M&A market: The rise of domestic investors

06/09/2022

Despite the COVID-19 pandemic, the M&A market in Vietnam shows high stability and even strong growth in 2021. In the first 10 months of 2021, the M&A market attracted US$8.8 billion. , an increase of 17.9% compared to 2020 and 13.7% compared to 2019, at the same time, there were some notable changes.
 

Average transaction value tends to increase
 

The increasing attraction of M&A investment in Vietnam is clearly demonstrated not only by the growth of total transaction value but also by the increasing average value of transactions.
 
Average transaction value increased from US$28.1 million in 2019 to US$42.8 million in 10M 2021. More and more deals valued at over $100 million were recorded. Only in the first 10 months of 2021, there were 22 transactions compared to 19 transactions in the whole of 2019. Larger deals are expected to continue in the near future.
 
The Rise of Technology
 
In recent years, besides traditional industries such as Consumer Essentials, Banking and Finance and Real Estate, the Technology industry has received more and more attention from investors. In the first 10 months of 2021, the technology-related M&A market recorded outstanding growth in both value and quantity. The number of deals doubled while the total value more than tripled compared to the whole of 2020, reaching nearly 1 billion US dollars, even exceeding the level before the pandemic occurred.
 
The main factor driving this trend comes from the need to invest in technology infrastructure to meet the requirements of using alternative online services in the context of the ongoing epidemic. Online transactions are expected to continue to grow after the epidemic ends thanks to the Government's determination to digitally transform, along with the growth in the number of young tech-savvy consumers. Some of the Vietnamese companies that have benefited the most from this trend include VNG, VNPay, Sky Mavis, Momo and Tiki. These companies have successfully raised hundreds of millions of US dollars, becoming or approaching “Unicorn” companies. Recent notable deals include a US$258 million investment in Tiki led by AIA Insurance, Sky Mavis receiving US$152 million from an investor group led by Andreessen Horowitz, or Momo Huyen. $100 million from Warburg Pincus and other funds.
 
Vietnam has favorable conditions to become a technology startup hub in Southeast Asia. In recent years, the startup ecosystem in Vietnam has made great strides, creating an environment that encourages the startup community to grow. The large technology human resources associated with the entrepreneurial mindset and the Government's supportive policies play an important role in this development trend. More and more investments are expected to flow in to anticipate new opportunities in this sector.
 
The rise of domestic investors
 
In recent years, the M&A market in Vietnam has exploded with a series of deals done by domestic investors. Previously, M&A deals were mainly driven by foreign investors from Japan, Korea, Thailand, Singapore and Taiwan. However, the market is currently witnessing a shift towards domestic companies as they become more and more active in M&A activities.
 
In the first 10 months of 2021, domestic investors have shown strong participation in M&A activities with 133 transactions performed, while foreign investors from Japan and South Korea have been involved in M&A activities. completed 30 and 19 transactions respectively. Domestic companies accounted for 1.61 billion USD in total deal value for 10M 2021 and only 68 million USD less than Japan's 1.67 billion USD. However, excluding the deal that Sumitomo Mitsui Financial Group buys a 49% stake in FE Credit for $1.3 billion, Vietnamese companies will outperform Japanese and Korean investors in terms of price. deal value.
 
When looking for reasons for the rising trend of domestic M&A investors, it can be seen that Covid-19 has significantly affected foreign investors, especially in the short term, causing them to apply a more conservative approach to investing, where direct exposure is limited. The presence of international companies becomes less in 2020 which has led to a decline of more than 20% year-on-year in both the number and value of transactions coming from foreign investors. Meanwhile, targeted companies in Vietnam are in urgent need of capital and investment to survive and develop through the pandemic.
 
Domestic investors seize these opportunities to expand market share, penetrate new markets and industries, and form strategic relationships. Domestic deal value increased to US$2.2 billion in 2020, representing a growth of 201% year-on-year. The recovery was hampered by Covid in the 2nd and 3rd quarters of 2021, which reduced the number of transactions. However, domestic investors still focus on investment; price

By BSC

chevron_left
chevron_right