The Vietnam M&A market in 2023 will be filled with challenges for investors, with a cautious mindset stemming from the volatile market in Vietnam and internationally. Investors will be more careful in identifying transactions and assets that can bring assets and value to themselves in a more strategic direction, rather than just short-term financial gain. This is both a challenge and an opportunity for investors as well as legal consulting organizations on M&A.
In the first 10 months of 2022, Vietnam M&A activities in Vietnam tended to go down and basically returned to pre-pandemic levels, marking a relatively bleak year for the M&A market in Vietnam.
During this period, the total value of M&A transactions reached $5.7 billion, down about 35.3% over the same period last year, while the number of transactions decreased to less than 350 transactions, equivalent to a 50% reduction compared to the same period of nearly 700 transactions in 2021.
Regarding the cause, according to experts at the M&A Forum in 2022, it is partly because investors’ psychology has become more cautious with a strategic, global perspective, not just short-term profits. The other part is due to the impact of global tensions on the macro-economy, creating a cause for investors’ fear and anxiety, etc.
Mr. Masataka “Sam” Yoshida, Global Director of Transnational M&A Services, RECOF Corporation, General Director of RECOF Vietnam, discussed the impact of global economic fluctuations, specifically on the relationship between Japan and Vietnam as follows: “The depreciation of the yen against the USD may have a short-term impact on Japanese investors, but on the other hand, low-interest rates and the decrease in value of yen are positive for other investors in different aspects and related to Vietnam… Vietnam is an attractive point for Japanese investors because of its young population. The average age difference between Japan and Vietnam is 17 years, the middle class in Vietnam is growing rapidly, especially since Vietnam is the country with the fastest GDP growth in Southeast Asia. This makes Japanese companies look at the positive and believe in the future. When investors divest from Vietnam, Japanese investors will step in, but there is still a need to monitor and study more features in relation to the market. The time period (estimated) maybe 6 months.”
Sharing the same view about the positive prospect in Vietnam’s M&A market, Mr. Kazuhiko Yoshimatsu, General Director and Chief Representative of Tokyo Stock Exchange (Singapore) said: “I have participated in many M&A deals in Vietnam. I think the growth of Vietnam’s capital market in the past 10 years is remarkable… With this trend and support, I believe Japanese businesses will invest more in Vietnam.”
Having similar opinions with experts and representatives of entities participating in the M&A Forum 2022, Lawyer Pham Duy Khuong, Managing Director of ASL LAW Firm, commented: “Almost everyone sees a decrease in Vietnam’s M&A market in the last 6 months of 2022, difficult to predict in 2023. If looking at how investment flows into Vietnam will be affected, and from which country, it is difficult to determine which is the main source of M&A. According to the nationality of organizations investing in Vietnam, Vietnam is attractive and suitable for investors, with regards to Japan, Korea, and especially Singapore (difficult to classify where the cash flow comes from, very many sources from China to Singapore and then disbursed in many other countries). The US and EU are still not too large of capital flows to Vietnam’s M&A market.”
Discussing the attraction of M&A investment in Vietnam in 2023 for more sustainable development in the coming time, Lawyer Pham Duy Khuong said: “To speak specifically about Vietnam’s bright spot in attracting M&A capital is difficult, but there is a trend that can be seen, that is, many Indian companies are still looking for IT personnel from Vietnam. Vietnam has a potential market of 100 million people, which is an attractive point for investors. To attract more foreign capital, it is necessary to have both stricter and more open regulations, which are related to the transfer of profits and capital of investors abroad. Relating to the banking system helps investors more convenient in account management and payment when necessary.”