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Vietnam M&A Research Report 2019

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FiinGroup is pleased to present our intensive report of Vietnam M&A 2019, the 9th issue of this report. This report presents the extensive data mining of M&A deals in Vietnam in the reviewed period, as well as analysis by key investors and industries where we recognize potential investment opportunities in the near future.

The research provides latest information on market activities as well as competition landscape of M&A in Vietnam. Three main segments of M&A categories including (i) Inbound M&A, which is when a foreign company merges with or acquires a domestic company) (ii) Domestic M&A, which is when two domestic companies merge with or acquire other (iii) Outbound, which is when a domestic company merges with or acquires a foreign company. In addition, we provide in-depth review for the 4 outstanding sectors: Real estate, Industrial goods & Services and Food & Beverage and banks and 3 trendy sectors: Health Care, Education and Utilities.

Download pdf here: http://bit.ly/Vietnam_M_A_Research_Report_2019

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Vietnam M&A Research Report 2019

  1. 1. VIETNAM M&A 2019 Research Report Issue 9 | August 2019 Waiting for breakthrough Financial Information | Business Information | Market Research
  2. 2. 2Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Preface FiinGroup is pleased to present our intensive report of Vietnam M&A 2019. In addition to the M&A data mining, we also focus on M&A opportunities by featuring some industries where we recognize potential investment opportunities arising given its new dynamics and regulatory developments. We also covered the latest state of SOE IPOs and divestments, in-depth sector reviews and outlook for the years ahead. The report utilized our 9-year M&A historical data in Vietnam. In addition to data analysis, the report also leverages on the authors’ extensive knowledge and experience in advising various M&A transactions in Vietnam. We have surveyed relevant foreign and local institutional investors as well as conducting a number of in-depth interviews with experienced M&A advisers and Government officials during our preparation. We strongly believe that this report will be valuable to institutional investors, investment companies and foreign players who are considering M&A as a strategy to set a foothold or to expand your business in Vietnam. About FiinGroup This report is prepared by a team of experienced analysts, researchers and data clerks at FiinGroup. FiinGroup is the Vietnam’s leading integrated service provider of financial data, business information, industry research and other premium advisory services. Our Mission is to Enlighten the Market. We’re on a mission to help investors and enterprises grow their businesses and gain competitive advantage with the trusted information and data provided by FiinGroup. FiinGroup is now serving thousands of corporate clients including securities companies, research houses, asset managers, investment companies, industry players as well as sophisticated individual investors. Our Market Research division has been established as the first independent research house in Vietnam, covering various major sector in Vietnam and providing local insights to our clients at quality standards of the World’s prestige advisory firms. More details can be found at http://fiinresearch.vn/. If you have any questions about this report or our services, please do not hesitate to contact Dong Le, Director of Market Research Services at dong.le@fiingroup.vn or +84 (24) 3562 6962, ext 110.
  3. 3. 3Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Table of contents @ 2018 FiinGroup JSC All rights reserved. All information contained in this publication is copyrighted in the name of FiinGroup, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher. PREFACE 2 Table of figures 5 Abbreviation 6 1. M&A in Vietnam at a glance 7 - 10 1.2 Key facts and figures 8 – 9 1.2. Key findings & key trends to watch 10 2. Business landscape 11 -14 3. 2018-1H2019 M&A in Review 15 – 34 3.1. 2018-1H2019 M&A in a nutshell 15– 21 3.2. Inbound M&A 22 – 28 3.3. Domestic M&A 29 – 32 4.4. Outbound M&A 33 – 34 4. Sector review 35– 57 4.1. Real estate 35 – 40 4.2. Industrial goods and services 41 – 43 4.3. Food and beverage 44 – 46 4.4. Banks 47 – 49 4.5. Emerging sectors for M&A: Health care, Education and Utilities 50 – 57
  4. 4. 4Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Table of contents @ 2019 FiinGroup JSC All rights reserved. All information contained in this publication is copyrighted in the name of FiinGroup, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher. 5. Key themes 58 - 71 5.1. Valuation Review 58– 60 5.2. Updates on SOE IPOs and Divestment 61– 65 5.3 FTAs and opportunities 66 -68 5.4 Regulatory updates, barriers to M&A in Vietnam and expected changes 69-73 6. Outlook and perspectives 74-75 Appendices & Disclosures 76-93 Our Methodology 94-95 Important Disclosures 96
  5. 5. 5Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Table of figures Figure number Tittle Page 1 Vietnam GDP Growth 2015-2021f 13 2 Vietnam Population structure 14 3 Vietnam urbanisation rate 1980-2018 14 4 Vietnam M&A Market size 2008 – 6M2019 16 5 M&A average deal size (US$mn) 2008-6M2019 17 6 Proportion of Deal Value (US$mn) and Number of Deal by value ranges 18 7 Total M&A Deal Value (US$mn) & Number of Deal by Top Sectors, 2018 19 8 Total M&A Deal Value (US$mn) & Number of Deal by Top Sector, 1H2019 20 9 Total Deal Value by Category, 2013-1H2019 21 10 Inbound M&A (US$mn) in Vietnam, 2013 - 1H2019 23 11 Top 8 Inbound M&A Deals, 2018 – 1H2019 23 12 Inbound M&A (US$mn) Deal by Country, 2018 24 13 Inbound M&A (US$mn) Deal by Country 1H2019 25 14 Inbound M&A (US$mn) into Vietnam by South Korean Investors, 2011 – 1H2019 26 15 Inbound M&A (US$mn) into Vietnam by Singaporean Investors, 2011 – 1H2019 27 16 Inbound M&A Activities (US$mn) by Top Sector 28 17 Domestic M&A Total Deal Value (US$mn) & Deal Number, 2011 – 1H2019 30 18 Domestic M&A activities by top sector 31 19 Domestic M&A Deal Value (US$mn) & Deal Number in Construction & Materials 32 20 Outbound M&A Activities (US$mn) 2011-1H2019 by Vietnam Domiciled Enterprises 34 21 Inbound M&A Activities (US$mn) in Real Estate, 2011 – 1H2019 36 22 Domestic M&A Activities (US$mn) in Real Estate, 2012 – 1H2019 38 23 Inbound M&A Activities (US$mn) in industrial goods & Services, 2011 – 1H2019 42 24 Total M&A Deal Value (US$mn) & Deal Number, Food & Beverage 45 25 Noticeable F&B deals in 2018 – H12019 46 26 Total M&A Deal Value (US$mn) & Deal Number, Banking 48 27 Recent Divestments in the Banking Sector 48 28 M&A Deal Value (US$mn) & Deal Number 2011-1H2019 51 29 M&A Deal Value Proposition, 2011-1H2019 51 30 Education M&A Deal Volume, 2011-1H2019 53 31 Education expenditure of Vietnamese people, US$bn 54 32 Vietnam's school age population (millions) 54 33 Outbound internationally mobile tertiary students (Thousands) 54 34 Utility M&A Deal Volume, 2011-1H2019 55 35 Number of Solar Power projects registered and completed 56 36 Top M&A deals in renewable energy 2018-1H2019 57 37 Valuation Multiples of 2018-1H2019 M&A Deals 59 38 Valuation Multiples of 2018-1H2019 M&A Deals by Sector 60 39 Number of successful IPO 2011-1H2019 62 40 Number of IPOs 2016-2020: Plan vs Actual 62 41 Divestment volume 2017-2020: Plan vs Actual 63 42 Top upcoming SOE Divestments under SCIC’s portfolio 64 43 Charter capital (US$mn) of upcoming IPOs 65 44 Number of upcoming IPOs by sector 65 45 Vietnam Inbound M&A Deal Value (US$mn) by Country 77 46 Total Deal Value (US$mn) in Vietnam by sector 77 47 Vietnam M&A Market by ICB Level II Sector, 2018 – 1H2019 78 48 Vietnam M&A Market by ICB Level IV Sector, 2018 – 1H2019 79 49 Valuation Multiples of M&A Deal by Sector, 2018-1H2019 82 50 Upcoming IPOs 2018-1H2019 84 51 Top IPOs 2017-2020 86
  6. 6. 6Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Abbreviations No . Word Stands for 1 CAGR Compounded Annual Growth Rate 2 CAR Capital Adequacy Ratio 3 CMSC Commission for the Management of State Capital at Enterprise 4 CPTPP Trans-Pacific Partnership (CPTPP), 5 AHFTA ASEAN-Hong Kong, China Free Trade Agreement 6 EVFTA EU-Vietnam Free Trade Agreement 7 EVIPA EU-Vietnam Investment Promotion Agreement 8 F&B Food and Beverage 9 FDI Foreign Direct Investment 10 FOL Foreign Ownership Limit 11 FTA Free Trade Agreement 12 IPO Initial public offering 13 M&A Merger and acquistion 14 MARD Ministry of Agriculture and Rural Development 15 MOC Ministry of Construction 16 MOCST Ministry of Culture, Sport and Tourism 17 MOH Ministry of Health 18 MOIT Ministry of Industry and Trade 19 MOST Ministry of Science and Technology 20 MPI Ministry of Planning and Investment 21 PC People's Committee 22 PM Priminister 23 RHS Right hand side 24 RE Renewable energy 25 SBV State Bank of Vietnam 26 SBV State Bank of Vietnam 27 SCIC State Capital Investment Corporation (SCIC) 28 SEGs & SCs State Economic Groups and State Corporations 29 SOE State-Owned Enterprise 30 SPA Shareholder purchase agreement 31 VAMC Vietnam Asset Management Company 32 Y-o-Y/Y/Y Year over year 33 YTD Year To Date
  7. 7. 7Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Section 1: M&A in Vietnam at a glance
  8. 8. 8Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Accumulated deal volume 2003-2018 3,103 Deal volume 2018 266 M&A Deal value 2018 $7.54bn 21% M&A Value growth (CAGR) 2008-2018 % of Inbound M&A value 2018 56% Average deal size 2018 $28mn Vietnam M&A in 2018: Key facts & Figures Deal>$100mn as % of 2018 M&A value Deal <$50m as % of 2018 volume M&A Top target sectors 2018Top winner inbound investors 2018 Country Deal value (US$m) Singapore 1,412 South Korea 1,260 United States 525 Thailand 306 Japan 285 Vol (#) Japan 18 South Korea 14 Singapore 12 Thailand 8 United States 6 Real Estate 38% Banks 12% Industrial Goods & Services 11% Food & Beverage 11% Construction & Materials 7% Financial Services 4% Others 17%
  9. 9. 9Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Accumulated deal volume 2003-2018 3,210 Deal volume 1H2019 107 M&A Deal value 1H2019 $2.15bn -55% Decline in value y-o-y % of Inbound M&A value 1H2019 67% Average deal size 1H2019 $20mn Vietnam M&A in 1H2019: Key facts & Figures Deal>$100mn as % of 1H2019 M&A value Deal <$50m as % of 1H2019 volume M&A Top target sectors 1H2019Top winner inbound investors 1H2019 Country Deal value (US$m) South Korea 1,047 Australia 200 Japan 128 Singapore 39 Thailand 26 Country Vol (#) Japan 10 South Korea 3 Singapore 2 Thailand 2 Australia 1 Industrial Goods & Services 53% Health Care 15% Construction & Materials 12% Food & Beverage 7% Utilities 7% Travel & Leisure 3% Others 3%
