With the population of 100 million people, Vietnam is one of the main growth destinations attracting capital and future M&A deals. Countries which lead the investment wave into Vietnam, sectors that attract the strongest capital flows, chances for local startups, international investors, and local firms to do M&A in Vietnam are the main issues of the second session of Vietnam M&A Forum 2018 in Hanoi last week.


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Dominic Scriven - Executive chairman, Dragon Capital Group

Vietnam is the market for M&A, however, one of the most important things is setting a price tag on a transaction. In many cases, sellers offer a very high price while the buyers always want a lower price. These things make negotiations difficult, and that is why the two sides must make in-depth research and understand each other, otherwise they cannot agree on any issue.

Many M&A deals in Vietnam take place in the fast moving consumer goods segment, despite the fact that the number of successful deals in this field has been getting lower. In general, I see that we will move from FDI and FII to strategic investment in the coming time.

Masataka Sam Yoshida - Senior managing director, Recof Corporation

In the Vietnamese M&A market, Japanese investors are new arrivals compared to those from South Korea or Singapore. This is due to the lack of information. Japanese investors are very careful and conservative in their investment, which makes decision making longer. We need as much information as possible about our target partners before making a decision.

Previously, Japanese investors were very strong in M&A activities. However, successful deals are getting fewer, only one third compared to earlier times. I see that the Vietnamese M&A market is very active, even though many Vietnamese company owners are still hesitant.

Neil MacGregor - Managing director, Savills Vietnam

Vietnamese investors are very good at approaching land funds. Especially in Ho Chi Minh City, the demand for land increased five-fold compared to 2013, in both office and residential projects. M&A in the Vietnamese real estate market is attractive because it offers higher yields than other countries like Hong Kong or Singapore. However, I see that the greatest challenge for investors lies in acquiring land funds.

I think that risk management is more important than the transaction price. The buyers I see will be ready to pay a higher rate if they see lower risk in an investment. I think that the Vietnamese M&A market is now in the spotlight, however, we should think more about the possibility to approach successful deals and offer more opportunities for foreign investors.

Le Viet Anh Phong - Partner, head of Financial Advisory, Deloitte Vietnam

The Vietnamese M&A market is very challenging and in order to approach the market, companies must have many channels. Meanwhile, local companies have set up a system of channels to distribute their goods and this is a major advantage for local companies.

I think that one of the key challenges for M&A is the transaction’s valuation because sellers always compare their deals to others and in many cases they do not have enough information to make a decision and are not ready to share information. Despite the inherent risks and the lingering issues with valuation, M&A is still the fastest way for companies to increase their capacity and accelerate growth.

Fan Li - Executive director, Warburg Pincus

Warburg Pincus has been present in Hong Kong since 1994. Today, Vietnam is an important market for us in the ASEAN as we are expanding operations in the country.

Warburg Pincus is also active in the Vietnamese M&A market, which provides sufficient information to evaluate target companies. Last year, we have completed a successful deal, securing profitability in the capital market. We believe that Vietnam has ample potential for growth. The country has been on the radars of foreign investors in recent years.

Jiun Park - Deputy director, Global M&A Facilitation Centre, KOTRA

South Korean investors are changing their investment strategy from labour-intensive sectors to growing domestic markets, especially in the fields of logistics, infrastructure, and pharmaceuticals. An increasing number of Korean small- and medium-sized enterprises (SMEs) are keen on the Vietnamese market.

South Korean investors are becoming more active in Vietnam’s M&A market with an estimated value of $300 million last year. South Korean investors have clinched deals worth $200 million in the first half of 2018. After the deals, they have extended their reach to regional markets like Myanmar, Laos, and Cambodia. There are immense opportunities for partnerships between the two sides, especially as South Korean companies are seeking opportunities to expand in the region.

Mutual goals vital for post M&A success


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The third session of Vietnam M&A Forum 2018 dealt with how buyers and sellers in a deal can find a common ground and reach long-term success together.

During the last panel discussion at Vietnam M&A Forum 2018, experts and corporate executives shared insights on the post-M&A integration process. According to the panellists, the tricky part is to seek mutual understanding, which includes the ability to compromise and work together for the long-term.

Nguyen Thi Tra My, deputy chairwoman and CEO of PAN Group, emphasised that before signing an M&A deal, the company will set out very clear goals and focus on corporate governance at the other firm. As PAN Group believes human resources can make or break a company, it always takes a good look at who runs the target firm.

“We are always careful about the human factor. After an M&A transaction, we want to make sure that employees at both firms feel valued and at ease with the new combined company,” said My.

She gave an example of the merger between PAN Group and Vietnam National Seed Corporation (Vinaseed), where staff members at the latter firm are much more experienced than those at PAN. According to My, it took great efforts from both PAN and Vinaseed to retain these talented employees and provide them with job security and respect.

Another matter is creating added values for both sides after a deal gets inked. Deputy CEO of HDBank Le Thanh Trung said that in his 10 years of doing M&A, he could see that the greatest deals often start with a thorough selection process, to ensure mutual determination to triple or even quadruple the successes that each side used to have prior to the merger.

Trung referred to the takeover between HDBank and Dai A Bank, a small credit institution headquartered in Dong Nai province. According to the banker, HDBank had already looked at a few banks based in Northern Vietnam to acquire, but in the end it chose to shake hands with Dai A Bank. HDBank reckoned that Dai A, with its strong presence in the south-eastern Vietnamese economic zone, can help grow HDBank’s business exponentially.

“Dai A also had a good management team and a desire to work together with us to achieve bigger success. At the end, we swapped shares on a 1:1 ratio, and both sides were happy with the merger,” said Trung.

This view was shared by Dr Young-sup Joo, former Minister of Small- and Medium- Sized Enterprises and Startups in South Korea. According to Dr Joo, following a merger, South Korean companies can share technologies with their Vietnamese partners, and in return, the Vietnamese firms offer a strong brand presence in Vietnam and a dominant market share.

“Korean firms are eager to branch out to the world, and they look forward to partnering up with Vietnamese businesses and sharing hi-tech skills,” said Joo.

The former politician compared post-M&A integration to a married couple, where both partners are supposed to tolerate each other’s differences and lift each other to new heights.

Other experts, meanwhile, believe in the power of matchmakers, or more formally deal advisors. Rick Marchese, founder of Lores Loreno Private Capital, stressed that advisors can help the two sides find compatible partners, thus having a greater chance at post-M&A success.

“It is a red flag if any of the sides do not have an advisor, because an independent advisor can provide unbiased comments for both sides. For example, the two biggest roadblocks in an M&A are usually buying the wrong company or doing deals at the wrong price, and advisors can help with this,” said Marchese.

Renee Kha, managing director at VietValues Appraisal & Consulting, gave an example in which an investor takes over a land bank only to find out later that it has not been given full land use rights. The investor may feel tricked, and this situation could have been avoided with the help of an advisor, said Kha.

Nguyen Cong Ai, partner at KPMG Vietnam and panel moderator, concluded that a clear mutual strategy is vital for post-M&A bliss.


VIR