Investment funds seek a "safe and secure" approach.

Unwilling to take risks, investment funds now prioritize seeking businesses with sustainable cash flow, profitability, and sound business models.

Investment funds are benefiting from the growth in consumer spending in Vietnam. Photo: Duc Thanh

Focus on the consumer goods sector.

Investment funds operating in the Vietnamese market benefit from the growth in consumer spending in Vietnam. Hospitals, medical equipment, logistics, and food retail are always sectors that receive significant attention from foreign investors. Accordingly, Mekong Capital's Mekong Enterprise Fund IV continues to focus on sectors within the consumer goods industry.

In June, SSI Fund Management Company Limited (SSIAM) and Union Securities Investment Trust Co., Ltd. (USITC) – a subsidiary of Union Bank of Taiwan (UBOT) – signed a cooperation agreement to establish a new investment fund. Mr. Nguyen Phan Dung, Deputy General Director of SSIAM, stated that the new fund will not be limited to specific product types or investment sectors.

Based on the specific needs of each product, SSIAM always aims to help investors access businesses with high growth potential and attractive valuations, originating from sectors that will benefit most from Vietnam's long-term economic growth, including consumer goods, retail, education, healthcare, commercial banking, residential real estate, industrial real estate, information technology, and transportation.

According to Dr. Le Minh Phieu, founder of LMP Lawyers, these are also good business sectors during difficult times. In particular, strategic equity investments or mergers and acquisitions (M&A) remain attractive to investors. This year, the firm has handled 10 transactions, of which 4 have been completed, several have been finalized, and others are in the negotiation phase.

Target companies that are already profitable.

In the current environment, investment criteria have become more stringent. Mekong Capital prioritizes businesses with sustainable cash flow, proven profitability, and sound business models. “Due to current limitations on access to equity capital and high borrowing costs, investing in any business that requires further funding rounds to survive is a risk we are unwilling to take,” said Chad Ovel, CEO of Mekong Capital.

One strategy that Mekong Capital has consistently pursued is investing in governance capabilities and leadership teams. According to Chad Ovel, the biggest lesson the fund has learned from over 20 years of investing in 45 companies in Vietnam is that companies that consistently strive to build strong management teams and improve leadership quality are likely to outperform their competitors.

“This needs to remain the central focus at all times. If it wasn’t successfully implemented in the years leading up to the economic upheaval, then weathering the storm will be much more difficult,” said Chad Ovel.

Currently, Mekong Capital is not experiencing any slowdown in interest from potential strategic investors in its investment fund companies. In fact, in some cases, some strategic investors seem even more active during what are considered challenging economic periods.

The Vietnamese IPO market is currently quite sluggish, but Mekong Capital plans to push for the early listing of Vua Nem and F88. A positive sign is that the State Securities Commission has recently made significant improvements in accelerating the processing of applications for the necessary listing steps. This improvement is crucial for any company, as well as investment fund companies, helping to restore confidence in the ability to list in a timely manner once businesses meet all the necessary standards.

Mekong Capital currently has funds available in Mekong Enterprise Fund IV, equivalent to 3-4 new investments. These investments will be made in one year. In addition, the company also has several new investments related to land and forests.

Meanwhile, a representative from SSIAM stated that, for the listed investment segment, the SSI Fund is still maintaining a state of new disbursements and portfolio restructuring. However, the fund must still ensure safe portfolio management principles by selecting companies with the best governance foundations, transparency, bright prospects, and reasonable valuations to create medium- and long-term value for clients.

For the PE investment segment, SSI Fund is also actively exploring new investments as well as divesting existing ones. Disbursement depends on the progress in finding suitable businesses that meet the funds' criteria, and on negotiations with the investment recipients to reach mutually agreed terms. Each investment recipient is a partner and is willing to dedicate time to working closely with the company's management to increase its value.

According to Mr. Dung, finding deals with superior profit potential is a goal, but equally important is helping the capital-receiving companies build sustainable 3-5 year business plans, improve operational management, restructure finances, and build a network of strategic partners. Divestment also depends heavily on timing and market conditions. At the same time, finding a suitable partner to take over the capital is a crucial factor alongside the price.

16th Vietnam M&A Forum 2024

The 16th Vietnam M&A Forum 2024 – a prestigious annual event on mergers and acquisitions and investment networking organized by Investment Newspaper under the direction and sponsorship of the Ministry of Planning and Investment – will be held at the JW Marriott Saigon Hotel (Ho Chi Minh City) on Wednesday, November 27, 2024.

With the theme "A Blossoming Market," the Vietnam M&A Forum 2024 will delve into emerging M&A opportunities in promising sectors such as real estate, retail, technology, renewable energy, financial services, and logistics.

The 2024 M&A Forum will include the following main activities:

The main conference will feature leading speakers from Vietnam and internationally.

Honoring outstanding M&A deals and consultants for the period 2023-2024.

Publication of the 2024 M&A Market Overview Special Issue (Vietnamese - English bilingual).

Source: https://baodautu.vn/quy-dau-tu-tim-cach-an-chac-mac-ben-d229454.html