  10. 10. 10Vietnam M&A 2019 Research Report| Issue 9 | August 2019 6 M&A deals are focusing on industrial goods & services, construction & materials, retail and real estate. This trend is predicted to continue. Besides, Education, health care and pharmaceuticals and renewable energy which having been hot over the past 2 years will also be on the radar of investors in the time to come. 5 The signings of FTAs and CPTPP will stimulate foreign capital inflows and encourage foreign players to seek investment opportunities in Vietnam, given the increasing transparency and promising removal of 49% foreign ownership cap. 4 Migration of manufacturers from regional countries due to the ongoing trade war will boost the demand for industrial real estate, including warehouses and industrial parks. 8 Shifting of foreign manufacturers to Vietnam due to FTAs and trade war also boosted the demand for Industrial Goods & Services with key sectors such as logistics and transportation services. In order to accelarte SOE IPO/divestments in coming years, the government is taking some aggressive steps, stipulating the deadline for SOEs to hand over capital to SCIC to speed up divestment and equitization. First,108 SOEs slated to be sold by SCIC between now and 2020. Singapore, South Korea and Japan and Thailand are expected to remain the major foreign investors, driven by sovereign wealth funds, private equity and large conglomerates. Vietnam is thriving with robust economic growth and favourable social-economic conditions. Young population, rapid urbanization and emergence of middle-income class have reciprocally nurtured strong domestic consumer demand. In line with the upsizing economy, the M&A market size is facilitated to grow. M&A activities in 2018 remained vibrant with the transaction volume being on par with previous years. However, M&A value cooled down a bit due to pending significant deals as well as slow process of SOE divestments. 2018 deal value reached US$7.54bn, decreased by 44% compared to 2017. Excluding US$4.7bn from Thai Brev-Sabeco megadeal in 2017, the decline was 14% y-o-y. In other words, 2018’s deal value was equal to 86% of 2017’s value without Sabeco deal. Although deal-making in 1H2019 was still quiet, achieving US$2.15bn (down 55% y-o-y), given on confidence in realization of pending megadeals and speeding-up SOE divestment in 2H2019, we forecast M&A activities will recover the growth momentum to reach around US$6.64bn by the end 2019, hence the full-year value would also be equal to approximately 86% of 2018 deal value. Key findings and trends to watch Vietnam M&A market continued to be led by foreign investors. However, domestic investors are getting proactive and aggressive in order to enhance market position. 1 2 3 7 SOE IPOs and Divestments are lagging far behind targets; Banks are struggling in raising capital to meet Basel II by 2020 due to FOL of 30%, hence government actions to propel restructuring and easing FOL will be main drivers for M&A. Section 1: M&A in Vietnam at a glance| Key findings and trends to watch Forecasted M&A value in 2019: US$6.64bn ~86% of 2018’s Key themes that shaped M&A in 2018-1H2019 and trends to watch in the years ahead:
  11. 11. 11Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Section 2: Business landscape Macro-economic and business environment that foster M&A activities in Vietnam
  12. 12. 12Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Age 15-64: 70% Internet penetration Smart phone users Per capital GDP Vietnam in numbers $245bn (2018) Growth rateGDP 7.1% (2018) 6.7% (2021f) 3.27% (2018) Inflation 1,723 new FDI projects (Jun 19, 26% y/y) Registered capital: $ 7,41 billion $2,564 (2018) 40% Urbanization Population 95.5mn (2018) 67% (2017) 84% (2017) Average age: 32 Section 2: Business landscape
  13. 13. 13Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Upbeat outlook for international capital inflows • Tightening monetary in line with disciplined fiscal policies helps Vietnam keep inflation below 4% since 2016, control the Dong within a narrow band and reduce public debt. • Since 2014, the Vietnam government has issued Resolutions on enhancing business environment and national competitiveness. Resolution No.02/2019 prioritises four tasks: Simplifying business procedures; reforming in specialised inspections, connecting the National Single Window Portal; enhancing electronic payment and developing innovation ecosystems and supporting startups. • The new Competition Law and the Anti-corruption Law entering into force from 1 Jul 2019 increase a transparent, fair and competitive environment. • If the new the Securities Law (proposed to be in force from 2021) is approved by the end of this year, foreign capital inflow is expected to soar in response to the removing of the 49% foreign capital cap on listed companies. • Those remarkable efforts gave Vietnam the 69th in World Bank’s latest Ease of Doing Business rating, marking 30 steps advanced from 2014 (*). Within the East Asia Pacific region, Vietnam ranked 2nd after Malaysia. World Bank acknowledged Vietnam’s positive progress in making doing business easier in three aspects: Starting a Business, Paying Taxes, and Enforcing Contract. * Based on 10 indicators: The ease in Starting a Business, Dealing with Construction, Getting Electricity, Registering Property, Getting Credit, Protecting Minority Investors, Paying Taxes, Trading across Borders, Enforcing Contracts, Resolving Insolvency. Figure 1: Vietnam GDP Growth 2015-2021f Source: FiinGroup, World Bank • 2019 saw the signing of the EU-Vietnam Free Trade Agreement (EVFTA), the EU-Vietnam Investment Promotion Agreement (EVIPA) and the entry into force Trans-Pacific Partnership (CPTPP), ASEAN-Hong Kong, China Free Trade Agreement (AHKFTA). • The EVFTA, CPTPP, AHKFTA along with other bilateral and multilateral agreements Vietnam have signed or is negotiating, will increase foreign capital inflows and encourage domestic enterprises seeking business opportunities oversea. Commitment to macroeconomic stability and enhanced business environment that encourage investments Economic resilience momentum Huge opportunities from free trade agreements Escalating global tensions: Opportunities in challenges Section 2: Business landscape 6.7 6.2 6.8 7.1 6.6 6.5 6.5 6.5 6.3 6.5 6.3 5.9 5.9 5.8 0 2 4 6 8 2015 2016 2017 2018e 2019f 2020f 2021f Vietnam East Asia & Pacific In the context of escalating global tensions, Vietnam is emerging as one of the most attractive destinations for investors seeking markets with high growth prospect, stable economic and political environments. Investment has also been encouraged by recent government’s policy aiming to stabilize macro-economy and improve business conditions • The US increasing sanctions on Iran and the US-China trade war have let to a deceleration in global trade and global business confidence. Even so, Vietnam reached a 10- year high growth rate of 7.1% in 2018 • In 1H2019, Vietnam GDP growth was softened to 6.76 % and is expected to moderate to 6.6% in 2019 due to credit tightening, slower private consumption and weaker external demand, still outperforming the region. • Over the medium term, Vietnam’s growth is projected to stay resilient around 6.5%, remaining one of the fastest-growing EAP economies. • As tariff tensions between the US and China showing signs of complexity, many manufacturers consider moving their productions to other countries. Southeast Asia wherein, Vietnam being a prominent candidate, expected to gain the most benefits. • As of 20 Jun 2019, Vietnam granted 1,723 new licensing FDI projects, an increase of 26.1% year-on-year. FDI capital inflows from January to May 2019 hit a four-year high of $16.74 billion, up 61% year–on–year.
  14. 14. 14Vietnam M&A 2019 Research Report| Issue 9 | August 2019 The market expects to see more investments to serve Vietnam’s strong market demand Without a doubt, the growth of investments in Vietnam is driven by foreign investors who are eager to enter a massive market of 100 million people, with the emerging urbanising middle-class. Towards 2035, favorable demographic factors will be the key resources of demand in consumer-oriented goods & services. High penetration of internet and smartphone also indicate high potentials for the development of e-commerce, fin-tech and other internet-based businesses. In the medium term, the fast aging population will boost the demand for health care and other products & services aiming at elderlies Vietnam‘s internet penetration rate and smartphone users reached 67% and 84% of population respectively as of 2017. Meanwhile, only more than 10% of people shop online, less than 40% of adult have a bank account, and over 90% of transactions are still made in cash. Altogether these figures indicate a potential for the future development of e-commerce, fin-tech and other internet-based businesses. Source: United Nation The urbanising middle-class will be the key resources of demand for future growth. The need for housing and infrastructure will boost the real estate market, especially the property market. Also, increasing demand for high-quality Health Care and Education, Travel, Retail, F&B, and other consumer-oriented goods & services are calling for multinational and large domestic investors to enter the market. Source: World Bank Figure 2: Vietnam Population structure Section 2: Business landscape that fosters M&A in Vietnam Figure 3: Vietnam urbanisation rate 1980-2018 Golden but fast aging population, People loving the internet and smartphone 0 5 10 15 20 25 30 35 40 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 • Increasing per capita income has led to a rapid expansion of the middle-income class population. By 2035, more than 50% of Vietnam’s population will be middle-income class as estimated by World Bank and Vietnam’s MPI. • Additionally, in 2019 and by 2020, Vietnam’s urbanisation rate is expected to reach approximately 40% according to the Vietnam Urban Development Association. Thus, there will be about 50% of Vietnam’s population will live in urban areas until 2040s of the 21st century. Growing & urbanising middle-income class • Vietnam is in the period of “golden population” with the average age of 32, and nearly 70% of the population are in working- age (15-64) (UN). Abundant labour resources will be a significant force for the growth of the entire economy. • ‘Golden population’ era is also witnessing Vietnam become one of the fastest aging nation in the time to come, driving demand for Health Care and other products & services aiming at elderlies. 23.0 23.2 22.5 21.2 70.3 68.9 67.7 66.9 6.7 7.9 9.8 11.9 0 20 40 60 80 100 2015 2020f 2025f 2030f 0-14 15-64 65+
  15. 15. 15Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Section 3: 2018-1H2019 M&A in Review 3.1 2018-1H2019 M&A in a nutshell 3.2 Inbound M&A 3.3 Domestic M&A 3.4 Outbound M&A
  16. 16. 16Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Shortage of megadeals and delayed SOE IPOs and divestments drove a sharp decline in deal value Source: FiinGroup Figure 4: Vietnam M&A Market size 2008 – 6M2019 Section 3: 2018-1H2019 M&A in Review | 2018-1H2019 M&A in a nutshell The deal-making has finally leveled off after hitting an all-time high of US$13.43bn in 2017. In 2018, the total M&A value plunged 44% to US$7.54bn. The slump spread into 2019 that saw only 107 deals completed at a value of US$2.15bn within the first six months, translating into sharp decreases of 22% in deal volume and 55% regarding deal value compared to the same period last year. This cooling-down does not really mean a crash, however. With 266 deals completed, M&A volume in 2018 was on a par with 2017’s total of 268 transactions. M&A activities were strong at the beginning of 2018 with a flurry of large-scale transactions by big names including the Singapore- based GIC Private Limited acquiring a minority stake in Vinhomes JSC for US$1.3bn or Vingroup’s investment of US$500.8mn in 98% stake of Berjaya VIUT LLC. Similarly, deal-making stayed busy in 2H2018, exceeding 24 deals from 2H2017 The deceleration was largely attributed to the absence of blockbuster deals like the Sabeco- ThaiBev at US$4.7bn, which standalone made up 51% of 2H2017 and 35% of 2017’s total deal value. Total M&A value in 2018 actually recorded a 14% y- o-y decline from the 2017’s value excluding the mega Sabeco deal. 2018 M&A activity plummeted in value by 44% to US$7.54 bn from the 2017’s record due to the shortage of megadeals and delay in SOE ‘s IPO and divestment. The market has stayed calm in the first 6 months of 2019. Both the number and value of deals fell by 22% and 55% on 1H2018 levels. 2H2018 recorded a few big-ticket marque deals, noticeably 10% of Masan by SK investment at US$472.6mn. Megadeals appeared sporadically in 1H2019. The most notable case was the transaction of SK Investment to acquire 6% of Vingroup for US$1bn. Slow progression of SOE IPOs and divestments was another reason for the drastic decline in deal value since 2H2018. A series of large names such as PetroVietnam, Agribank requested for a delay of divestments and IPOs. Deal value was not disclosed for around 30 deals in 2018 and 15 deals in 1H2019 3,732.6 9,691.6 5,003.5 2,721.6 2,153.3 162 105 138 129 107 1H2017 2H2017 1H2018 2H2018 1H2019 TOTAL DEAL VALUE (US$mn) NO. OF DEALS 118 34 61 299 1,719 1,117 1,140 1,750 6,314 5,131 3,472 4,851 6,388 10,188 13,429 7,544 2,153 - 120 240 360 480 600 0 3,000 6,000 9,000 12,000 15,000 Deal Value (US$mn) Number of deals (RHS)
