Concerted action needed for M&A breakthrough
In this article (5)
It is forecasted that the value of mergers and acquisitions (M&A) deals in 2017 will not exceed those of 2015 and 2016, thus, the market needs a boost from enterprises and the government to leverage the opportunities from foreign capital to make a breakthrough.
In 2016, the total value of all M&A deals over the world was $3.5 trillion, a reduction of 27 per cent on-year, but a high value nevertheless. However, this could be considered an ending of the global M&A’s growth period. Due to Brexit and Donald Trump’s new policies, global M&A activities are becoming harder to predict and there may be some shifts in the flow of investment capital in the world.
According to the statistics of the Institute for Mergers, Acquisitions and Alliances (IMAA), Vietnam hit a 10-year record hike of $5.2 billion in M&A activities in 2015. In 2016, the value of M&A deals was $5.1 billion, even though experts said that in the second half of 2016, the growth was slowed down because not many big M&A deals were publicised at the time.
It is forecasted that in 2017 without a breakthrough, the total value of M&A deals in Vietnam may not overtake 2015 and 2016 figures. For a breakthrough, the Vietnamese M&A market really requires a boost.
The most vibrant industries with the highest number of M&A deals in 2016 were the retail sector, consumer goods production, and real estate. The finance and banking industry did not have many outstanding activities last year. Some other fields, such as education and technology, also attracted M&A investment in 2016.
Foreign capital has been playing an important role in M&A activities in Vietnam with numerous sizeable deals. For example, Japanese enterprises are now strategic partners to many state-owned enterprises, such as Vietnam Airlines and Petrolimex. Similarly, a number of South Korean enterprises joined the Vietnamese market by investing in agriculture, and investors from Singapore have been paying close attention to some real estate projects.
“Some other fields, such as education and technology, also attracted M&A investment in 2016.”
According to some assessments made by the government and investors, the progress of equitisation and the state divestment from big enterprises is slow. A wide range of Vietnamese enterprises are luring in investors after being equitised or divested by the state, such as Saigon Beer-Alcohol-Beverage Joint Stock Corporation (Sabeco), Hanoi Beer Alcohol and Beverage Joint Stock Corporation (Habeco), Vietnam Mobile Telecom Services Company (MobiFone), and Vietnam Dairy Products Joint Stock Company (Vinamilk).
Currently, Sabeco and Habeco’s stocks have been listed on the stock exchange. However, most investors said that this step was implemented more slowly than they had expected.
There are numerous challenges for the growth of M&A in Vietnam, including changes in the US policies, the withdrawal of the US from the Trans Pacific Partnership or the various obstacles to equitisatisation, the problems of enterprises’ quality, and the scale of the Vietnamese economy.
To achieve at least 2016’s $5.1 billion in deal value, the state divestment in some Vietnamese enterprises should be implemented more quickly and thoroughly.
Questions & Answers
Q.Which industries in Vietnam saw the most M&A deals in 2016?
Which industries in Vietnam saw the most M&A deals in 2016?
The retail sector, consumer goods production, and real estate were the most vibrant industries for M&A deals in Vietnam during 2016. Other fields like education and technology also attracted investment.
Q.What factors are making global M&A activities harder to predict?
What factors are making global M&A activities harder to predict?
Brexit and Donald Trump’s new policies are making global M&A activities harder to predict. These events may also lead to shifts in the flow of investment capital worldwide.
Q.Which specific Vietnamese state-owned enterprises are attracting investor interest for divestment?
Which specific Vietnamese state-owned enterprises are attracting investor interest for divestment?
Sabeco, Habeco, MobiFone, and Vinamilk are among the Vietnamese enterprises attracting investors as the state plans to divest from them. Sabeco and Habeco stocks are already listed.
Q.What is the primary challenge for M&A growth in Vietnam mentioned in the article?
What is the primary challenge for M&A growth in Vietnam mentioned in the article?
Challenges for M&A growth in Vietnam include changes in US policies, the US withdrawal from the Trans Pacific Partnership, obstacles to equitisation, enterprise quality issues, and the scale of the Vietnamese economy.
Reader pulse
Will Vietnam's M&A market achieve a breakthrough in 2017?
23,905 votes so far