Japanese investors will expand their M&A investment into Vietnam in the post-Covid period

Japanese investors will expand their M&A investment into Vietnam in the post-Covid period

The wave of Japanese companies conducting investment procedures in Vietnam is expected to develop sharply when the isolation barrier is removed. At the recent Vietnam M&A Forum 2020, Mr. Masataka Sam Yoshida, Global Director of Transnational Mergers and Acquisitions Services, RECOF Corporation, said that the trend of Japanese M&A companies entering Vietnam will be vibrant in the post-Covid-19 period.

A need to shift the flow of money

According to Mr. Masataka Sam Yoshida, the first basis to promote the investment wave in Vietnam is that Japanese companies need new markets to expand as most sectors in Japan have hit the ceiling. Nearly a third of the population is over 65 years old, making the average age of Japanese people 48.4 years old, nearly 20 years older than the average Vietnamese people.

The second factor is the M&A growth strategy supported by the overflowing money in Japan. This money is accumulated over the past 20 years, more than 2,345 billion USD, existing in the form of bank deposits with 0% interest rates. With the aim to reinvest this amount of money, the shareholders have made 2019 a record year with more than 4,000 different types of M&A deals.

Speakers discuss the potential wave of investment from Japan. Picture: vietnamfinance

At the end of October 2020, Vietnam ranks 5th in the world in terms of the number of transactions with 21 deals. In particular, considering the recent growth rate of M&A transactions between Vietnam and Japan, Vietnam may start to compete for the Number 2 position with the UK.

Vietnam – a prosperous and full of potential market

Mr. Masataka Sam Yoshida explained that from the Japanese point of view, there are about 5,500 Japanese companies in Thailand. Therefore it is too late to join this market. Regarding Myanmar, there are only less than 400 Japanese companies and conservative Japanese investors still have to wait for the appropriate time to enter this country.

Meanwhile, Vietnam has about 2,000 Japanese companies. The country is classified in the group of safe and full of potential destinations. Hence, when the barrier to quarantine and limit the pandemic into Vietnam is lifted, a large wave of Japanese companies waiting to conduct investment procedures will emerge strongly.

Vietnam achieved the highest number of deals with 33 deals in 2019, 1.5 times higher than the previous year. This is a concrete demonstration of the Japanese companies’ interest in Vietnam.

A remarkable extension

Considering the ranking of countries by transaction value, Vietnam has never been in the top three countries in the past due to the small size of enterprises. Yet in 2019, the transaction value in Vietnam reached 389 million USD, 2.8 times more than in 2017, and ranked in the top 3 for the first time, with a very small difference compared to the country standing in the second position – Indonesia which has the valued of 415 million USD.

Most recently, in the first 10 months of 2020, there were 21 announced M&A transactions between Japan and Vietnam, second only to Singapore. Despite a 25% decrease year-on-year due to the impact of the epidemic, considering the total number of outbound transactions in Japan decreased by 33% during this period, the 25% decrease in Vietnam still shows positive than other countries.

In terms of transaction value, Vietnam ranked second with 282 million USD. Vietnam even occupies a higher position compared to 2019 in the transaction value ranking.

“The interest from Japanese investors to Vietnam is huge even during the pandemic. The slowdown in investment activities is only a matter of time and the M&A market will be active again when the quarantine restriction has been removed, “said Masataka Sam Yoshida.

ASL LAW is M&A law firm in Vietnam. If you need any inquiry, please contact us.


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