  17. 17. 17Vietnam M&A 2019 Research Report| Issue 9 | August 2019 M&A activities in 2018 and 1H2019 were flavored with bite- sized transactions Source: FiinGroup Throughout 2018 and 1H2019, the M&A market was not as characterized by megadeals as 2017, but bite-sized transactions. Figure 4 reveals a deep fall in the average deal size over the past 18 months. After skyrocketing to US$50mn in 2017, the average deal value plunged to US$28mn and US$20mn by the end of 2018 and 1H2019 respectively. This was indeed a return to regular scale in the absence of megadeals. The drop in the average deal value was also affected by the fact that more than 30 deals were completed last year, and 15 deals took place this year without disclosure of transaction value. Regarding key areas of focus, Real Estate continued to lead both the deal value and volume in 2018, followed by Banks, Industrial Goods and Services, F&B, and Construction Materials. The sectors that stood out most so far in 1H2019, capturing 94% of total deal value were Industrial Goods & Services, Health care, Construction & Materials, F&B, and Utilities. Inbound and domestic deals remain the two key sources of capital. Outbound M&A, despite accounting for an insignificant portion of the total M&A value showed great prospects. The reviewed period 2018-1H2019 witnessed two big deals closed by Vietnamese companies oversea including FPT Corp’s acquisition of 90% stake in the US-based tech-advisory firm Intellinet Corp and the transaction made by Yeah 1 to acquire 100% of Youtube multi-channel network ScaleLab (although the deal value was later net off as Yeah 1 sold the acquired stake back to the previous owner). Overall, M&A activities in the last 18 months were portrayed by key foreign investors including Singapore, South Korea, US, Japan, and Australia seeking minority stakes in large domestic corporations such as Vingroup or Masan. Meanwhile, active local acquirers like Vingroup are aggressively expanding their market share by buying majority shares in smaller domestic players. Figure 5: M&A average deal size (US$mn) 2008-6M2019 Section 3: 2018-1H2019 M&A in Review | 2018-1H2019 M&A in a nutshell 7 4 5 27 35 26 19 17 33 50 28 20 0 12 24 36 48 60 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H2019
  18. 18. 18Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Deal size analysis: Megadeals dropped, while bite-sized deals expanded Figure 6: Proportion of Deal Value (US$mn) and Number of Deal by value ranges Source: FiinGroup BY DEAL VALUEBY NUMBER OF DEALS In terms of deal value Megadeals valuing over US$100mn maintained the major contribution to total M&A activities over the last 3 years. However, 2018 witnessed a shift in the value contribution among deal value ranges in which medium sized transactions posted significant increases against megadeals. In particular, 2018 recorded 16 megadeals worth US$4.93bn, accounting for 62% of total M&A value and representing a sharp decrease of 12% on 2017’s level. In contrast, the value portion of transactions ranging US$5-25 and US$25-50 jumped from 7% each to 10% and 13% respectively. H2019 continued to see the rise of medium sized deals ranging between US$5-25mn. To date, the value contribution of this segment jumped up to 15%. As the total number of deals sharply decreased, megadeals like SK Investment-Vingroup showed more significant portion to total M&A value which is 66% in 1H2019. Deal value is expected to recover along with the closure of more megadeals in the second half of this year. In terms of deal volume Despite driving total M&A value, megadeals accounted for a minimal proportion of total M&A volume. The percentages have hardly changed over the past 3 years, ranging between 4% and 7%. Meanwhile, most M&A deals during 2018- 1H2019 were less than US$30mn as afore- mentioned. Notably, micro deals being less than US$1mn soared from 4% in 2017 to 18% in 2018 before reaching 24% after the first half of 2019. 1H2019 also recorded more deals ranging between US$1-5mn, making proportion of this segment climb to 30% of total deal volume. Megadeals are expected to come back amid increasing M&A activity. Evidently, around 15 on- going deals announced in 1H2019 are all acquisitions of majority stakes. Additionally, the fact that our database recorded around 30 pending deals since 2018 to date with notable names such as the merger of PGBank to HDBank which has recently received approval from SBV for the acquisition. These clues spark the hope for an improved performance for the M&A activities by the end of 2019 and the years forward. Section 3: 2018-1H2019 M&A in Review | 2018-1H2019 M&A in a nutshell 4% 18% 24% 24% 24% 30% 28% 24% 21%9% 10% 4%8% 5% 3% 7% 6% 4% 2017 2018 1H2019 Less than US$1mn US$1-5mn US$5-25mn US$25-50mn US$50-100mn More than US$100mn 7% 10% 15%7% 13% 7%11% 12% 9% 74% 62% 66% 2017 2018 1H2019 Less than US$1mn US$1-5mn US$5-25mn US$25-50mn US$50-100mn More than US$100mn
  19. 19. 19Vietnam M&A 2019 Research Report| Issue 9 | August 2019 2018 M&A: Real estate dominated M&A scene Sectors with highest M&A value • Real estate continued to be the most vibrant sector, generating US$2.84bn, equivalent to 38% of the year’s M&A activities. Apart from GIC Private Limited’s acquisition of 5.7% in Vinhomes, this sector also witnessed three other megadeals closed by two key players Vingroup and Novoland. Megadeals amounted to US$2.1bn contributing to 74% of the entire sector M&A value. Overall, M&A activities in sector are currently driven by the expansion of key players like VinGroup and Novaland to accelerate their land bank for future projects. Emerging sectors in M&A • Recently foreign investors have been keen on some emerging sectors including Health care (especially pharmaceuticals , Utilities, (especially renewable energy) and Education (*) As a results, M&A deals have been flowed into these sectors over the past 18 months Sectors with highest M&A volume • Industrial goods and services scored third highest in deal value (reaching US$801mn accounting for 10%), but the highest in deal volume. These sectors are benefited by strong domestic demand amid growing population and rapid urbanization that enhance investor confidence. The most active subsectors include Electronic components and equipment, container packaging and transportation services. In 2018, industrial goods and services saw around 45 deals closed or approximately 17% in total M&A deal number in 2018. • Banks & Financial Services, Construction & Materials and F&B and Utilities maintain stable growth over the last few years. These sectors combined account for more 37% of total M&A market value. Besides the Warburg Pincus LLC-Techcombank, 2018 recorded two more completed inbound deal in which standard chartered sold minority stakes of 6% to Alp Asia Finance (Hong Kong) at US$220mn and 5% to Estes Investments Limited (US) at US$152mn. Figure 7: Total M&A Deal Value (US$mn) & Number of Deal by Top Sectors, 2018 Source: FiinGroup Section 3: 2018-1H2019 M&A in Review | 2018-1H2019 M&A in a nutshell (*): Education is classified as Business Training & Employment Agencies in ICB Level 4. 2,844 928 801 798 521 332 215 211 189 169 102 99 94 240 41 6 45 21 18 18 22 14 16 8 7 7 10 33 0 600 1,200 1,800 2,400 3,000 0 10 20 30 40 50 Deal Value (US$mn) Number of deals (RHS)
  20. 20. 20Vietnam M&A 2019 Research Report| Issue 9 | August 2019 1H2019 M&A: Domestic consumer-oriented sectors on the rise Industrial goods and services secured the top position • Industrial goods and service remained the most active sector for M&A activities with 25 deals worth US$1.13bn, accounting for 52.5% of total deal value and 23% in total number of deals in 1H2019. Notably, this period recorded a megadeal worth more than US$1bn completed by the Korea-based SK Investment Vina acquiring 6% of Vingroup. • Other domestic consumer-oriented sectors such as Construction & Materials, F&B and Utilities continued to be among the key attractions for M&A due to consistently growing demand from the local market. The increasing of young households, rapid urbanization and emerge of the middle- income population segment are expected to remain the key drivers of growth in these sectors. • Health care, Renewable Energy, F&B, Utilities, Personal & Household Goods maintained their attraction in 1H2019. In fact, deal makers of some transactions in these sectors kept in secret the deal value; hence the total M&A value in these sectors should have been higher. • Real estate, Banks and Financial Services had a pause • Real Estate was drastically silent and disappeared from top 5 most active sectors due to SBV’s credit tightening to real estate which caused domestic capital inflows to projects to reduce sharply, but potentially attract foreign capital later on. • Similarly, Banks and Financial services were quiet within the first due. The total number of deals and deal value were strongly impacted by pending deals from 2018. Banking and financial services belong to the list of businesses that required special approval from government bodies, hence the process usually takes time. Evidently, our database recorded 5 pending deals from last years to date with notable names such as the merger of PGBank to HDBank which has recently received approval from SBV for the acquisition. Therefore, M&A activities in these sectors are expected to recover soon upon the materialization of these pending deals, along with the movement of banks under pressure of raising capital to meet Basel II in 2020. Figure 8: Total M&A Deal Value (US$mn) & Number of Deal by Top Sector, 1H2019 Source: FiinGroup Section 3: 2018-1H2019 M&A in Review | 2018-1H2019 M&A in a nutshell 1,130 325 263 158 144 54 27 18 18 6 4 6 25 8 17 8 14 2 2 3 6 3 5 14 0 6 12 18 24 30 0 250 500 750 1,000 1,250 Deal Value (US$mn) Number of deals (RHS)
