phien 1 M&A forum, Vietnam's M&A market in 2021 is an ideal destination for foreign investors, Vietnam's M&A market in 2021

Vietnam’s M&A market in 2021 is an ideal destination for foreign investors

Mr. Masataka Sam Yoshida, Global Director of cross-border M&A transactions company, RECOF Corporation, said that in the M&A trend of Japanese investors in Southeast Asia, Vietnam achieved the highest number of deals with 33 deals in 2019. 1.5 times higher than the previous year.

Vietnam M&A Forum 2020 with the theme Rising in a new normal state is held in the COVID-19 pandemic and the Fourth Industrial Revolution that has changed the world economy. The outlook for Vietnam’s economy can be considered as positive in the global economic recession. Vietnam has been making great efforts to overcome the challenges and seize opportunities to become a destination of a new investment wave in the region when there is a trend to re-shift global capital flows.

Leaders of the Ministry of Planning and Investment affirmed “Foreign investment is an important part of the economy. The Government always creates favorable conditions for foreign investors to invest and do business in Vietnam and continues to direct the formulation of policies to create conditions for the private economy to participate in the process of restructuring state-owned enterprises through capital contribution and share purchase; promoting linkages along the value chain between state-owned enterprises and private enterprises both domestically and abroad … ”.

A resurgence in a new normal state

In the first session, discussing with the coordination of Mr. Seck Yee Chung, Executive Lawyer, Baker & McKenzie Law Firm. The speakers brought an overview of the M&A market in Vietnam. Evaluating M&A activities in Vietnam. In the past year, especially the vision of investors from Japan, Korea, Singapore…

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Speakers in session 1: A resurgence in a new normal state. Photo: Le Toan/VIR

Previously, in terms of the ranking of countries by transaction value. Due to the small business size, Vietnam was never among the top three. But in 2019, transaction value in Vietnam was reached 389 million USD. 2.8 times higher than in 2017. Ranking in the Top 3 for the first time, with a very small difference compared to 2nd place Indonesia (worth 415 million USD).

The latest M&A trend

The latest trend is that in the first 10 months of 2020, there are 21 M&A transactions between Japan and Vietnam, only lower than Singapore. Despite a 25% year-on-year decline, considering the total number of outbound transactions in Japan decreased by 33% during this period, Vietnam’s 25% decline is not only lower than the aforementioned average but lower than most other countries. Except for Thailand and Malaysia, which have much less transaction value than Vietnam.

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

Mr. Masataka Sam Yoshida, Global Director of Transnational M&A Services, RECOF Corporation, General Director of RECOF Vietnam said in the M&A trend of Japanese investors in Southeast Asia. Vietnam achieves the highest number of deals with 33 deals in 2019, 1.5 times higher than the previous year. This specifically demonstrates the interest of Japanese companies in Vietnam.

The interest from Japanese investors in Vietnam is huge. Even during the pandemic, the slowdown in investment activities is purely a matter of time. Overview of the M&A market from the perspective of Japanese companies. Regarding domestic transactions shows that the number of M&A transactions between Japanese companies has steadily increased over the past 5 years. In 2019, all categories recorded at the highest level in history.

In 2020, the Japanese domestic M&A market value decreased by 4% year-on-year due to the COVID-19 epidemic. But the Japanese domestic market really bottomed out in May, and the months after that were recovering similarly. Overseas M&A activity decreased by 33% year-on-year and is recovering slowly. Mainly due to entry restrictions in most countries.

The reason

The trend of M&A from Japanese companies to Vietnam will be exciting. As companies need new markets to expand. Most sectors in Japan have grown, Almost a third of the population is over 65 years old. Making the average Japanese age 48.4 years old. Nearly 20 years older than the Vietnamese. Japan’s population is decreasing by about 276,000 per year.

Another reason is that the M&A growth strategy is supported by the abundant money in Japan accumulated over the past 20 years. More than 2,345 billion USD, existing bank deposits at 0% interest rates and under pressure to re-invest this amount of money by shareholders makes 2019 a record with more than 4,000 deals in all types of M&A, General Director of RECOF Vietnam affirmed.

From the Japanese perspective, Japanese companies currently have very few jobs in a market like Thailand, with around 5,500 Japanese firms in the country and too late to enter. Regarding Myanmar, there are only less than 400 Japanese companies and Japanese investors still have to wait to consider the appropriate time.

Meanwhile, Vietnam has about 2,000 Japanese companies, which will continue to attract by 6 factors. The new Japanese Prime Minister, in strict accordance with his predecessor’s policy, chose Vietnam as a destination during his first visit.

Among Southeast Asian countries, Vietnam is an attractive destination for foreign businesses. There are many reasons for this. The biggest reason is the number 1 economic growth in Southeast Asia. Despite the effects of the COVID-19 pandemic, Vietnam is currently the only country with positive growth so far and forecast for 2020. While other Southeast Asian countries have negative growth. In addition, the barrier to quarantine and limit the pandemic when entering Vietnam has been lifted. A huge wave of Japanese companies waiting to conduct investment procedures will emerge.

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

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