return icon Vietnamnet.vn

M&A in technology booms during pandemic

The Mergers and Acquisitions (M&A) market in Viet Nam has been going through a downturn due to the pandemic, but the technology sector is bucking the trend.

 

The seminar on "Digital transformation and M&A trends in the technology sector in 2022" was jointly held by Nha dau tu Magazine and Nova Group on January 11. — Photo itcnews.vietnamnet.vn

Nguyen Cong Ai, deputy director of KPMG Viet Nam, noted that technology sector was becoming more appealing to foreign investors. In 2021, technology M&A doubled in transaction volume and tripled in value, reaching about US$963 million by October.

Sub-sectors that have been attracting strong investment inflows include e-commerce, fintech, ed-tech, logistics and digital transformation.

Tiki has sucessfully raised $258 million in a funding round led by AIA Insurance; Sky Mavis $152 million by Andreessen Horowit; and Momo $100 million by Warburg Pincus.

“Foreign investors are showing great interest in Viet Nam’s technology sector. Recently, we have been receiving an increasing number of requests from Korean and Japanese investors who are interested in Viet Nam’s internet economy, fintech, edtech and media,” Ai added.

The deputy director believes foreign interest in technology can be mainly attributed to favourable policies of Vietnamese Government on tech startups. Another contributing factor is the quality of human resources, which has been improving substantially in recent years.

Nguyen Viet Khoi, director of Institute of Skills Education and Creative Intelligence, said Viet Nam’s digital economy had been forging ahead over the past few years. Rapid growth could be observed in information technology (IT), telecoms, e-commerce and startup ecosystems.

Remarkably, 5,600 new digital firms, with nearly one million personnel, were established last year, raising the total number of digital firms to over 64,000 and marking a 9 per cent growth in the sector.

Such a steady expansion has allowed the technology market to draw in massive foreign investment and multiply M&A transactions.

However, digital firms in Viet Nam are still at an early stage. A majority of them are startups with original ideas but have trouble with management and strategic planning.

Meanwhile, investors with deep pockets prefer putting money in firms that can draw up a detailed plan to realise their ideas.

This mismatch between investors and investees is causing a setback for M&A growth.

To deal with the setback, Khoi said the grow-at-all-cost model was indispensable. Additionally, trading floors for startups, which are similar to ChiNext (China), KONEX (Korea) or NASDAQ (US), could be developed to facilitate startup funding.

The director also recommended the Government launch a regulatory sandbox to provide digital firms with testing grounds for their technology innovations.

Regarding M&A in IT, Nguyen Thanh Tuyen, deputy director of the Ministry of Information and Communications' Department of Information Technology, revealed there was no significant M&A in digital technology in Viet Nam prior to 2015.

It was between 2015 and 2018 that first major transactions in the sector began to emerge, notably VNG seizing a 38 per cent stake in Tiki and the buyout of Mundo Reader by Vingroup.

From 2019 to 2021, Viet Nam saw a sharp upturn in M&A with many noteworthy deals including Vision Fund and GIC Fund pouring $300 million to VNPay, Temasek’s investment of $100 million to Scommerce, and the buyout of Base platform by FPT.

As the COVID-19 pandemic has been paving the way for the widespread application of digital technoloy, M&A in this sector will continue to boom in the next several years. Sub-sectors that are likely to become investment magnets include e-commerce and fintech.

Despite the positive outlook for M&A, Tuyen said that most products and services of Viet Nam’s tech firms only targeted the domestic market. Few seek customers abroad.

Such a narrow market reach is a setback for the rapid growth of M&A.

Ho Phi An, chief executive officer of EI Industrial, believes the rapid growth of M&A in technology is good news for the sector. Through M&A, digital firms will be able to tap into abundant sources of foreign funds.

The downside is that firms are more vulnerable to hostile takeovers as soon as they are open to M&A. However, growth always comes at a cost, so the risk of a takeover should not be a matter of concern.

“We should not be concerned with hostile takeovers when we participate in international markets. It’s quite normal for a firm to be taken over if it is not good enough,” An added.

