Data from Bloomberg indicates that the total value of global M&A and related transactions experienced a 25 per cent decrease in 2023, reaching a low of US$2.7 trillion. This decline, the lowest since 2013 and below the $3 trillion mark, could be attributed to factors such as political and economic instability which affected investor confidence worldwide. The macroeconomic conditions, coupled with rising global inflation, contributed to cautiousness among investors.

The tightening of monetary policies in major economies, resulting in increased interest rates, also impacted emerging markets, making transactions more expensive and influencing both the quality and volume of deals in the market.

Việt Nam's M&A market also experienced a period of stagnation in 2023, reflecting the global trend. According to the Việt Nam M&A Transformation report by KPMG, the total value of M&A transactions in Việt Nam reached VNĐ4.4 trillion in the first ten months of 2023, involving over 260 deals. The average deal value stood at VNĐ54.5 million. Comparatively, these figures represented a 23 per cent decrease in transaction value compared to the beginning of the year and a decline in the number of deals compared to two years ago.

However, despite these challenges, experts remain optimistic about the future of Việt Nam's M&A market. The anticipated recovery in 2024 is driven by factors such as stabilised macroeconomic conditions, increased investor confidence, and the government's commitment to infrastructure development and economic reforms.

Investors maintain confidence in Việt Nam's economy and the government's ability to tackle challenges in the global and domestic context. Key factors supporting the market include stable foreign investment flows, the government's commitment to infrastructure development and economic reforms, and the potential of Vietnamese businesses.

In 2023, the M&A market witnessed some significant deals that highlighted its potential. Sumitomo Mitsui Banking Corporation (SMBC) from Japan acquired a 15 per cent stake in Việt Nam Prosperity Joint Stock Commercial Bank (VPBank) for $1.45 billion, following its purchase of FE Credit, a consumer finance company, from VPBank in 2021.

The real estate sector also saw noteworthy transactions, such as ESR Group Limited's $450 million investment acquiring strategic shares of BW Industrial Development Joint Stock Company (BW Industrial), a leading industrial and logistics developer in Việt Nam. BW Industrial plans to utilise the capital to maintain its position as a key infrastructure developer for the new economy and capitalise on the production shift to Việt Nam. Gamuda Land (Malaysia) also expanded its presence in Việt Nam through the acquisition of 100 per cent of shares worth $316 million in Tâm Lực Real Estate Group, with plans to develop a high-end complex project worth $1.1 billion in Thủ Đức city centre.

In the medical sector, Thomson Medical Group (Singapore) made an entry into Việt Nam by acquiring controlling shares in Việt Pháp Hospital for over $380 million.

Additionally, in the consumer sector, Bain Capital, a leading US private investment fund, invested $200 million in equity in Masan Group, marking a significant milestone for the domestic consumer industry and highlighting its attractive prospects.

The resilience of Việt Nam's M&A market in 2023 can be attributed to investors' confidence in the economy's endurance, government solutions, and the internal resources and potential of Vietnamese businesses.

The government has taken proactive measures to effectively address difficulties and challenges, enhance the investment and business environment, resolve outstanding issues, and implement synchronised solutions, particularly in fiscal and monetary matters, to support production and business activities. Strategic infrastructure projects have also been prioritised, and new growth drivers such as the digital economy, circular economy and green growth have been promoted. These efforts have contributed to macroeconomic stability, controlled inflation, and maintained a relatively high level of economic growth compared to other economies in the region and globally.

A surge in 2024

The M&A market is expected to experience a surge in 2024, according to S&P Global's latest M&A Outlook. Despite a sluggish period in 2023, dealmakers are anticipated to be driven by several factors that will stimulate transaction activity next year. The US Federal Reserve's decision to halt interest rate hikes has created a stable interest rate environment, boosting the prospects of the global M&A market.

Jens Kengelbach, head of global M&A at Boston Consulting Group, expressed optimism about the M&A outlook for 2024, citing promising signs of recovery in transaction activity. Economic volatility and uncertainty have historically led to a slowdown in M&A, but they also present an opportunity for attractive valuations and the emergence of new opportunities, according to the expert.

Key growth drivers for 2024 include robust foreign direct investment (FDI) inflows, supported by political stability and trade agreements. Additionally, with inflation under control and GDP growth forecast at 5.8 per cent in 2024 and 6.9 per cent in 2025, coupled with manageable public debt, the conditions are favourable for investors seeking strategic opportunities in the dynamic Vietnamese market.

Trần Duy Đông, Deputy Minister of Planning and Investment, emphasised that Việt Nam's M&A market would continue to hold significant opportunities and prospects due to strengthened fundamental factors. Efforts to enhance institutions and policies were underway to facilitate investment and business activities, including M&A. The government was actively researching timely and effective policy responses to the global minimum tax issue, aiming to enhance the attractiveness of foreign investment, particularly from multinational corporations. Furthermore, divestment and restructuring activities within the state-owned enterprise sector would be promoted following a period of slowdown.

The robust implementation of these measures will contribute significantly to the rapid and sustainable recovery of the economy, not only in 2024 but also in the coming years, according to Đông. As the economy rebounds, consumer confidence improves, business growth becomes clearer, and foreign investment accelerates, M&A activities are expected to regain momentum.

Key sectors expected to be "hot" in 2024 include green energy, technology, real estate and healthcare. Infrastructure and technology growth, driven by digital transformation, are propelling investment trends in these industries. Real estate, in particular, is anticipated to be a sector with significant potential for M&A activity, with financial institutions showing interest in short-term or long-term investment opportunities in search of high returns.

Investors are likely to target businesses with stable and long-term investment strategies, with a focus on sectors such as agriculture, food, and the medical industry encompassing hospitals, pharmaceuticals and medical equipment. Additionally, investors may seek opportunities in sectors that offer favourable valuations during periods of market decline, such as real estate and construction. Industrial production and logistics are also attracting interest, influenced by changing regional dynamics.

Japanese investors, facing economic challenges and constraints domestically, are increasingly considering investment opportunities abroad, including Việt Nam. Logistics, particularly cold supply chains, have piqued Japanese interest. Though Japanese investors are monitoring the Vietnamese stock market, the lack of comprehensive regulations for acquiring public companies and the relatively small scale of the market have limited their actions thus far. — VNS