The Hanoitimes - Chinese enterprises are forecast to shift their investment strategies by pouring more capital into building plants in Vietnam to take advantage of its integration commitments within ASEAN and other free trade deals, which will contribute to pushing up M&A activities.
Experts have been upbeat about Vietnam’s merger and acquisition (M&A) market this year, fueled by the government’s continued initiatives to relax the foreign ownership ceiling and the country’s adoption of new trade deals.
Seck Yee Chung from global law firm Baker & McKenzie said Vietnam’s M&A value, especially in the retail, consumer goods, and food and beverage (F&B) sectors, will rise in 2019 as more foreign investors look to increase their investment and further expansion within the local market.
The retail and consumer sectors will continue to see big interest from investors
The amount of M&A and investment activities in the market indicate many trends, in particular, reflecting confidence in the market, Chung said, noting M&A activities in 2018 did not outpace 2017, which had two high-profile public company deals in the beverage sector. However, M&A activities in the retail, consumer goods and F&B sectors remain higher than other sectors.
Specifically, he said, within the consumer goods industry, convenience stores and mini-marts in Vietnam remain one of the fastest growing segments in the industry and it is expected to see continued investment.
“We have seen and can expect an increase in foreign investment into privatized state-owned enterprises due to the continued initiatives to relax the foreign ownership ceiling, which has been integrated into the government’s desire to divest its ownership in big players in the consumer goods market,” Chung said.
Echoing Chung, Vice Chairman of the Vietnam Association of Foreign Invested Enterprises Nguyen Van Toan, is also optimistic about the M&A market in 2019 thanks to recent positive developments.
According to Toan, M&A deals hit US$9.9 billion last year, making a record disbursement of foreign direct investment (FDI) of US$19.1 billion in the year. This shows foreign investors’ increasing confidence in Vietnam as well as achievements in state divestment and privatization.
Big push underway
Toan forecast Chinese enterprises will shift their investment strategies by pouring more capital into building plants in Vietnam to take advantage of its integration commitments within ASEAN and other free trade deals, which will contribute to pushing up M&A activities.
Chung also believed Vietnam will gain from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in various ways, from lowered tariffs to exports to increased confidence in the Vietnamese market.
“The adoption of the CPTPP would result in a reduction of tariffs on consumer goods, such as certain milk and dairy products and textile products, leading to a potential overall increase in the growth of these consumer goods, thereby increasing incentives to invest and driving M&A activities in the areas,” he explained.
In addition, Chung said, there are some positive trends from a regulatory perspective which may further build confidence for investors in M&A deals in the retail, consumer goods and F&B sectors, which include the government’s increasing willingness to engage in state divestment; regulations to ease some of the requirements for foreign-invested traders; and the drafting of the Securities Law aiming to ease foreign ownership limitations and conditions.
However, in order to remain an attractive destination for foreign investors, Chung suggested the government should continue to embrace Industry 4.0 and prioritize making digital tools and services available to businesses besides cutting regulatory red tape to lessen unnecessary burdens for investors and entrepreneurs.
Besides, Nguyen Thi Viet Nga from the Academy of Finance recommended legal regulations should be streamlined as there are no full details for M&A in Vietnamese documents and laws, causing difficult for state agencies to manage and prevent local firms from finding suitable partners.
Serving as brokers for M&A deals, securities, financial and audit companies should enhance their roles in the deals as their human resources, professionalism and information have remained insufficient, Nga added.