The M&A market has cooled down during the Covid period

	M&A market has cooled down during Covid-19 period
	Southeast Asian M&As gathering momentum
	VN pharmaceutical market: stiff competition fosters M&A wave

Data on M&A activities from mid-2019 up to now show that real estate, finance - banking, industry, retail, logistics, agriculture, pharmaceutical - health, and construction have been the main sectorsattracting M&A deals. Photo: ST

M&A plunged

In the decline of global investment, M&A activities also witnessed a sharp decline since the beginning of the year.

Accordingly, the total value of global M&A in the first six months of 2020 was US$901.7 billion, 52% lower than the same period last year. Particularly in the Vietnamese market, the total value of M&A deals in 2019 reachedUS$7.2 billion, then by 2020, it is expected that the M&A value will continue to decline, estimated at US$3.5 billion, equal to 48.6% compared to 2019.

In addition to Covid-19, another reason for the decline in M&A this year is that the equitization and divestment process in 2019 and the first nine months of 2020 has continued to be quiet and has not been implemented as planned.

The market is expected to have more large-scale divestments which will help significantly increase the value of M&A in Vietnam.

“Covid- 19 and its new normal status have an impact on M&A activities globally as well as in Vietnam. Investors and enterprises have adjusted their strategy, increased restructuring activities, the need forselling company increases, the detailed appraisal and decisionsare also more difficult,” Mr. Le Trong Minh,Head of The Organizing Committee of Vietnam M&A Forum 2020, said.

Regarding M&A activities involving foreign elements in 2020, Mr. Do Van Su, Deputy Director of Foreign Investment Department, Ministry of Planning and Investment (MPI), said that the number of M&A deals byforeigninvestors into Vietnam fell sharply. Accordingly, the value of M&A deals between foreign investors and domestic enterprises was only 40% of the previous year in value and the number of deals also decreased by 50%.

According to Mr. Do Van Su, the peculiarity of these M&A deals was the inflow of capital from outside the border.However, the restriction of travel among countries had been drastically reduced for nearly 10 months meaninghumans as well as machinerycannot be moved, whichlimits market research and purchasing decisions. Most of the deals made this year were transactions which had alreadyinvestigated.

Data from the Ministry of Planning and Investment also showed that, in the first 10 months of 2020, there were 5,451 instancesof capital contribution and share purchases by foreign investors with a total capital contribution of US$6.1 billion, down 43.5% compared to last year.

In the total number of capital contribution and share purchase instances byforeign investors, there were nearly 1,400 of capital contribution, share purchase which increases the charter capital of the enterprises with the value of capital contribution of nearly US$2.5 billion and 4,059 turns of foreign investorsboughtdomestic shares without increasing charter capital with a value of more than US$3.6 billion.

According to experts, the Covid-19 pandemic with border blockadesin many countries was slowing down M&A activities in Vietnam. However, in the long term, the pandemicwouldmake the market explode with increasing demand from both sellers and buyers. Mr. Do Van Su also emphasized that Vietnam was expected to be the destination of foreign capital flows in the process of investment capital flows, especially in a year when there are a series of big fluctuations happening.

Break out in 2021

Data on M&A activities from mid-2019 up to now shows that real estate, finance - banking, industry, retail, logistics, agriculture, pharmaceutical - health, and construction are the main sectors attracting M&A deals.

In the market, foreign investors are still in the leading position, in which investors mainly come from four countries including: Japan, Korea, Thailand and Singapore. However, a noteworthy point is that the proportion of M&A value in which Vietnamese enterprises play the role of buyer is tending to increase.

According to Ms. Pham Mai Huong, Director of KPMG Vietnam's Financial Advisory and Business Purchasing, in the early months of 2020, the number of customers coming to learn and exchange didnot decrease, especially in the field of infrastructure and real estate. In addition, in the retail segment, the production of essential consumer goods was also receiving attention, the production of raw materials, export products with good export potential was researched by customers.

Regarding M&A in the real estate sector, Ms. Nguyen Thi Van Khanh, Senior Director of Vietnam Capital Market, Jones Lang LaSalle Vietnam (JLL), said that in the consulting process for real estate projectswithbad debt of the bank, JLL noted that foreign investors were very interested in these bad debts.

However, in a number of recent deals, there have been barriers leading to a large gap between the bank as the seller and the investor as the buyer, so the two sides had not met.

According to the representative of JLL, many domestic investors had purchased bad debts and had a high success rate, however, for the bad debt acquisition ascollateral of the banks,it was difficult for foreign investors.

Besides investing in new projects, mergers and acquisitions are and will be an important part of the investment activities of foreign investors in Vietnam.

Commenting on the prospects of M&A in the future, Mr. Do Van Su said that although the data showed the slowdown of the M&A market, with the trend of investment changing, researching domestic enterprises of foreign investors looked like a compressed spring and the premise for a boom in 2021.

To receive the M&A capital flows, the representative of JLL Company said that the big challenge of Vietnam was transparency in corporate governance, the legality of the project, because the reputation of enterprises and the legality of the project were great concerns for foreign investors. "If enterprises can meet those criteria, M&A activities will increase in 2021 and the following years," said Ms. Nguyen Thi Van Khanh.