Vietnams M&A market is attractive to investors despite COVID-19

Vietnam’s M&A market is attractive to investors despite COVID-19

According to data from KPMG Vietnam (a company providing professional services in Vietnam), in the 10 months of 2021, the M&A market attracted more than 8.8 billion USD, up 17.9% compared to 2020 and 13.7% compared to 2019 – before the COVID-19 epidemic.

Despite the pandemic, the size of Vietnam’s M&A market (M&A) still reached $8.8 billion in the first 10 months of 2021, an increase of 18% compared to 2020.

The strong growth in both value and number of M&A deals in Vietnam despite the COVID-19 pandemic shows that Vietnam’s M&A market is still an attractive market for both domestic and foreign investors.

Over the past decade, M&A has become one of the most effective capital mobilization channels, contributing to diversifying capital attraction channels for the Vietnamese economy, promoting the growth model innovation, restructuring the economy to equitize state-owned enterprises.

At the same time, Vietnam’s M&A market has grown strongly with thousands of successful deals, reaching a total value of more than 50 billion USD. In 2021, despite the negative impact of the COVID-19 pandemic, foreign investment in Vietnam, including investment flows through M&A.

By the end of November 2021, the total investment capital newly registered, adjusted and contributed capital, bought shares by foreign investors reached 26.46 billion USD, up 0.1% over the same period in 2020; in which, investment through capital contribution and share purchase reached nearly 4.4 billion USD.

Along with the development of the economy, the M&A market in Vietnam shows high stability, even strong growth in 2021.

Vietnam has also been making great efforts to overcome challenges and seize opportunities to become a stopover for a new wave of investment in the region when there is a tendency to re-shift global capital flows.

In the future, M&A will create many Vietnamese corporations with a scale comparable to large corporations in the region. During the COVID-19 period, domestic buyers have certain advantages in carrying out M&A deals.

Constantly improving the legal corridor for M&A activities

The next year 2022 will be a very important year, focusing on quickly recovering the economy, creating a foundation for implementing the goals of the 5-year plan 2021-2025 and the 10-year strategy 2021-2030. Challenges and difficulties are still great when the COVID-19 pandemic can develop more complicatedly, with new strains just appearing; The world economic recovery is forecasted to be unstable and uneven, risks and uncertainties continue to increase.

That context requires Vietnam to proactively come up with strategic directions and drastic solutions to overcome difficulties, promote economic growth, and put the economy on a solid recovery trajectory soon.

New-generation Free Trade Agreements, such as the Regional Comprehensive Economic Partnership (RCEP), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Free Trade Agreement between Vietnam and the European Union-EU (EVFTA), the UK-Vietnam Free Trade Agreement (UKVFTA), etc. which Vietnam actively participates in are expected to create a free trade area large-scale new business, facilitating the expansion of export markets, creating a foundation, and promoting Vietnamese enterprises to restructure. This not only helps promote trade growth, but also contributes to leading the flow of Foreign investment capital; including investment through M&A activities in Vietnam.

In addition, the legal corridor for investment and business activities is also constantly being improved. After the Law on Investment, the Law on Enterprises was revised, the Law on Investment in the form of public-private partnership (PPP) officially took effect in early 2021, recently, the Government has also developed and prepared to submit to the National The Assembly considers the project of one law amending many laws, in order to remove difficulties and obstacles, and create favorable and open conditions for investment and business activities in Vietnam.

From a business perspective, after two years of facing many difficulties due to the impact of the epidemic, the business community has made great efforts to find new growth models or restructure to adapt to the rapidly changing context with the impulse from cheap capital sources, economic support and recovery policies issued by the Government.

Legally, the environment will be better for investors. There are two important contents: the FTAs that will come into effect here and the agreements on cooperation between Vietnam and neighboring countries that will come into effect from January 2022, will boost production and export, and improve the quality of products, customs clearance and improve market access ability.

In the period of 2019 – 2020, the value of M&A played by Vietnamese enterprises as a buyer accounts for one-third of the total value of M&A conducted.

M&A deals of Vietnamese enterprises have been successful and many M&A plans have also been shaped. Therefore, the market continues to be led by foreign investors; which focuses on 4 countries: Japan, Korea, Thailand and Singapore. For example, in just 9 months of 2020, there were 19 transactions between Japanese investors and Vietnamese enterprises and Thai investors continue to have M&A deals in the Vietnamese market in the manufacturing sector.

Mr. Tran Quoc Phuong – Deputy Minister of Planning and Investment assessed that the field of M&A has become an effective capital mobilization channel, contributing to diversifying activities to attract investment resources for the Vietnamese economy. promoting the process of renovating the growth model, restructuring the economy, diversifying forms of business ownership.

M&A is also the shortest way for foreign companies to penetrate and expand the Vietnamese market with high efficiency and cost savings.

The report of the Department of Corporate Finance (Ministry of Finance) shows that, in the first 7 months of 2020, 6 enterprises have received reports on approving the equitization plans of 6 enterprises; in which, there is 1 enterprise under the equitization plan according to Decision No. 26/2019/QD-TTg approving the list of enterprises to be equitized until the end of 2020.

According to Official Letter No. 991/TTg-DMDN approving the list of state-owned enterprises (SOEs) to be equitized each year for the period 2017 – 2020 and Decision 26, the number of enterprises still required to be equitized in the year 2020 is 91 units.

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