Bui Thu Thuy, deputy director of Enterprise Development Agency under the Ministry of Planning and Investment, acknowledged that the legislative process in Viet Nam was quite lengthy. It takes 5-7 years to develop a fully-fledged legal framework, so Government policies normally cannot keep up with the pace of change.

Additionally, the practice in some countries that financially supports 100 per cent of startups' initial costs or accept a failure risk of 20 per cent is unsuitable for Viet Nam currently.

"Our current financial situation does not allow such a practice and we cannot accept such a high risk either," Thuy said.

The deputy director said the authority would come up with favourable policies for digital firms and startups, but financial support would require cooperation between agencies and assocciations across the board. —

Source: VNS

MORE NEWS

Three SARS-CoV-2 Omicron variant BA.5 cases detected in Hanoi

Although the number of daily new cases of Covid-19 is decreasing sharply, Hanoi has recorded three infections caused by the BA.5 sub-strain of the Omicron coronavirus variant.

Binh Duong ranks first nationwide by GDP

The southern province of Binh Duong took the lead among Vietnam’s 63 provinces and cities in terms of gross domestic product (GDP) per capita in 2021, according to the latest data released by the General Statistics Office.

Tan Hoang Minh allegedly appropriates VND8 trillion of investors

Tan Hoang Minh Group, a major property developer based in Hanoi, is facing charges of misappropriating over VND8 trillion from investors, said a Ministry of Public Security representative.

Businesses get set for circular economy

Vietnam’s rapid economic growth has caused environmental challenges which have forced the nation to focus on fostering the development of a circular economy with less pollution and reused and recycled products.

Over 60,000 fishing vessels urged to seek safe shelter from storm Chaba

Approximately 60,000 fishing vessels operating at sea have been urgently notified to avoid dangerous areas and seek safe shelter from incoming Storm Chaba, according to the National Steering Committee for Natural Disaster Prevention and Control.

Siem Reap - Da Nang air route resumed

Flight K6 840 departed from Siem Reap of Cambodia at 3:35 pm on July 1 and landed safely at Da Nang International Airport at 5:35pm on the same day.

Embassy: two Vietnamese arrested in Spain for alleged sexual assault

Police on the Spanish island of Mallorca on June 25 said they had arrested two Vietnamese citizens accused of raping a 17-year-old girl and privacy violation, according to the Vietnamese Embassy in Spain.

The key role of top leaders in fighting corruption in Vietnam

Head of the Party Central Committee's Commission for Internal Affairs Phan Dinh Trac has emphasized the important role of top leaders, especially Party Secretary General Nguyen Phu Trong, the people and the media in fighting corruption.

Huge costs for filling Ha Long largest open-cast coal mine

It would cost about VND 1.20 trillion (USD 52.18 million) to fill the Nui Beo open-cast coal mine pit in Ha Long City after closure.

Cutting taxes on petrol products is more urgent than ever

“VND50,000 please. No, just VND30,000."  “VND100,000, please. No, only VND70,000." These were conversations I heard yesterday at a filling station.

28 provinces, 21 central hospitals report lack of drugs, medical equipment

Twenty-eight healthcare departments and 12 out of 21 central hospitals have reported they lack drugs.

HCMC proposes developing huge port in Can Gio

The HCMC government has proposed developing an international container port in the outlying district of Can Gio with an estimated investment of some US$6 billion to aid the local marine economy.

500 tonnes of Vietnamese-labelled rice exported to EU

Loc Troi Group JSC exported nearly 500 tonnes of rice labelled with its own brand name “Com Vietnam Rice” to the EU markets in June.

HCM City collects US$7 million of taxes, fines from people with Google incomes

Ho Chi Minh City has collected taxes and fines worth a total of 169 billion VND (7.26 million USD) from 38 individuals who earned incomes through Google in the first half of the year.

VIETNAM NEWS HEADLINES JULY 1

Vietnam develops world’s first effective vaccine against ASF: German newspaper
back_to_top