  21. 21. 21Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Vietnam on track for strong revival in domestic consolidations Figure 9: Total Deal Value by Category, 2013-1H2019 Source: FiinGroup • 2018 was marked with the revival of domestic consolidations. In 2017, the value contribution of domestic M&A slumped to 12%, while deal size also registered a record-low due to the flow of inbound megadeals. The growth momentum was regained in 2018 as Vietnamese investors doubled the M&A deal value to US$3.25 from the 2017’s number, thereby making an impressive contribution of 43% to the total transaction value, such a strong rebound after a steep fall that brought domestic acquirors back on track to closely approach foreign players. • Throughout 2018-1H2019, the domestic sector appeared to dominate the market, considering the deal volume. However, in terms of deal value, inbound M&A remained the dominator of the Vietnam M&A market. After a year staying calm, moving into 1H2019, foreign investors swiftly stepped back the pace and scale of their merger and acquisition to account for 68% of 1H2019’s total deal value. Meanwhile, domestic deals were still active but accounted for a humbler proportion of 32.5% in terms of value contribution • In terms of average deal value, foreign investors tend to seek for sizable deals to quickly get a foothold in the market. Thus, the inbound sectors were usually marked with megadeals. • Both cross-border acquisitions and domestic consolidations are expected to maintain a strong momentum during 2019-2021, fueled by new progressions from the State's roadmap to divest from large corporations, adoption of FTAs as well as government’s upcoming plan to remove 49% foreign ownership cap on listed companies • To date, outbound M&A remained consistently inconsiderable, with a negligible contribution to the total M&A activities throughout the years from 2013 to 1H2019. Nonetheless, 2H2018 and 1H2019 saw Vietnamese technology players FPT Corp and Yeah 1 expanded with significant deals in the US as afore-mentioned Average Deal Value Deal value (US$bn) 2017 2018 1H2019 Domestic 1.6 3.25 0.7 Inbound 11.75 4.2 1.45 Number of deals Domestic 113 174 81 Inbound 148 82 25 Section 3: 2018-1H2019 M&A in Review | 2018-1H2019 M&A in a nutshell 14.1 18.7 8.6 79.4 51.3 58.1 2017 2018 1H2019 Average deal value (US$mn) Domestic Inbound 48.1% 36.1% 46.1% 49.4% 11.9% 43.4% 32.5% 51.7% 63.8% 53.7% 50.4% 87.5% 56.0% 67.5% 0.2% 0.1% 0.2% 0.2% 0.5% 0.7% 0.0% 2013 2014 2015 2016 2017 2018 1H2019 Domestic Inbound Outbound
  22. 22. 22Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Section 3: 2018-1H2019 M&A in Review 3.1 2018-1H2019 M&A in a nutshell 3.2 Inbound M&A 3.3 Domestic M&A 4.4 Outbound M&A
  23. 23. 23Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Inbound M&A slowed down during 2018 – 1H2019 Source: FiinGroup Figure 10: Inbound M&A (US$mn) in Vietnam, 2013 - 1H2019 YEAR Acquiror Nation of acquiror Target DEAL VALUE (US$mn) 2018 GIC Pte Ltd. Singapore Vinhomes 1,300 2019 SK Investment Vina II Pte. Ltd South Korea Vingroup 1,009 2018 SK Investment Vina II Pte. Ltd South Korea Masan Group 472 2018 Hanwha Vietnam Opportunity Private Fund 1 South Korea Vingroup 400 2018 Warburg Pincus LLC U.S. Techcombank 370 2018 Alp Asia Finance Vietnam Ltd Hong Kong Asia Commercial Bank 220 2019 Fitness & Lifestyle Group Pty Ltd Australia CMG Asia 200 Figure 11: Top 8 Inbound M&A Deals, 2018 – 1H2019 Source: FiinGroup INBOUND M&A 2011 - 1H2019 US$38.06bn 756 Deals Accumulated inbound M&A deal value into Vietnam since 2011 reached US$38.06bn from 756 transactions. After a record year in 2017 with 148 inbound deals, the inbound market contracted significantly in 2018 with only 82 deals. In terms of value, inbound deals in 2018 registered US$4.2bn, decreasing by 37% y-o-y compared to inbound value in 2017 without the mega SABECO deal. Particularly, medium value deals become predominant as foreign investors tend to acquire minority stakes. As a result, inbound deals only accounted for 57% of total M&A transaction value in 2018, compared to a staggering 88% in 2017. Real estate, banks, and industrial goods & services were the key inbound sectors in 2018, driven by significant investments in Vinhomes, Vingroup and Masan Group. The inbound market remains quiet during the first half of 2019, but still accounted for 67% of total M&A value. 1H2019 only recorded US$1.45bn from 25 transactions, a 67% decrease compared to same period last year. The slowdown of real estate sector, industrial goods & services and healthcare sectors were the main drivers during 1H2019. Section 3: 2018-1H2019 M&A in Review | Inbound M&A Deals with undisclosed buyers are not counted 3,548 3,632 1,794 3,096 3,429 5,134 11,753 4,221 1,453 60 64 71 91 113 102 148 82 25 0 30 60 90 120 150 0 2,800 5,600 8,400 11,200 14,000 2011 2012 2013 2014 2015 2016 2017 2018 1H2019 Deal Value (US$mn) Number of deals (RHS)
  24. 24. 24Vietnam M&A 2019 Research Report| Issue 9 | August 2019 0 500 1,000 1,500 Singapore South Korea United States Japan Thailand Hong Kong Malaysia Philippines Majority stake Minority stake Inbound M&A in 2018: Singapore led the market in terms of deals value Figure 12: Inbound M&A (US$mn) Deal by Country, 2018 Capital inflows for M&A from Singapore reached US$1.4bn in 2018, accounting for 33% of total inbound value into Vietnam. As such, Singapore has replaced Thailand as the leading investors in Vietnam via M&A. The majority of completed deals from Singaporean bidders focused in the real estate sector, contributing over US$1.37bn in value. The largest deal was the acquisition of 5.74% stake in Vietnam’s leading real estate development conglomerate Vinhomes by GIC Pte Ltd valued at US$1.3bn. Other notable deals include the acquisition of Phu An Khang Real Estate JSC from Frasers Property Limited for US$18mn, followed by US$11.4mn investment from Keppel Land to fully acquire Saigon Sport City project. Given the high demand for residential real estate, investment into real estate sector from Singapore is expected to keep growing in the upcoming years. South Korea also emerged in 2018 as an active investor with over US$1.26bn capital inflows into Vietnam via M&A transactions, accounting for nearly 30% of total inbound value. South Korean investors eyed on various sectors, including Industrial Goods & Services (US$920.2mn), Financial Services (US$226.6mn) and Food & Beverage (US$36.3mn). Highest value deal was the US$472.5mn acquisition of 10% stake in Masan Group from SK Investment. In particular, South Korean bidders tend to acquire reputed and established names to quickly capture market share in their respective industries. Within the financial services sector, consumer finance companies were highly pursued as South Korean investors aggressively penetrated this growing market. Major deals include the 100% acquisition of Prudential Vietnam Finance from Shinhan Card for US$151mn and US$74.7mn purchase of 100% stake in Techcom Finance from Lotte Card. Since 2018, investors from Singapore and South Korea escalated their investments in Vietnam and dominated the inbound market in terms of deal value. Meanwhile, despite the highest number of deals, Japanese investors usually contributed small and medium-sized deals. Source: FiinGroup BY TOTAL DEAL VALUE BY NUMBER OF DEALS Section 3: 2018-1H2019 M&A in Review | Inbound M&A INBOUND 2018 US$4.22bn 82 deals 18 14 12 8 6 5 4 3 2 2
  25. 25. 25Vietnam M&A 2019 Research Report| Issue 9 | August 2019 0 500 1,000 1,500 South Korea Australia Japan Singapore Thailand Hong Kong United States United Kingdom Majority stake Minority stake Inbound M&A in 1H2019: South Korea strengthened its presence in Vietnam with over US$1bn capital inflows Figure 13: Inbound M&A (US$mn) Deal by Country 1H2019 Given the strong momentum in the 2H2018, South Korean investors continued to solidify their footholds in Vietnam via M&A transactions. During 1H2019, capital inflows from South Korea surpassed US$1bn, a quadruple increase compared to 1H2018. Following the strategy in 2018, South Korean investors continued to invest in high-profile names with established market share. In particular, after the US$472mn investment in Masan Group, SK Investment spent another US$1bn to acquire 6% stake in Vingroup - the giant conglomerate in Vietnam. In fact, from 2018 to 1H2019, South Korean investors have already poured in over US$1.4bn into Vingroup, accounting for 25% total inbound deal value during this period. These investors saw high potentials from Vietnamese firms as an ideal strategic partner to accelerate their regional objectives while benefiting from the promising growth trajectory. After an impressive year in 2018, capital inflows from Singapore decelerated in 1H2019 with only US$60mn from 2 minor deals. As the real estate sector started to cool off, Singaporean investors have been shifting to Food & Beverage and Industrial Goods & Services sectors, which will gain significant benefits from the CPTPP and upcoming EVFTA. Japan remains the most active investor in terms of volume. Inbound M&A from Japan totaled US$128.3mn from 10 deals during 1H2019, suffering a 49% decrease from 1H2018. With a conservative investment strategy, Japanese investors tended to acquire minority stakes at a small value. The largest deal was worth US$106.5mn, in which Taisho purchased additional 20.6 million shares of Hau Giang Pharmaceutical to lift its stake to 51%. 1H2019 also witnessed the appearance of Australian investors with the acquisition of CMG Asia from Fitness and Lifestyle Group, Australia's most significant gyms business, for over US$200mn. Inbound M&A in 1H2019 recorded 25 deals, down from 27 deals in same period last year. In terms of inbound deals value, 1H2019 only achieved US$1.45bn, a 54% decrease compared to 1H2018. Apart from South Korea, frequent investors such as Singapore and Thailand have reduced the size of their investments. Source: FiinGroup INBOUND 1H2019 US$1.45bn 25 deals BY TOTAL DEAL VALUE BY NUMBER OF DEALS Section 3: 2018-1H2019 M&A in Review | Inbound M&A 10 3 2 2 2 1 1 1 1 1 1
  26. 26. 26Vietnam M&A 2019 Research Report| Issue 9 | August 2019 CAPITAL INFLOWS 2011 - 1H2019 via M&A US$4.57bn 68 Deals Figure 14: Inbound M&A (US$mn) into Vietnam by South Korean Investors, 2011 – 1H2019 Spotlight: South Korea solidified its presence in Vietnam Investment waves from South Korea In light of recent government’s efforts and blooming economy in Vietnam, South Korean investors accelerated their investments into Vietnam via M&A with large-scale acquisitions. Ever since the 2H2015 when Decree 60 was imposed to raise the foreign ownership level to 100% and VKFTA was officially signed to reduce tariff barriers, capital inflows from South Korea experienced a steep upward trend. In particular, inbound M&A from South Korea recorded US$3.5bn in value during 2016-1H2019, registering an outstanding CAGR of 28.5%. South Korean companies have primarily invested in industrial sectors, evidenced by US$2.1bn investment in Industrial Goods & Services sector since 2016. Main bidders in this sector were giant business conglomerates that sought large-scale deals to acquire high-profile enterprises, namely Gemadept, Masan Group and Vingroup. This strategy allowed South Korean giants to rapidly gain direct access to local markets, enjoy sustained growth while mitigating risks. Besides manufacturing, South Korean buyers also targeted banking and consumer finance sectors. Given the booming digital finance in South Korea, these financial investors sought to quickly capture the robust growth of Vietnam with the support of technology. Shinhan Bank pioneered in 2017 with 100% stake acquisition of ANZ Bank (Retail division) for US$240mn. Subsequently in 2018, Shinhan Card and Lotte entered the local consumer lending market with 100% buyouts of local finance companies. Considering the pervasion of South Korean retails, the appearance of finance companies would complement existing chains and create a strong ecosystem in Vietnam. Moreover, as the South Korean government is tightening the consumer lending market due to enormous household debts, South Korean financial institutions is expected to keep invading into Vietnam, exploiting the untapped consumer lending market for over 90 million people. Recently, a third wave of investments, in which South Korean’s SMEs take the form of strategic alliances with local firms, is arriving. Particularly, South Korean partners will offer modern technology, while Vietnamese companies could assist with brand presence and distribution. Capital inflows to Vietnam from South Korea escalated since 2016, peaked in 2018 and followed by an outstanding 1H2019. Section 3: 2018-1H2019 M&A in Review | Inbound M&A Source: FiinGroup 533 107 159 43 193 493 734 1,260 1,047 5 4 4 3 6 8 21 14 3 0 5 10 15 20 25 0 300 600 900 1,200 1,500 2011 2012 2013 2014 2015 2016 2017 2018 1H2019 Deal Value (US$mn) Vol (RHS)
