The market for M&A transaction in Vietnam is expected to boom in 2015 with many M&A activities in banking industry.
According to experts, there will be new capital flowing into the M&A market of Vietnam with a total forecasting value up to 20 billion USD over the period from 2014 – 2018.
Particularly in 2014, according to an incomplete statistics of the M&A Forum team (MAF), the value of M&A in Vietnam reached 4.2 billion USD.
According to Prof. Dr. Christopher Kummer, Chairman of the Institute for Mergers, Acquisitions and Alliances (IMAA), Vietnam has made progress in the ranking of the global M&A activity when rising to the 20th position.
The main trend of the Vietnam M&A market during 2015 – 2016 and the following years has focused on a number of key industries such as retail, consumer goods, real estate, finance and banking.
Currently, investors from Japan, South Korea and Thailand are the main customers who acquire projects, enterprises of Vietnam.
M&A Trend in Vietnam
The foreign investors have been taking a number of corporate intelligence research, background check and M&A due diligence in Vietnam before taking a closer look into the targets for M&A. The investors from Thailand, Singapore focus mainly on the field of consumer goods and retail; investors from Japan, South Korea eye real estate and industrial real estate projects.
In fact, there have been cooperations between Vietnam companies with foreign investors as Hoang Quan Real Estate has received capital from GEM investment fund (US); Sao Mai An Giang group is also negotiating for capital grants from a major investment fund from US; Nam Long, Thanh Dong, An Gia, Khang Dien… cooperate with Japan; Sacomreal and Thanh Thanh Cong Group cooperate with Gamuda Land from Malaysia.
Vietnam Policy Open-up Creating Positive Impact
The changing in the policies recently had a tremendous impact on the investment and business activities of enterprises, particularly place strong impact on the M&A activity in the future.
For example, many important laws aimed at innovating and improving the economic institutions such as the Public Investment Law, the Investment Law (revised), Business Law (revised), the Law on management and use of state capital in production – business, Housing Law (revised), Law on Real Estate Business (revised), which allows to ease room for foreign investors in many sectors are contributing to improve the legal environment for business investment activities in general and M&A market in particular.
Vietnam Bank Restructuring
Besides, the process of restructuring the commercial banking system and divest non-core investments of the state-owned enterprises under the policy of the Government is also contributing to make the M&A market more diverse.
2015 is the year to thoroughly handle weak banks, gather small banks to form large-scale banks, meet the international standards.
It is clear that the M&A activities are just starting to heat up since 2007, when Vietnam joined the World Trade Organization (WTO). The value of M&A increased gradually until 2012, a record year with more than 4.1 billion USD of total value.
Entering 2014, with stronger action by the Government on the process of equitization of state-owned enterprises, reform some laws related to business and investment, improve administrative procedures and keep a stable macroeconomic environment, along with better growth rate have encourage domestic and foreign enterprises to acquire.
The year of 2014 was a year marking the revival of M&A transactions in Vietnam, after this operation dropped more than 50% in value in 2013. According to statistics, Vietnam has witnessed 313 M&A transactions in 2014, increase slightly compared with the previous year. This figure includes transaction between Vietnam companies with each other, foreign enterprises purchase domestic enterprises and Vietnam enterprises go to buy assets abroad.
According to the State Bank of Vietnam (SBV), in 2015, there will be approximately 6 M&A transactions. Hence, not only large banks but small banks are actively looking for M&A partners in order to survive.
The first M&A transaction will be the merger of Southern in Sacombank, then asking many other weak banks to merge with large banks. With the goal that in 2015 the banking industry will have the 2nd restructuring, consolidating of banks to form the large-scale bank with international standards.
Currently, the SBV has approved the merger of Sacombank and Southern Bank, Maritime Bank and Mekong Bank. Although the conversion rate between Southern Bank shares into shares of Sacombank or Mekong Bank to Maritime Bank is still unknown, but two banks have a large difference in size and profitability especially in recent years.
Other M&A transaction in banking industry: Vietcombank will merge with Saigonbank. Vietcombank is currently the largest shareholder of Saigonbank with stake holding of over 8.2%.
In addition, BIDV will also merge with MHB. VietinBank merges with a small bank, which had been identified as PGBank.
In recent days, information about Nam A Bank will merge with another bank with a larger scale is interested by the market. The policy and direction of SBV to accelerate the restructuring in banking industry is crucial, therefore in the future, M&A transactions in the financial – banking sector will be very busy.