Yen depreciates, Japanese businesses increase overseas investment
According to data from auditing firm KPMG, 3 years ago, domestic investors dominated the mergers and acquisitions (M&A) market, but by 2023, the top 5 in M&A all belonged to foreign investors. The total value of M&A transactions in the first 10 months of 2023 was 4.4 billion USD with more than 260 deals, of which 80% of the transaction value came from the healthcare, finance, and real estate sectors. The average value of the deals was 54.5 million USD.
Dr. Nguyen Anh Tuan - RMIT University - commented that the recent trend is that the largest industry group is technology, followed by healthcare... retail and consumer goods only account for 8-9% but are important sectors that affect the national economy. In particular, in recent years, Japanese enterprises have participated strongly in M&A deals. Typically, the Japanese Sojitz Group through Sojitz Asia Pte.Ltd. and Sojitz Vietnam Co., Ltd. acquired the entire largest food distribution company in Vietnam, Dai Tan Viet Joint Stock Company (New Viet Dairy).
According to Dr. Nguyen Anh Tuan, the reason for this trend is that the Japanese yen is depreciating, causing Japanese businesses to seek ways to "invest money abroad" and this trend will continue in the near future.
Experts predict that in 2024, M&A will continue to be vibrant (economic expert Pham Chi Lan attended online)
In addition to Japan, Lawyer Dao Tien Phong, CEO of Investpush Law Firm, informed that many investors from countries such as Singapore, the US and China are also very interested in the M&A market in Vietnam. In particular, Chinese investors want to buy all or part of businesses that own restaurant chains or factories but have orders to the US and Europe. Lawyer Dao Tien Phong said that when planning an M&A, there should be a pre-equitization structure for legal convenience and to avoid tax risks. In addition, businesses must also pay special attention to the "anti-dilution" strategy to avoid being acquired by the entire company, if they only intend to sell a part.
"Selling out is too easy, but weakens internal strength"
In 2024, Dr. Nguyen Anh Tuan commented that the M&A market will continue to be vibrant. Investors will target businesses with stable and long-term product investment strategies in the agricultural and food industries. Investors also want to close deals in areas that can take advantage of cheap valuations such as real estate and construction. "In addition, the positivity and excitement in the market also comes from internal causes of domestic enterprises. When domestic capital sources are tightened, many businesses are forced to restructure, sell assets, and call for investment to resolve financial pressure," he worried.
Economist Pham Chi Lan said that seeking foreign capital is a big trend for Vietnamese enterprises because domestic capital is expensive. Even though capital is available, how to allocate and access it is still very difficult. Besides seeking capital, domestic enterprises invite foreign investors to seek technology, skills, management, markets, and take advantage of FTAs that Vietnam has signed.
Ms. Pham Chi Lan stated her opinion: “Finding new investors, finding investors from outside is what Vietnamese enterprises need. But what is more important is good macroeconomic policies so that enterprises can easily access external capital and help improve their position in the M&A process. This is what I am very worried about. The number of enterprises that have stopped operating from the end of last year to the beginning of this year is still increasing, if enterprises receive capital in time, this will not be the case."
In addition, Ms. Pham Chi Lan also noted that when discussing mergers and acquisitions, it should be understood in two ways. That is, businesses are looking for investors to join forces, join hands, and develop sustainably and long-term together. The second is businesses that want to "sell out" to withdraw from the market.
“If it is too easy to sell out, it will weaken Vietnam's internal strength. Some Vietnamese industries that have a certain position both domestically and for export may fall into the hands of foreign investors. We cannot have a middle- or high-income economy without self-reliance, but only rely on foreign investment. I support M&A to strengthen the capacity of domestic enterprises, but if it is done in the way of selling ourselves to foreign investors, it is very worrying," Ms. Pham Chi Lan warned.
Ms. Minh Huynh - Director of Tael Partners Fund:
When considering raising capital, the question must be asked: Why do we need to raise capital? What do we need from investors? Capital, technology or management? The second question is when investors join us, how will it change, how will it be managed, what are the expectations? The business must answer all of these questions before considering inviting investors to contribute capital.
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