  27. 27. 27Vietnam M&A 2019 Research Report| Issue 9 | August 2019 CAPITAL INFLOWS 2011 - 1H2019 via M&A US$5.55bn 85 Deals Figure 15: Inbound M&A (US$mn) into Vietnam by Singaporean Investors, 2011 – 1H2019 Spotlight: Singapore escalated its investment scale in Vietnam’s real estate sector The “Asian Tiger” Singapore remained the most active cross-border investor in South East Asia. Singapore remained active in pursuing investment opportunities in the region via M&A transactions. Led by GIC Private - the world’s eighth-largest sovereign wealth fund managing over US$390bn and numerous PE funds, Singapore possesses abundant sources of foreign reserves. As such, Singaporean investors are aggressive in their hunt for acquisition abroad, especially in emerging markets like Vietnam. Since 2011, Singapore has poured over US$5.55bn into Vietnam via M&A transactions, concentrating in 2016-2018 period. In particular, inbound capital inflows from Singapore spiked up in late 2016 through mega deals in real estate sector, exploiting the growing property market. As an emerging market with rapid urbanization rate, Vietnam offered high-yield opportunities that were unavailable in developed countries. The investment wave in real estate was triggered by US$442.5mn investment from CapitaLand and Keppel Land in 2017 into residential properties, followed by the US1.3bn acquisition of Vinhomes from GIC Private in 2018. In total, during 2016-1H2019, M&A transactions in real estate sector contributed US$2.39bn, accounting for 43% of total inbound value from Singapore since 2011. However, as foreign investments into real estate started to cool off, capital inflows from Singapore into this sector also experienced a downward trend in terms of volume, recording only 5 deals in 2018 and zero deal in 1H2019. Apart from real estate, M&A transactions from Singapore spanned across multiple sectors yet at insignificant value, including Food & Beverage (US$20mn) and Travel (US$18.7mn). 1H2019 was a dormant period for Singaporean investors, contributing merely US$39mn from only 2 deals - lowest level since 2012. The deceleration of investment capital from Singapore was a strong reflection of the global slowdown in M&A activities in 2019, attributed to greater market volatility and US-China tensions. As a result, large cross-border deals, even from market leaders like Singapore almost disappeared during the first six months of 2019. Capital inflows to Vietnam from Singapore surged rapidly since the 2H2016, hit record in 2017 and remained strong in 2018. Section 3: 2018-1H2019 M&A in Review | Inbound M&A Source: FiinGroup 79 10 595 141 1,049 433 1,794 1,412 39 4 2 13 9 11 15 17 12 2 0 4 8 12 16 20 0 400 800 1,200 1,600 2,000 2011 2012 2013 2014 2015 2016 2017 2018 1H2019 Deal Value (US$mn) Vol (RHS)
  28. 28. 28Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Source: FiinGroup Figure 16: Inbound M&A Activities (US$mn) by Top Sector Inbound M&A: Sector Analysis BY NUMBER OF DEALSBY TOTAL DEAL VALUE In 2018, inbound deals are highly concentrated as top four sectors attracted over 75% of total inbound deal value: Real Estate (US$1.4bn), Banks (US$742mn), Food & Beverage (US$584mn) and Industrial Goods & Services (US$454mn). Capital inflows into real estate sector were attributed to rapid urbanization with expanding middle class that stimulated the demands for residential property. Meanwhile, large foreign investments into two leading conglomerates namely Vingroup and Masan Group drove the industrials goods & services sector. Particularly, considering the upcoming CPTPP, EVFTA that will reduce tariff barriers and the movements of manufacturers from China, subsectors such as electronic equipment, heavy construction and transportation services will likely attract high interests. 1H2019 saw a significant shift in appetite of foreign investors. Real Estate, Banks and Financial Services contributed only US$15mn, equivalent to merely 1% of total inbound value during this period. Meanwhile, Industrial Goods & Services sector dominated with over US$1.02bn in just six months, accounting for 71% of total inbound transaction value. Section 3: 2018-1H2019 M&A in Review | Inbound M&A 1,394 742 584 454 238 147 135 120 104 90 69 Real Estate Banks Food & Beverage Industrial Goods & Services Financial Services Basic Resources Utilities Personal & Household Goods Construction & Materials Oil & Gas Health Care 2018 1H2019 8 3 8 7 8 4 8 9 2 2 4 Real Estate Banks Food & Beverage Industrial Goods & Services Financial Services Basic Resources Utilities Personal & Household Goods Construction & Materials Oil & Gas Health Care 2018 1H2019
  29. 29. 29Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Section 3: 2018-1H2019 M&A in Review 3.1 2018-1H2019 M&A in a nutshell 3.2 Inbound M&A 3.3 Domestic M&A 3.4 Outbound M&A
  30. 30. 30Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Domestic M&A 2018: Continued upward trend, but got off a slow start in 1H2019 2018 Domestic M&A Overview Accumulated domestic M&A value since 2011 recorded 1,385 deals valuing US$20.94bn. Remarkably, 2018 witnessed an upward in domestic M&A scale, recording US$3.26bn from 174 transactions, average deal size of nearly US$19mn which is significantly improved from 2017’s level of US$14mn. 1H2018 recorded 80 deals at US$1,806mn while 2H2018 saw a more than double performance, in terms of both deal value and volume. Half of domestic deal value in 2018 are made of mega deals in Real Estate, and Construction with active acquirors: Vingroup, Novaland, and An Quy Hung. Real estate is the most active sector in 2018, fueled by the race to collect good land among active domestic investors like Vingroup or Novaland. The situation is that "clean" property spots are getting scarce, while domestic enterprises are facing fierce competition foreign capital inflows. Furthermore, the real estate procedure requires 3 - 5 years to finish and property-transferring fee is increasing by 30 - 50 % over the year are additional factors to the surge of domestic M&A Real Estate market. Taking advantage of local expertise, domestic players see the urge of acquiring land areas for future projects and enhancing their foothold in the market. 1H2019 Domestic M&A Overview Domestic M&A activities ended the first half with a modest performance. Although 1H2019’s deal volume is comparable to 1H2018’s. total deal value of US$700mn, equal to less than half of 1H2018’s. Nam Long Investment Corp’s acquisition of 70% stake in Dong Nai Waterfront City for US$100mn was the only one mega-transaction completed by domestic investors. Overall, domestic M&A value contributes 33% to the total M&A value in this period. 1H2019 registered an average deal size of modestly US$9mn, with 73 out of 81 acquired deals ranging from less than US$1mn to US$25mn. However, 63% of total deal value amounting to US$442mn are constituted by 8 deals larger than US$25mn. During the first half of 2019, the “ever hot sector” Real Estate experienced a cooling time with only US$3.91mn from 5 deals. Recently, many M&A real estate failed to be executed, despite achieving agreements with foreign partners due to problems in the legal evaluation stage. This originated from inconsistencies in regulations such as complicated land use rights, which is regarded as the biggest barrier in M&A activities in real estate, especially for foreign investors. Figure 17: Domestic M&A Total Deal Value (US$mn) & Deal Number, 2011 – 1H2019 Source: FiinGroup Domestics M&A to 1H2019 US$20.94 bn 1,385 Deals Section 3: 2018-1H2019 M&A in Review | Domestic M&A Deals with undisclosed buyers are not counted 2,767 1,225 1,671 1,750 2,947 5,032 1,597 3,255 700 195 104 98 156 261 203 113 174 81 0 60 120 180 240 300 0 1,100 2,200 3,300 4,400 5,500 2011 2012 2013 2014 2015 2016 2017 2018 1H2019 Deal Value (US$mn) Number of deals (RHS)
  31. 31. 31Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Domestic M&A 2018 - 1H2019: Real Estate dropped, Construction & Materials, Industrial Goods & Services heat up Source: Fiingroup • During the first half of 2019, the “ever hot sector” Real Estate experienced a cooling time with only US$3.91mn from 5 deals. Recently, many M&A real estate failed to be executed, despite achieving agreements with foreign partners due to problems in the legal evaluation stage. This originated from inconsistencies in regulations such as complicated land use rights, which is regarded as the biggest barrier in M&A activities in real estate, especially for foreign investors. • While Construction & Materials took the whole year 2018 to achieve 15 deals totaling US$418mn, it needs only 6 months in 2019 to reach US$217mn from 13 deals, accounting for 31% of total domestic deal value in 1H2019, thereby replacing Real Estate to become the most active sector after within 1H2019. • Industrial Goods & Services decreased by half in deal volume and three times in deal volume, mainly focusing on Transportation Services, Containers & Packaging, Electronic Equipment. This can be explained by the increasing capital flow from Chinese enterprises as an impact of the US – China trade war as well as other beneficial Free Trade Agreement terms. Section 3: 2018-1H2019 M&A in Review | Domestic M&A BY NUMBER OF DEALSBY TOTAL DEAL VALUE Figure 18: Domestic M&A activities by top sector Unlike inbound M&A which has a high concentration on the top four sectors, over the past 2 years, domestic M&A showed fluctuations in both deal value and volume across sectors. • Real estate is the most active sector in 2018 fueled by the race to collect good land among active domestic investors like Vingroup or Novaland. Total real estate deal value was at US$1.45bn (US$56mn higher than that of Inbound deals) from 38 deals, 3 of which are mega deals, 2 from Vingroup & 1 from Novaland, amounting to US$811, making up for 56% of domestic M&A in real estate. The situation is that "clean" property spots are getting scarce, while domestic enterprises are facing fierce competition foreign capital inflows. Furthermore, the real estate procedures requiring 3 - 5 years to finish and property-transferring fee increasing by 30 - 50 % over the year are additional factors to the surge of domestic M&A Real Estate market. Taking advantage of local expertise, domestic players see the urge of acquiring land areas for future projects and enhancing their foothold in the market. • Construction & Materials is the 2nd largest sector recording US$418mn from 15 deals with stable domestic investments throughout the year. The 58% acquisition of Vinaconex Corp by An Quy Hung LLC at US$316.5mn makes up for 76% of the sector-wide deal value. 1,450 418 347 213 178 153 95 91 81 229 Real Estate Construction & Materials Industrial Goods & Services Food & Beverage Banks Chemicals Financial Services Personal & Household Goods Utilities Others 2018 1H2019 32 15 38 13 1 7 9 5 14 40 Real Estate Construction & Materials Industrial Goods & Services Food & Beverage Banks Chemicals Financial Services Personal & Household Goods Utilities Others 2018 1H2019
