The first discussion session on the theme “New Momentum for the M&A Market” at the Vietnam M&A Forum 2023 saw the participation of experienced experts in the field of M&A in Vietnam and internationally. The discussion primarily focused on topics such as Vietnam’s opportunities amidst the disruption and restructuring of the global supply chain, as well as addressing the challenges and solutions for the influx of foreign capital into Vietnam amid the backdrop of the new global economy. The session also explored the future prospects for the M&A market in Vietnam in 2024, among other topics.
Notable speakers and experts participating in this discussion included Mr. Masataka “Sam” Yoshida, Global Director of Cross-Border M&A Services at RECOF Corporation and CEO of RECOF Vietnam; Mr. Warrick Cleine, Chairman and CEO of KPMG in Vietnam and Cambodia; Ms. Binh Le Vandekerckove, Founder & CEO of ASART Advisory; Ms. Vo Ha Duyen, Chairwoman of VILAF Law Firm; Mr. Khanh Vu, Deputy CEO of VinaCapital Vietnam Opportunity Fund; and Mr. Sebastien Laurent, Asia Regional CEO at Financière de Courcelles.
Main Topics Discussed in the Session:
- Disruption and Restructuring of the Global Supply Chain: Opportunities for Vietnam to not only participate in the global supply chain but also attract investors, capital, and technology amidst the international supply chain restructuring.
- Inflow of Foreign Capital into Vietnam: The continued influx of foreign capital, with the presence of major global corporations, and the potential for new collaborations.
- Impact of the Crisis on Capital Flows: How the crisis is influencing capital flows and the future prospects of international capital entering Vietnam through M&A. The primary sources of capital.
- M&A Trends in 2024: Forecasting the trends and identifying dynamic sectors and industries for M&A activities in 2024.
Challenges for Vietnam in Developing the M&A Market
Following the presentation of the latest M&A data on Vietnam until October 2023, including the sectoral structure of M&A deals, the 15-year development trajectory of M&A in Vietnam, and the experiences gained during each 5 years-period, the first discussion session officially commenced.
The speakers provided insights into the challenges and solutions for Vietnam to navigate through the difficulties and further develop the M&A market.
Mr. Masataka “Sam” Yoshida identified historical challenges such as limitations, accounting systems, and overly high valuation expectations from sellers.
While these challenges have been overcome by some businesses, the most significant current challenge for the Vietnamese M&A market, according to Mr. Yoshida, is time. Transactions that could be completed in three months domestically in Japan or six months in Japan with Western counterparts take over a year when involving Vietnam.
Despite being attractive compared to other countries like Thailand and Myanmar, Vietnam needs significant improvements to become a more attractive investment destination globally.
Mr. Warrick Cleine highlighted the strengths of Vietnamese businesses in terms of the quality of goods and services and a skilled workforce. However, he pointed out weaknesses in management, transparency, and shareholder rights protection, especially in challenging circumstances. Companies excelling in these aspects tend to attract capital effectively.
Additionally, Mr. Cleine noted serious issues in Vietnamese companies related to the balance sheet, bad debts, high borrowing costs, and fundraising through high-interest-rate bonds in the last six months. These risk-laden factors pose dangers, potentially leading to systemic collapses, making Vietnamese businesses vulnerable to being undervalued and necessitating restructuring.
Ms. Binh Le Vandekerckove noted that medium-sized businesses in Vietnam, with revenues ranging from 20 to 30 million USD, still lack advanced knowledge in various aspects of M&A, particularly in valuation. This raises concerns that such businesses need to thoroughly understand M&A processes if they decide to engage in M&A deals in the future.
However, the passive nature of this learning method often does not yield positive results. M&A should not be a tool used only in times of financial pressure but rather a channel for implementing breakthrough business strategies.
Mr. Khanh Vu mentioned that his recent collaboration agreement for joint investment in the Vietnamese logistics sector faced a crucial issue – the inadequate infrastructure to meet demands. Infrastructure is a vital factor that needs systematic investment to enhance the competitiveness of the logistics sector. Without such improvements, over time, these difficulties will accumulate, leading to a significant increase in logistic costs, thereby reducing the attractiveness for investment.
Moreover, Mr. Vu pointed out another obstacle hindering the development of investment inflows into Vietnam, which is the liquidity level. Currently, 80-90% of the Vietnamese market consists of retail investors. While this is advantageous for mobilizing national resources, it doesn’t create many investment opportunities. Investors also seek profit and exit strategies, hence the need to improve cash flow liquidity, which is a crucial aspect for consideration.
Market M&A Outlook for the Future
After discussions, sharing, and conversations among speakers and attendees at the Vietnam M&A Forum 2023, the moderator of the first discussion session concluded the program with a question: If you had three keywords to share about future issues, what would they be? For me, it’s vision, innovation, and focus. Additionally, tax incentives were mentioned as a keyword.
Mr. Masataka “Sam” Yoshida: “I think people know that Japanese investors are active in the Vietnamese market. Japanese people are cautious in decision-making; there have been some differences for 20-30 years, but efforts to promote transactions between Japanese and Vietnamese investments continue.”
Mr. Warrick Cleine: “Three words – healthy, hopeful, and happy when we come here to Vietnam, a wonderful country, we should feel happy.”
Ms. Binh Le Vandekerckove: “Sustainable – Prosperous – Cautious.”
Ms. Vo Ha Duyen: “Sustainable – Prosperous.”
Mr. Khanh Vu: “First, policy cycles always change – very important for economic development. Second, business cycles, this year might not be good, but 2024 will bounce back. Vietnam is resilient. Third, emotional cycles – investor emotions – are they satisfied, are they in hope?”
Mr. Sebastien Laurent: “Go out to explore other markets. Many Vietnamese businesses with good financial resources can seek M&A opportunities.”
After the discussion session, Mr. Le Trong Minh (far right), Editor-in-Chief of Bao Dau Tu, Head of the Organizing Committee of the Vietnam M&A Forum 2023, presented commemorative plaques to the speakers who participated in the first discussion session.
Typically, during the M&A Forum, ASL LAW is awarded one of the Outstanding Vietnam M&A Advisors from 2009-2023.