Foreign capital via M&A mostly flows to HCMC

HCMC – Of the total value of share acquisitions and capital contributions by foreign investors in Vietnam at US$6.19 billion near the end of last year, HCMC accounted for nearly 60%.

According to the Foreign Investment Agency, the total value picked up 45.1% against 2016 and came from more than 5,000 cases of capital contributions and buyouts from last year’s beginning to December 20. This pointed to the explosion of the merger and acquisition (M&A) market as forecast by experts and foreign investors last year.

HCMC is the venue for most of the value. Data given at a meeting on 2018 socio-economic development and budgeting plans of the HCMC government shows HCMC approved 2,276 cases in which foreign investors carried out procedures to contribute capital, buy shares and acquire stakes of domestic enterprises with total registered capital of US$3.68 billion.

While foreign capital poured via M&A deals made up only 17.25% of the total value pledged for Vietnam, the proportion in HCMC was 57.7%.

Investments via capital contribution and share buying of foreign investors have reflected foreign capital flows in M&A activities in the Vietnamese market.

According to analysts and investors, M&A is regarded as the fastest way for foreign enterprises to penetrate the domestic market.

Vietnam’s M&A market has seen many high-value transactions since 2014 and higher value over the years, with a record high of US$5.82 billion in 2016. Though the number and value of M&A transactions were seen slowing down between late 2016 and mid-2017 with the absence of big deals, the market soon recovered and rose in the second half of last year.

However, it should be noted that the above-mentioned value is not final results of the year as data of localities are not fully updated yet like Vietnam Beverage’s acquisition of over 343 million shares of Saigon Beer-Alcohol-Beverage Corporation (Sabeco) on December 18 with VND109.966 trillion (around US$4.8 billion).

If the aforementioned deal is included, total foreign capital invested via M&A of last year would be some US$11 billion, US$8.48 billion of it in HCMC.

Though more barriers need to be lifted to facilitate M&A transactions in Vietnam, many investors, experts and enterprises attending the Vietnam M&A Forum 2017 last August had the same opinion about growth potential in the coming years.

In particular, Seck Yee Chung, partner at Baker & McKenzie, said there have been improvements in terms of laws. Vietnam has taken action to create business opportunities, promote development and open the door to foreign investors.

Since July 1, 2015 when the 2014 law on investment came into effect, capital contributions and share acquisitions at Vietnamese enterprises have been busier.

Under the existing regulations, investment registration is not required for such M&A deals by foreign investors, helping them approach the Vietnamese market quickly.

In addition, this investment tendency is assisted by Vietnam’s policy to boost equitization and capital divestment at State-owned enterprises. Notably, Decree 60/2015/ND-CP raises foreign ownership at listed and public enterprises from 49% to 100%, except for enterprises active in certain conditional business areas.

Therefore, analysts believe that foreign investments via capital contribution and share buying will grow faster in the coming time.

Source: The Saigon Times