Vietnam’s mergers & acquisitions (M&A) market attracted around US$5.7 billion in 345 deals during the first 10 months of 2022, a decline of 35.3% in value year on year, according to data from business advisory firm KPMG.

Production at Rhythm Precision Vietnam at Noi Bai Industrial Park. Photo: Pham Hung

This would average $16.5 million per transaction, equivalent to half of the value per deal last year.

The declining figure is in line with the global trend, with 8,258 M&A deals recorded globally during the third quarter of 2022 worth $544 billion, a significant drop from 9,605 deals for $1.05 trillion in the same period of last year.

A more cautious approach from investors in the post-pandemic period, along with high inflationary pressure, geopolitical tension, and differences in expectation between buyers and sellers, are taking a toll on cross-border M&A activities, CEO of KPMG Vietnam Warrick Cleine gave the remarks at the M&A Vietnam Forum 2022 held on November 23.

Cleine also added that consumption, real estate, and industrial sectors attract the largest proportion of investment.

Meanwhile, the Managing Director of ASL Law Firm, Pham Duy Khuong, attributed the slowdown of M&A deals in Vietnam to a complicated due diligence process, saying investors are taking more time to assess additional risk factors such as inflation or economic recession.

Director of VILAF Law Firm – Hanoi branch Bui Ngoc Anh noted the difficult economic environment has led to a rising number of companies seeking to secure working capital by selling assets and raising proceeds.

“Investors are not rushing into purchasing decisions with many options available in the market, and therefore prioritize quality over quantity. They would look for favorable terms before purchasing, and therefore drag down the negotiation process,” Anh said.

However, he expects the market to heat up in the remainder of the year and 2023, as those holding cash at the moment see the market's volatile period as an opportunity to purchase companies at attractive prices.

“The market would likely see billion-dollar deals next year, as investors and firms are locking in negotiations at the moment,” Anh added.

Bright prospects in the long term

M&A experts also suggested foreign investors would play a more prominent role in upcoming deals, especially as local firms struggle to secure new capital due to rising interest rates and low liquidity.

In this context, Vietnamese companies are seen as an appealing option for investors from Japan, South Korea, and Singapore, as they made up 40% of total deals during the 10 months.

Head of the Cross-border Division of RECOF Corporation Masataka Sam Yoshida suggested a young population, rising middle class, and rapid economic growth have put Vietnam among potential markets for Japanese investors in the search for M&A deals, especially in fields of IT, digital technologies, real estate, retail, and consumer finance.

On the country’s economic prospects, Deputy Minister of Planning and Investment Tran Quoc Phuong said the economy had seen a speedy recovery following two years of severe impacts of the Covid-19 pandemic.

This resulted in GDP growth of 8.83% in nine months and is forecast to hit 8% for the whole year.

Phuong added despite the dim global economic outlook, Vietnam’s economy would continue to shift from the recovery phase to rapid and stable development.

“Vietnam, with its experience in dealing with the Covid-19 pandemic and volatile world, would be prepared to deal with any future situation. This is the basis for the economy to overcome challenges and achieve strong results in 2023, eventually accelerating growth in 2024-2025 to realize the five-year socio-economic development targets,” Phuong said.

Phuong noted that investors remain confident in the government's ability to respond to Covid-19, stabilize the macroeconomy and improve the business environment.

“These are the main driving forces for economic growth in 2023 and the M&A market to continue thriving,” he said.

Phuong considered the stagnation of the M&A activities in recent months as short-term and would soon return to the recovery track.

“Vietnam remains a safe, attractive, and high-potential country for investors looking for new business opportunities,” Phuong asserted.