Vietnam's M&A Sector Poised for Strong Recovery in 2024
According to ASART Deal Advisory’s research, Vietnam has witnessed over 50 merger and acquisition (M&A) transactions in the first five months of 2023, totaling $2.88 billion in value. This marks a 28% increase in quantity and a 40% increase in value compared to the previous period.
Binh Le, head of M&A at ASART, stated that the consolidation trend through M&A is inevitable, particularly in emerging markets, and Vietnam is no exception. Many attractive companies in Vietnam have become favored targets for foreign investors. However, M&A activity slowed down in 2021-2022 due to factors such as the Federal Reserve increasing reserve fund rates, which led to a rise in the consumer price index (CPI) in the US. The recent positive changes in CPI, indicating the Fed’s anticipated reduction of reserve rates, can boost investor confidence and encourage capital injection into related projects.
Le also noted that the pressure on interest rates in Vietnam has decreased, allowing for more capital injection into the economy. Vietnamese target companies’ valuations have become more affordable due to declining profits and limited local capital sources, making them more open to foreign investment. Le anticipates a slight recovery in M&A activity this year and a strong recovery in the second half of 2024. Samuel Son-Tung Vu, partner of Bae, Kim & Lee Vietnam, highlighted that the global market’s uncertainty has made foreign investors more cautious in allocating their capital. However, if they find promising projects, they may be willing to invest more to capture the market.
Vietnamese companies have faced liquidity difficulties, leading them to seek new capital sources, particularly in the real estate sector. This eagerness to sell assets and raise capital presents opportunities for buyers, including foreign investors, to consider long-term investments in Vietnamese companies and projects at attractive valuations. ASART’s research also revealed that the majority of M&A deals in Vietnam since 1991 have been smaller than $5 million, with an increase in deal size over the past decade. This trend towards more sophisticated and larger deal sizes has contributed to the overall increase in M&A value in Vietnam.