After the gloomy first months of the year, the Vietnamese M&A market is showing more positive data in the final months of the year.
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| Tasco Auto has the largest automobile distribution system in the country, aiming at CKD assembly, while Mitsui aims at information technology and transportation (mobility) as key industries in the future. |
Expect a big boost
After a boom period, foreign investment in Vietnam through capital contributions and share purchases has slowed down significantly. In the first 7 months of this year, in contrast to the increase in foreign direct investment (FDI) flows, capital contributions and share purchases by foreign investors decreased in terms of transactions and value of capital contributions.
According to the Foreign Investment Agency (Ministry of Planning and Investment), as of July 20, 2024, the total registered foreign investment capital in Vietnam reached more than 18 billion USD, an increase of 10.9% over the same period in 2023. Meanwhile, disbursed capital reached more than 12.55 billion USD, an increase of 8.4% over the same period last year. Particularly, the capital contribution and share purchase of foreign investors reached 1,795 transactions, the capital contribution value reached 2.27 billion USD, down 3.1% and 45.2% respectively over the same period.
However, in August, the mergers and acquisitions (M&A) market showed many positive signs when businesses simultaneously announced successful deals. One of the recently announced deals that attracted much attention was Mitsui & Co.'s official investment to become a strategic shareholder of Tasco Auto - a member unit of Tasco.
The value has not been disclosed, but the deal is expected to create a big push in the mobility sector (information technology and transportation) in Vietnam, a field that is the strength of both parties. The cooperation between Tasco and Mitsui at Tasco Auto is considered an important step to help Tasco realize the Company's strategic goals.
In addition to mobilizing important capital resources, Tasco Auto will have the opportunity to learn international operational and management experience, optimize efficiency, as well as take advantage of the existing position and network from partners. At the same time, Mitsui will provide technological solutions, consulting and accompanying Tasco to improve operational efficiency, improve governance structure, and help the apparatus become streamlined and efficient.
For Mitsui, this is also an opportunity for Japanese enterprises to participate more deeply in rapidly growing fields in a market of 100 million people like Vietnam.
In the current context, the strategic partnership between Tasco and Mitsui is driven by a shared vision of capitalizing on the strong long-term growth opportunities in the automotive sector. The combination of Tasco’s leading advantages in the automotive service sector in Vietnam with Mitsui’s experience, international network and strong potential worldwide will help maximize the strengths of both parties, to develop and expand business, and increase operational efficiency.
In May 2019, Mitsui agreed to acquire a 35.1% stake in Minh Phu Seafood Corporation (Minh Phu), the world's largest integrated shrimp producer from farming to processing and sales.
In March 2024, according to Nikkei Asia, Mitsui also announced that it would invest about 84 billion yen ($560 million) in the Block B - O Mon gas power project chain in Vietnam. This announcement was made right after the Vietnam Oil and Gas Group (Petrovietnam) signed a series of commercial agreements related to the development of the Block B - O Mon gas power project chain with partners, including Mitsui Oil Exploration (MOECO) - a subsidiary of Mitsui & Co.
In addition to Japanese investors such as the “big guy” Mitsui, who have been making moves to indirectly invest in many potential fields in Vietnam, Korean investors have also made many moves. A typical example is the recent deal of Samsung Engineering - a member of Samsung Group (Korea).
Samsung Engineering has invested 41 million USD (nearly 960 billion VND) to buy back the entire convertible loan of the International Finance Corporation (IFC) at DNP Water Investment Joint Stock Company. After the transaction, Samsung Engineering owns 24% of DNP Water's equity. The two parties have cooperated to improve the operational efficiency of clean water and wastewater plants, and research and develop wastewater treatment projects in urban areas in Vietnam.
Another deal that has also attracted attention is the VIAC Limited Partnership Fund (an investment unit under the Vietnam Investment Fund of the National Investment Commission of Oman - Sultanate of Oman, through the conversion of bonds into shares) which will become a shareholder of Van Phu-Invest in the near future.
Over the past 15 years, the fund has disbursed about 300 million USD, focusing on industries with competitive advantages and contributing to the long-term sustainable development of the Vietnamese economy, such as infrastructure, energy, education, real estate, health care, etc.
Attracting capital through unique competitive advantages
The global environment for international investment remains challenging this year. Weak growth prospects, economic fragmentation, trade and geopolitical tensions, industrial policy and supply chain diversification are reshaping foreign direct and indirect investment patterns.
This has made some multinationals more cautious about expanding abroad. However, their profits remain high, financial conditions are gradually easing, and the number of new investment projects announced in 2023 will positively affect FDI attraction this year.
Meanwhile, in 2023, the cross-border M&A market will not grow as strongly as expected. Industry trends show that investment in infrastructure and the digital economy will decrease, but sectors related to the global value chain, including the automotive, electronics and machinery industries, will grow strongly.
In that context, the Vietnamese M&A market was quite gloomy in the first months of 2024. Previously, the question was whether this market would improve in the last months of the year in the context of not fully anticipating the impacts of the global political and economic situation. And at this time, the signals of the above investment deals show many bright spots, opportunities for businesses to launch grand business plans.
In fact, a recently published report by the Global Research Department of HSBC Bank stated that with many competitive advantages, Vietnam is still a favorite destination for foreign-invested enterprises.
According to HSBC, the interest of multinational corporations in Vietnam has increased strongly thanks to many factors, including competitive costs and FDI support policies. Compared to labor costs in the Asian region, manufacturing wages in Vietnam are lower, even though people have a solid general education level. The costs of production capital in all industries show a competitive advantage in terms of price.
In addition, Vietnam has made significant progress in establishing various economic agreements with its trading partners, such as the EU-Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). These developments have supported and facilitated foreign investors.
However, to maintain strong investment flows, HSBC experts said it is important for Vietnam to move up the production value chain and increase the domestic value added in the production of these related products.
In addition, investment decisions of multinational corporations in the coming years will also be influenced by solutions such as leveraging digitalization to streamline trade processes, ensuring stable energy and green production, improving infrastructure, etc.
Notably, there are signs that more sophisticated manufacturing processes and knowledge are entering Vietnam. In 2022, Samsung established a research and development center in Hanoi to expand its manufacturing capacity and began producing some semiconductor components. Meanwhile, Apple increased its influence in Vietnam, allocating product development resources to iPad.
And as in the case of Mitsui, becoming a strategic shareholder of Tasco Auto is not only an opportunity to participate more deeply in rapidly growing fields in a market of 100 million people like Vietnam, but also realizes Tasco's vision of moving upstream in the industry with an automobile assembly project to be developed in 2024.
Global M&A activity to slow in Q2 2024. Prolonged high interest rates, an unfavorable regulatory environment, and inflated equity markets leading to excessive valuations have weighed on M&A activity in the first months of this year.
The number of deals signed globally in the second quarter fell 21% to 7,949, according to data from Dealogic. But the total value of transactions rose 3.7% to $769.1 billion, with Asia-Pacific down 18%.
Although large deals are still happening regularly, experts say the number of mega-deals, worth more than $25 billion, has slowed compared to previous M&A cycles, as regulators tighten antitrust oversight.
However, leading investment bankers and M&A lawyers have brushed aside concerns about the health of the M&A market and forecast a positive outlook moving into the second half of 2024.
Source: https://baodautu.vn/thi-truong-ma-lo-dien-bom-tan-d223877.html
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