  32. 32. 32Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Domestic Spotlight: Construction & Materials heat back to the race Source: FiinGroup Figure 19: Domestic M&A Deal Value (US$mn) & Deal Number in Construction & Materials Construction & Materials ended 1H2019 as the most dominant sector among Domestic M&A activities with 13 deals totaling US$217mn, constituting 31.43% of total domestic M&A deal value – highest figures since 2011. The average deal size was also very impressive at US$16.7mn. Construction & Materials seems not to be an attractive sector for M&A ever since it was first recorded in 2011, with the proportion of the total domestic deal value never passing 10%. Especially, 2017 witnessed the sector’s lowest point of deal value, volume, and contribution to total domestic deal value of US$30mn, 9 and 1.86% respectively. However, 2018 saw the Construction & Materials deal value rocke by 15 times with deal number almost doubled, compared to those of 2017. This upward trend continued throughout 1H2019, but mainly on the domestic side as the same figure of Inbound deal value is 10 times lower. This surge of Construction & Materials resulted from the active Real Estate sector with M&A value (worth US$1,311mn in 2018). High demand from the property market raised the demand for Building Materials, Fixtures and Heavy Construction (in which the domestic investment flow mainly focuses on). 1H2019 Construction & Materials recorded only one mega-deal of 58% acquisition of Vinaconex Corp by An Quy Hung valuing at US$317mn, besides the transaction of Vingroup-Thai Son Investment at US$78mn and other 13 deals of being less than US$20mn. In 1H2019, Vinaconex Corp has successfully divested its state capital after its first attempt failed in 2018, thereby welcoming three new major shareholders Star Invest LLC, An Quy Hung LLC & Cuong Vu Real Estate LLC owning 8%, 58%, 21% for US$36.45mn, US$317mn and US$85.4mn,respectively . Section 3: 2018-1H2019 M&A in Review | Domestic M&A 231 115 38 118 212 108 30 418 217 26 18 16 28 47 24 9 15 13 0 15 30 45 60 0 100 200 300 400 500 2011 2012 2013 2014 2015 2016 2017 2018 1H2019 Deal Value (US$mn) Vol (RHS) 31.4%31.4%1.9%2.5%7.6%6.9%2.3%9.3%8.3% Contribution to total domestic M&A value
  33. 33. 33Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Section 3: 2018-1H2019 M&A in Review 3.1 2018-1H2019 M&A in a nutshell 3.2 Inbound M&A 3.3 Domestic M&A 3.4 Outbound M&A
  34. 34. 34Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Source: FiinGroup Figure 20: Outbound M&A Activities (US$mn) 2011-1H2019 by Vietnam Domiciled Enterprises Outbound: Vietnamese key tech players ‘footprints in the US Outbound M&A by Vietnamese companies remains insignificant, in both deal number & deal value Outbound M&A, since recorded, has been much less significant than Inbound and Domestic M&A during 2011 – H12019. Specifically, Outbound M&A peaked in 2012 with US$274.6mn from only 3 deals, and then plunged over the next 3 years. However, from 2017 onwards, overseas investment showed prospects with 1 deal each year. Noticeably, 2018 and 1H2019 witnessed the significant capital outflows from Vietnamese technological giants. Noticeable deals in 2018 & 1H2019 In July 2018, FPT acquired 90% stake of the US- based technological consulting company Intellinet at an initial deal payment of US$30mn for total estimated deal value of nearly US$50mn. This is FPT’s strategic move in its ambition to provide comprehensive digital transformation services to enterprises, and boost operations in the US market. The acquisition of Intellinet is expected to raise FPT’s revenue in U.S market from US$65mn to US$100mn after one year. It is forecasted that in the next 3 years, FPT's US revenue may double. Currently, the US is FPT's second-largest processing market after Japan. One year later, in July 2019 (*), FPT has announced the strategic investment in Homa Techs Inc., with specific figures notified later. This acquisition sets FPT’s first foot in joining the Asia’s smart home market which is worth US23,078mn. CAPITAL OUTFLOWS 2011 - 1H2019 via M&A US$431mn 16 Deals 1H2019 welcomed an outbound deal when Yeah1 acquired 100% of ScaleLab, #1 fastest- growing media company by Yeah1 at US$20mn. 400mn-subscriber ScaleLab is expected to raise Yeah1 monthly Youtube views to 6.9bn and subscribers to 610mn throughout the world. This follows Yeah1’s strategic plan to go global. However, 2 months later, ScaleLab was sold back to its original CEO at US$12mn. This is followed by an incident when Youtube accused SpringMe - a Yeah1 subsidiary – of violating Youtube policies in selecting and managing channels & videos, resulting in Youtube terminating its Content Hosting Agreement (CHSA) with Yeah1 & its subsidiaries. Following that, Yeah1 & its subsidiaries cannot make any earnings from third-party businesses’ advertisement on their channels.As further negotiations with Youtube did not work, Yeah1 had to sell off ScaleLab to protect Yeah1’s capital investment and preserve the investors’ interest. Prospects for 2H2019 Technology continues to witness huge capital outflows when Vietnamese technological giants are expanding their influence in advanced markets such as the U.S, Japan, etc., Also, the energy sector, with policies encouraging investments is expected to see oversea expansion of large corporations such as Hoang Anh Gia Lai, Thanh Thanh Cong, etc., Section 3: 2018-1H2019 M&A in Review | Outbound M&A 0 275 7 5 12 22 61 50 0 0 3 1 4 1 4 2 1 0 0 1 2 3 4 5 0 60 120 180 240 300 2011 2012 2013 2014 2015 2016 2017 2018 1H2019 Deal Value (US$mn) Number of deals (RHS) (*) excluded from the chart of outbound M&A activities as this deal happened in July 2019- not belonging to the reviewed period
  35. 35. Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Section 4: Sector Review 4.1 Real Estate 4.2 Industrial Goods & Services 4.3 Food and Beverages 4.4 Banks 4.5 Emerging Sectors for M&A: Health care, Education & Utilities
  36. 36. 36Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Source: FiinGroup • Notwithstanding interests from multiple foreign investors, Real Estate sector is highly concentrated. Particularly, top four bidders accounted for 76% of total real estate inbound value during 2011-1H2019: Singapore (US$2.3bn), Hong Kong (US$2.1bn), South Korea (US$934mn) and Japan (US$827mn), with diverse appetites and investment scales. Specifically, Singaporean investors eyed the residential segment with the intense penetration of Keppel Land and CapitaLand, altogether adding nearly 30 large-scale projects over a five-year span. Meanwhile, South Korean investors, led by Lotte Group, aimed at commercial properties to provide office and retail spaces for South Korean firms, along with housing for expatriates. Notable transactions was the acquisition of Landmark 72 Tower by Mirae in 2016. • With the imminent arrival of manufacturers relocating from China due to the trade war, industrial real estate is expected to heat up in 2H2019 and attracted more foreign interest. • Real Estate sector has always been the main contributor for inbound M&A in Vietnam, driven by high demand for all real estate segments. From 2011 to 2018, the sector attracted over US$8.29bn from inbound deals, registering an outstanding 37% CAGR and accounting for 22% of the total inbound value. Nonetheless, as the sector started to attract rising interests from the domestic market, foreign investments into real estate plunged in terms of both deal volume and value. In 2018, the sector only recorded USS$1.4bn from 8 deals, lowest volume since 2012. Apart from the US$1.3bn megadeal of GIC Private to acquire Vinhomes, the market did not witness any other large-scale transactions that exceeded US$50mn. The market remained inactive in 1H2019 as no inbound transactions occurred. • Despite a slowdown in 2018 and 1H2019, Real Estate sector still posted huge opportunities with solid growth trajectory, driven by the following factors: (i) rapid urbanization rate; (ii) growing middle-class with rising disposable income; and (iii) increased demands for industrial real estate amid US-China trade war. Figure 21: Inbound M&A Activities (US$mn) in Real Estate, 2011 – 1H2019 Inbound Real Estate transactions posted strong growth during 2011-2018 but decelerated in 1H2019 Section 4: Sector Review | Real Estate INBOUND M&A IN REAL ESTATE 2011 - 1H2019 US$8.29bn 94 Deals 151 103 598 763 1,636 823 2,817 1,394 0 1 2 11 18 18 12 24 8 0 0 6 12 18 24 30 0 700 1,400 2,100 2,800 3,500 2011 2012 2013 2014 2015 2016 2017 2018 1H2019 Deal Value (US$mn) Vol (RHS)
  37. 37. 37Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Singaporean investors dominated major inbound real estate deals Date 4/2018 Size (US$ mn) 1,300 Acquired stake 5.7% Acquirer • GIC Private Limited, a Singapore sovereign wealth fund, purchased ordinary shares and extended debt instrument for Vinhomes at combined value of US$1.3bn, including US$850 million for 5.74% stake. The deal expanded GIC’s portfolio in Vietnam, which already owned stakes of large companies such as Vinamilk, Vietcombank and Masan. Target Date 5/2018 Acquirer • Singapore-based Frasers Property acquired 75% of the issued share capital of Phu An Khang Real Estate JSC, a wholly-owned subsidiary of Tran Thai Group. The US$18mn acquisition allowed Frasers Property to participate in residential-cum-commercial projects in HCMC. Target Size (US$ mn) 18 Acquired stake 75% Acquirer • In early April 2018, VinaCapital Vietnam Opportunity Fund (VOF) made a US$21mn private equity investment to purchase 12% stake in Cenland, one of Vietnam’s leading real estate brokerages. The deal helped VOF jump in a growing market with unexploited potentials. Target Date 4/2018 Size (US$ mn) 10 Acquired stake 12% Acquirer • In March 2018, Keppel Land acquired the remaining 10% stake in Saigon Sport City project for US$11.4mn. After the acquisition, Keppel Land has consolidated full ownership of the prime township, solidifying its presence in Vietnam. Target Date 3/2018 Size (US$ mn) 11.4 Acquired stake 10% Section 4: Sector Review | Real Estate
  38. 38. 38Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Source: FiinGroup • However, 2018 witnessed a strong rebound with 32 deals valued at US$1.45bn, recording an impressive 187% y-o-y growth. Amid the upcoming tightening policies relating to granting land use rights and lending for real estate projects, large real estate developers intensively acquired smaller companies, who already owned approved real estate projects with favourable locations and can be put into immediate use. This strategy would allow acquirers to shorten the idle time and reduce capital expenditures, thus enhancing market advantage with lowered product costs. The most active acquirers were Vingroup and Novaland, who respectively spent US$922mn and US$365mn to capture majority stakes of real estate developers and projects, notably including Berjaya Financial Centre and International University Town. These acquisitions provided Vingroup and Novaland with solid foundation prior to a strict real estate market in 2019. • Compared to inbound transactions, domestic M&A deals within the Real Estate sector occurred at much higher volume with total 192 deals. In terms of value, domestic M&A mainly comprised of small-scale transactions, yielding only US$7.34bn during 2011-1H2019. Despite that, Real Estate sector remained the key driver for domestic M&A, accounting for 36% of total domestic value during 2011-1H2019. • The market stayed stable during 2013-2015, then abruptly skyrocketed in 2016 to surpass US$2.9bn. The sudden rise could be explained by the conclusion of 30,000bn VND credit package, which prompted real estate developers to rapidly expand and accelerate their investments. The ending of disbursement package significantly reduced the demand for residential housings in 2017, causing developers to reduce their investment scale to the lowest level since 2012. Figure 22: Domestic M&A Activities (US$mn) in Real Estate, 2011 – 1H2019 Domestic Real Estate transactions occurred at high volumes but lower deal value DOMESTIC M&A IN REAL ESTATE 2012 - 1H2019 US$7.5bn 192 Deals Section 4: Sector Review | Real Estate 0 2 798 826 783 2,970 681 1,450 4 0 1 21 40 32 43 18 32 5 0 12 24 36 48 60 0 600 1,200 1,800 2,400 3,000 2011 2012 2013 2014 2015 2016 2017 2018 1H2019 Deal Value (US$mn) Vol (RHS)
