South Korean banks target M&A in Vietnam’s banking sector
South Korea investors are predicted to hold a pioneering role in investing in finance, technology, real estate, and consumer finance in Vietnam.
At present, five South Korean commercial banks are planning to acquire stakes of foreign banks, including those in Vietnam, according to Michael Dc Choi, vice director of the Korean Trade and Investment Promotion Agency (KOTRA).
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On July 22, South Korean KEB Hana Bank’s acquisition of a 15% stake worth US$868 million in state-run BIDV, the country’s largest lender by assets, made headlines and became the largest foreign-invested M&A deal involving foreign investment in Vietnam’s banking sector so far.
Not only in the banking sector, South Korea investors are predicted to hold a pioneering role in investing in finance, technology, real estate, and consumer finance in Vietnam, said experts at the conference.
South Korea’s SK Group poured US$1 billion into Vingroup in May, serving as a driving force for the transition of the Vietnam’s M&A market towards a new development phase, focusing on large scale M&A deals in the private sector.
While Thailand dominated Vietnam’s M&A market in 2017, the first six months of 2019 were marked by a significant rise in capital inflow from South Korea with large M&A deals.
Industry insiders attributed a decline in Thai’s capital into M&A deals in Vietnam to a downsizing in the former’s M&A market.
In early 2019, M&A transaction value in Thailand was down 64.7% year-on-year to US$3.1 billion with 23 deals.
Kim Ja Jum, vice general director of South Korean Kiwoom Securities, said the growing number in South Korea – Vietnam M&A deals was thanks to the South Korean government’s support policies to small and medium enterprises with billions of US dollars.
Jum said his company has been in contact with KOTRA to search for investment opportunities in Vietnamese SMEs.
According to Jum, South Korean companies are focusing on buying input materials from Vietnam for production, which would later be exported to Vietnam. Alternatively, they could opt for production right in Vietnam, its home market and also for ASEAN.
If a suitable partner is found, Kiwoom plans to acquire a majority stake worth at least US$25 million per company, said Jum.
Daniel Lee, CEO of South Korea’s STIC Investment, said Vietnam and Asian countries accounted for 19% of its investment portfolio.
STIC Investment are looking at three investment options, including two in Vietnam, while the company is currently holding stakes in Tiki, Cammsys Vietnam, Hoa Sen Group, Nanogen Pharmacy, among others.
KOTRA Vice Director Choi said Vietnam would need to develop professional M&A brokerages to continue attracting investment capital from South Korea and other countries. He named one of the major concerns for South Korean investors is the lack of transparency in financial statement of Vietnamese enterprises.
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