor had to sell a project into which he had put a lot of effort to a Japanese retail corporation with a loss of nearly VND200 billion ($8.5 million), even though the project is approaching completion.
Mr. Dau Anh Tuan, Deputy General Secretary and Head of the Legal Department, Vietnam Federation of Trade and Industry, said that business activities reflected the status of the economy. Therefore, it is a worrying phenomenon as many enterprises, especially large enterprises, have to sell most of their assets to sustain themselves, and the number of enterprises leaving the market has increased sharply compared to recent years. “The fact that a strong enterprise has to sell the entire property in the face of difficulties in short-term liquidity is greatly pitiful. It is a major loss for the economy when businesses have to sacrifice their ownership despite the temporary hardship,” said Mr. Dau Anh Tuan.
According to Mrs. Trang Bui, General Director of Cushman & Wakefield Vietnam, the fact that many domestic real estate enterprises face difficulties in capital sources has created opportunities for foreign investors with flexible cash flow. From the beginning of 2023 until now, the Vietnamese market has witnessed the emergence of many foreign investors, half of which are new to the Vietnamese market. While previously most investors came from Hong Kong (China), Singapore, there are now many new investors coming from South Africa, Arab countries.