  39. 39. 39Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Vingroup and Novaland actively increased their land banks via M&A Date 12/2018 Size (US$ mn) 69 Acquired stake 100% Acquirer • Novaland completed the acquisition of 100% of Thinh Vuong Real Estate JSC with a consideration of US$69mn. The purchase allowed Novaland to control other real estate subsidiaries of Thinh Vuong, increasing its land banks and projects. Target Date 8/2018 Acquirer • Along with the acquisition of Thinh Vuong, Novaland also purchased Dinh Phat Real Estate JSC with a consideration of US$152mn, which strengthened its portfolio prior to a tightened real estate market in 2019. Target Size (US$ mn) 152 Acquired stake 100% Acquirer • In August 2018, Vingroup completed the USS$506mn purchase of 98% stake in Berjaya Vietnam International University Township. The acquisition aimed to accelerate the long-delayed project in HCMC. Target Date 8/2018 Size (US$ mn) 506 Acquired stake 67.5% Acquirer • Prior to the acquisition of Vietnam International University Township, Vingroup contributed approximately US$86mn to own 67.5% stake in Berjaya Vietnam Financial Center limited. Through this deal, Vingroup will develop a project comprised of an office building, a five-star hotel, serviced residences, and a shopping mall on a 6.6ha land plot in HCMC. Target Date 3/2018 Size (US$ mn) 86 Acquired stake 67.5% Dinh Phat Real Estate Joint Stock Company Thinh Vuong Real Estate Joint Stock Company Section 4: Sector Review | Real Estate
  40. 40. 40Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Outlook for Real Estate sector in 2H2019 • 1H2019 turned out to be a quiet period with only 5 small-scale deals for both domestic and inbound markets. In particular, the domestic real estate market were less vibrant due to the issuance of new lending policies by SBV and tightened grant of land use rights. • In order to reduce non-performing loans and limit lending for high-risk sectors, including real estate, Circular 19/2017/TT-NHNN lowered the maximum ratio of short-term funds for long-term loans from 45% to 40%. In addition, Circular 19 also raised the risk coefficient of real estate loans from 150% to 200%, discouraging capital inflows into real estate sector. • Circular 37/2018/TT-BTC imposed tightened regulations on the management and disposition of public real estate. • Directive 11/CT-TTg, which provided solutions to foster a stable real estate market, required competent authorities to issue regulations for condotel market. Implication • In 2H2019, the pipeline supply is expected to decrease in light of restrictions in downtown area, slow licensing process from HCMC and strict scrutiny for divestment of SOE’s real estate. • Nonetheless, long-term outlook remains optimistic with strong fundamental, fueled by high urbanization rate of nearly 40% and steady population growth of 2% per annum. Further, given the improved infrastructure with newly built highways, residential projects expanded further away to suburban areas, posing huge opportunities for real estate M&A activities outside of HCMC and Hanoi. Residential sector • On the other hand, commercial sector is expecting a boost in 2H2019. In particular, aligned with the upcoming investment inflows into Vietnam thanks to FTAs and relocation of manufacturers from China. Thus, industrial real estate including warehouses, factories and industrial parks will attract high interest from foreign players, who provide alternative capital sources amid tightened credit policies. • In addition, the office sector emerges as a potential driver for M&A activities. The appearance of flexible workspace, which registered 109% y-o-y growth in terms of leasing area, provided a new wave of supply for the sector. Looking forward, office supply volume during 2019-2021 is expected to escalate, driven by solid expansions of IT/Tech sectors and persistent growth of flexible workspace. Commercial sector Section 4: Sector Review | Real Estate
  41. 41. 41Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Section 4: Sector Review 4.1 Real Estate 4.2 Industrial Goods & Services 4.3 Food and Beverages 4.4 Banks 4.5 Emerging Sectors for M&A: Health care, Education & Utilities
  42. 42. 42Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Source: FiinGroup • The sector maintained strong momentum into 2018 as foreign investors keep eyeing on the rising logistics sector of Vietnam. Given the fast-growing economy along with upcoming movements of manufacturers from China, Vietnam is expected to become a logistic hub. Notable deal was the US$47mn transaction of Mirae Financial Group to acquire the logistics centers in Yen Phong Industrial Park. • The sector is expected to be active in 2019 amid the signings of new FTAs, which stimulate processing and manufacturing industry and thus boost demand for logistics sector. Particularly, investors started to look into emerging subsectors, evidenced by the investment of Ryobi Holdings into Amerasian Shipping Logistics to develop cold chain in Vietnam. • Industrial goods & services has always been an active sector for inbound M&A activities in Vietnam, driven by high demand for transportation and logistics services. The sector started to gain attention from foreign investors since 2013. In particular, during 2013-2016, industrial goods & services contributed 55 deals, which were mainly small and medium-scale deals. As such, the sector during 2013-2016 only recorded a modest US$304mn in terms of deals value. • Yet, the sector experienced a steep upward trend during 2017-1H2019, thanks to improved infrastructure and rising export/import activities that lured in foreign investment into logistics. Despite a reduction in deals volume, this period witnessed the surge of mega deals. Specifically, industrial goods & services sector attracted over US$1.99bn from inbound investors during 2017-1H2019, registering an impressive 25.6% CAGR. The investment wave was triggered by the US$86mn deal of CJ Logistics Corp acquiring 82% stake in Gemadept, followed by investments into Dinh Vu and Cat Lai ports of Samarang Ucits - Samarang Asian Prosperity in late 2017. Industrial Goods & Services started to attract large-scale inbound deals since 2017 INBOUND M&A IN INDUSTRIAL GOODS & SERVICES 2011 - 1H2019 US$2.36bn 95 Deals Figure 23: Inbound M&A Activities (US$mn) in industrial goods & Services, 2011 – 1H2019 Section 4: Sector Review | Industrial Goods & Services 0 55 24 55 178 48 518 454 1,026 0 5 5 11 21 18 21 7 7 0 5 10 15 20 25 0 250 500 750 1,000 1,250 2011 2012 2013 2014 2015 2016 2017 2018 1H2019 Deal Value (US$mn) Vol (RHS)
  43. 43. 43Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Foreign investors escalated their investments into logistics sector Date 5/2019 Acquirer • In May 2019, the Japanese transportation company Ryobi Holdings acquired 35% stake of Amerasian Shipping Logistics, a freight forwarding and logistic company for an undisclosed amount. The investment aimed to develop the cold chain logistics segment in Vietnam. Target Size (US$ mn) Undisclosed Acquired stake 35% Acquirer • In March 2019, the Taiwanese marine transportation company Wan Hai Lines LTD purchased over 19 million shares of Da Nang Port for US$17mn. After the deal, Wan Hai Lines raised its stake in Da Nang Port to 20%, solidifying its ownership in the growing logistics company Target Date 3/2019 Size (US$ mn) 17 Acquired stake 20% Acquirer • In October 2018, the joint venture between Mirae Asset and Naver Asia Growth Fund spent US$47mn to acquire two logistic centers in Yen Phong Industrial Park. The deal allowed the joint venture to expand its portfolio and enter the flourishing logistic sector in Vietnam. Target Date 10/2018 Size (US$ mn) 47 Acquired stake 100% Yen Phong Industrial Park Section 4: Sector Review | Industrial Goods & Services
  44. 44. Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Section 4: Sector Review 4.1 Real Estate 4.2 Industrial Goods & Services 4.3 Food and Beverages 4.4 Banks 4.5 Emerging Sectors for M&A: Health care, Education & Utilities
  45. 45. 45Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Source: FiinGroup Figure 24: Total M&A Deal Value (US$mn) & Deal Number, Food & Beverage Food & Beverage (F&B) has always been a “magnet” for M&A thanks to the sector’s high and stable growth rate, driven by Vietnam’s population size of almost 100mn people, rapid urbanisation, emerging middle class, and resilient GDP growth. From 2011 to H12019, 245 deals with the total value of US$12.5bn have been recorded, led by “big men” in the industry such as Masan, Kido, and Pan Group. Nevertheless, 2018 and 1H2019 witnessed the cool- off of M&A activities in the F&B sector, mostly due to the slump in Inbound M&A. 2018 recorded 21 M&A cases valued at US$798mn, equivalent to just 66% of deal volume and 13% of deal value noted in 2017. Deal making in F&B in 1H2019 maintained this stable and steady trend. The main reason for the sudden drop in value is the absence of blockbuster deals like ThaiiBev and Sabeco in 2017 or Singha-Masan in 2016. During this period, there were only small and mid-sized deals. The average values of M&A deals were US$16.5mn in 2018, and US$19.75mn in 1H2019. As a result, M&A value in this sector turned to the regular norm as the period before 2016, but overall, the outlook for F&B will still be vibrant thanks to uprising of domestic players and growing domestic demand. Section 4: Sector Review | Food & Beverage M&A in F&B went back to regular norm after the inbound fever Inbound M&A had driven the market during the period. 2018 inbound M&A plummeted 90% y-o- y, in line with absence of megadeals like Sabeco. The downward trend remained in 1H2019. Meanwhile, domestic M&A value decreased but with a lower degree of 38% in 2018 and started recovering in 1H2019, achieved 64% of 2018’s value. Explanations for this could be while international investors hesitated to invest in the context of global market uncertainties, domestic players, being confident about resilient growth of the sector and the economy, actively looked for expansion through M&A transactions. One of the noticeable domestic M&A deal was the Masan Group, through their subsidiary Masan Beverage, increased its ownership of Vinacafe Bien Hoa from 68.5% to 98.5% for US$18mn. 1,242 325 630 870 596 1,612 6,306 798 158 26 21 24 29 52 32 32 21 8 0 12 24 36 48 60 0 1,600 3,200 4,800 6,400 8,000 Deal Value (US$mn) Vol (RHS) 100 1,310 6,052 584 22 496 303 254 213 136 0 1500 3000 4500 6000 7500 2015 2016 2017 2018 1H2019 Domestic Inbound Source: FiinGroup
  46. 46. 46Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Food & Beverage: Favorable demographic factors to boost growth Noticeable F&B deals in 2018 – H12019 1H2019 recorded no megadeals but 2 noticeable transactions from GTNFOODS and HAGL Agrico. GTNFOODS which owns 51% of Moc Chau Milk has its divesture to Vinamilk with 36% valuing at US$51.5mn. Vinamilk’s bid offer of acquiring 49% was first rejected by GTNFOODS, given GTNFOODS’ concern of Vinamilk’s monopolistic position in dairy market. This move of M&A from Vinamilk is a firm preparation against the dynamic capital flows in F&B from foreign investors, taking advantage of Moc Chau Milk’s 60-year tradition & biggest cow farms in the North Another attention-gained deal is the 8% acquisition of HAGL Agrico from THACO valuing at US$45.5mn. This transaction was conducted, while HAGL Agrico was put into the black list by HOSE. THACO will be mainly in charge of restructuring HAGL Agrico’s liabilities & capitals to expand agricultural land bank to 30,000 ha. An interesting case in domestic M&A in 2018 is the acquisition of Vinacafe Bien Hoa JSC (VCF) by Masan - the biggest deal with US$74.6mn for 30.4% stake. Vinacafe sold itself not because of loss, but because Masan constantly bought shares from its major shareholders. Acquiring Vinacafe, Masan obviously becomes the top three key players in Coffee market. Factors for Domestic F&B M&A growth • Increasingly young population rate (45% of population are under 35 years old, according to GSO). • Increasing monthly expenditure on F&B (35%, according to MOIT report). • Increasing available source of raw agricultural materials, acting as an advantage for F&B companies to focus on diversifying more organic & healthy product lines. Acquiror name Target company/ asset % Stake acquired Type Deal value (US$ mn) 2018 Masan Beverage Vincacafe Bien Hoa 98.9% Domestic 75 2018 Bien Hoa Sugar & Thanh Thanh Cong Tay Ninh Sugar Công ty Cổ phần Tập đoàn PAN 100% Domestic 58 2018 Sojitz Corporation Khanh Hoa Sugar 65% Inbound 10 2018 STIC Investment Inc Vocarimex 51% Domestic 42 2019 Công ty Cổ phần Đầu tư Thành Thành Công Công ty Cổ phần Đầu tư Thành Thành Công 7% Domestic 27.81 Dominant trends in F&B • Organic & Natural F&B. According to Nielsen, 86% of respondents said they have used organic food/drink at least once. • New definition of convenience F&B. Due to the smaller family size & increasing single rate, F&B giants are concentrating on providing “Ready meals” – not just processed meat or noodles, but fresh and nutritious foods. • Technology-based F&B providers. As young population are more tech-savvy, F&B companies are taking advantage of online delivery platforms; or in other words, are bringing their products “online”. Figure 25: Noticeable F&B deals in 2018 – H12019 Section 4: Sector Review | Food & Beverage
  47. 47. Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Section 4: Sector Review 4.1 Real Estate 4.2 Industrial Goods & Services 4.3 Food and Beverages 4.4 Banks 4.5 Emerging Sectors for M&A: Health care, Education & Utilities
  48. 48. 48Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Foreign strategic investors gradually exited due to minority share constraints and Foreign Ownership Limit After the booming period, M&A in banking has been very quiet throughout 2H2018 to 1H2019. By 1H2019, there remains 45 commercial banks in total – 4 SOCBs, 31 JSCBs, 1 JV and 9 foreign banks. The government has indicated the commitment to sector consolidation by ceasing granting licenses to new foreign banks in Vietnam, but instead to encourage strategic investors to take over 100% of zero-VND banks or to buy shares of existing banks. However, due to reasons regarding FOL and minority shares for strategic investors, plus the expected expenses in both resolving the existing bad assets and capital contribution, there have been less M&A activities since 2H2018 to 1H2019. Source: StoxPlus Section 4: Sector Review | Banks Despite high levels of foreign interest in the sector, some banks have hit the FOL limit and have limited levels of free-float shares. • Out of the 17 banks that are listed, four banks have hit FOL limit at 30% and 10 banks have above- 20% foreign ownership. Even if foreign investors manage to seize 30% of the banks’ equity, it is not enough for them to make a strong impact on the market. • Current shareholders are reluctant to set the high free float rate; the average is only 63%. These factors are major obstacles to strategic investors, who are looking for sizable impact on banks’ operations and long-term successes, rather than private equity investors looking for financial gains. • These elements were cited as reasons for the lack of M&A activities in 2018 as well as the exits of Société Générale, BNP Paribas, and HSBC from Vietnamese commercial banks SeABank, OCB, and TCB respectively. • While the Prime Minister has mentioned a possible raising of FOL, no clear direction for banks have been issued as of the writing date. Figure 27: Recent Divestments in the Banking Sector M&A IN BANKING 2011 - 1H2019 US$5.32bn 56 Deals Target Seller Stake Seller’s nation Status Time OCB BNP Paribas 19% France Completed Jan 2018 ACB Standard Chartered 15% UK Completed Jan 2018 SeABank Société Générale 20% France Completed Mar 2019 Figure 26: Total M&A Deal Value (US$mn) & Deal Number, Banking Source: FiinGroup 1,562 1,135 246 119 834 18 482 928 0 10 8 9 3 8 1 11 6 0 0 3 6 9 12 15 0 400 800 1,200 1,600 2,000 2011 2012 2013 2014 2015 2016 2017 2018 1H2019 Deal Value (US$mn) Vol (RHS)
  49. 49. 49Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Banking M&A is getting warmer amid the return of mega deals Section 4: Sector Review | Banks KEB Hanna Bank-BIDV closed the highest value M&A deal in the history of banking industry • On July 22, BIDV announced the highest value M&A deal in the history of Vietnam's banking industry, selling to its strategic foreign partner KEB Hana Bank (Korea) a total of more than 603 million shares, equivalent to 15% of the charter for US$865bn. • Following the deal, state ownership will reduce from 95.28% to 80.99%. The increase in charter capital is part of BIDV’s plan to comply with Basel II. Moreover, by doing this, the bank might improve its credit ratings and become more competitive in domestic and international markets. Prospect from continuing state divestment from big banks Recent approved investments set mega-deals to come back soon • SBV approved the principle agreement for HD Bank to acquire 100% of PGDBank. HDBank’s charter capital is expected to reach US$676mn. After this transaction, HDBank’s coverage across 63 cities and provinces will be effectively strengthened. • The deal Vietcombank (VCB) selling 3% stake to GIC (Singapore) & Mizuho Bank (Japan) was approved by December 2018. With this deal, Vietcombank became the first state-owned commercial bank to raise its capital last year. However, the actual capital was still low, compared to the necessary amount of capital under Basel II. • After successfully selling 3% of capital to foreign investors last year, VCB proceeded the plan of selling 6.5% of shares from now until 2020. Mr. Vo Viet Hung , Head of VCB's Capital Raising Department said that the roadmap for selling 6.5% of shares had been approved by the bank and waiting for approvals of the SBV as well as related line ministries. • According to industry experts, GIC - investment fund of the Singapore Government continue to show its interest in participating in the next fund-raising rounds of the most profitable bank in Vietnam. Hope from sales of “Zero Dong” banks… • During the recent meeting with Korean banks, Deputy Prime Minister Vuong Dinh Hue affirmed the Government was focusing on restructuring the financial and banking systems, so from now until the end of 2020, the Government would not grant licenses to establish foreign-owned banks. However, foreign investors might consider buying weak banks that are currently restructured such as OCEAN BANK, GPBank and Construction Bank. • So far, many foreign investors have revealed their interest in buying these bad banks and participating in restructuring banks and credit institutions, for instance, J. Trust and Maruhan, Srisawad Corporation (Thailand), Clermont Group (Singapore). • Going forward, pressure of raising capital to satisfy Basel II remains a driver for M&A. For small banks with low CARs, credit growth is limited, unless the levels of capital adequacy approache the minimum requirement, hence, M&A continue to be a solution for these banks to grow and revive profitability. • Besides compliance, banks that are looking to expand their network coverage in line with retail banking strategies could consider M&A, such as the case of HDBank and PGBank in 1H2018. • While there has been progress with bad assets resolution under Resolution No 42, there remains about 3% of the total loans outstanding still classified as bad debt and hidden bad debt, illiquid and seeking solution. This, in turn, has delayed and complicated the process of valuation for some banks, as well as required a higher capital contribution from interested buyers. On the other hand, the challenges would filter and attract only the most financially capable and experienced investors to Vietnam to sustain the development of the sector Capital adequacy, bad assets settlement and banks’ valuation will be key drivers for M&A
  50. 50. Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Section 4: Sector Review 4.1 Real Estate 4.2 Industrial Goods & Services 4.3 Food and Beverages 4.4 Banks 4.4 Emerging Sectors for M&A: Health care, Education & Utilities
  51. 51. 51Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Foreign investors eyes acquisitions in Health Care Source: FiinGroup Figure 28: M&A Deal Value (US$mn) & Deal Number 2011-1H2019 Domestic 21% Inbound 79% Outbound 0% Figure 29: M&A Deal Value Proposition, 2011-1H2019 Section 4: Sector Review |Emerging Sectors for M&A Health care is among one of the most vibrant sectors for M&A activities over the last decade, accumulated the value of US$1.3bn from 80 deals recorded since 2011. Deal making in this sector mainly focused on Pharmaceuticals and Medical Equipment, dominated by inbound inflows accounting for nearly 80% of the sector-wide M&A value. The growth momentum has continually been supported by rapidly increasing pharmaceutical market which is expected to exceed US$7bn by 2020. Also, the rapid aging population and the booming of urban middle- class stimulate demand for high-quality healthcare. Meanwhile, government hospitals being overcrowded create an enormous opportunity, attracting investment from the private sectors. After peaking in 2017, Healthcare M&A then dropped to only US$102mn with 7 deals in 2018, aligned with the overall cooling-down in value of the Vietnamese and global M&A markets under global economic uncertainties. Even so, Healthcare ended the first half of 2019 being the 2nd most active sector with 8 deals signed, valued at US$325mn – promising to make a new record by the year-end. ▪ Fitness & Lifestyle Group Pty Ltd (FLG) acquired 100% CMG Asia stake for US$200mn. The investment is a part of the plan by Quadrant Private Equity (FLG’ owner) to expand their business, particularly in Asia, as it prepares the overall company for sale. ▪ Taisho Pharmaceutical Holdings successfully possessed the controlling interest in Hau Giang Pharmaceuticals (DHG) - the biggest pharmaceutical retailer in Vietnam - by raising its stake from 35% to 51% at US$106.48. Taisho’s ambition to acquire DHG has been a long-term process since 2016 as they continuously bought additional stakes from various major stakeholders. Noticeable deals in 2018-1H2019 Source: FiinGroup Health care 118 14 105 15 32 127 466 102 325 10 8 6 6 10 12 13 7 8 0 3 6 9 12 15 0 120 240 360 480 600 2011 2012 2013 2014 2015 2016 2017 2018 1H2019 Deal Value (US$mn) Vol (RHS)
  52. 52. 52Vietnam M&A 2019 Research Report| Issue 9 | August 2019 Regulations & SOE divestments to boost M&A in Health Care Section 4: Sector Review | Emerging Sectors for M&A ▪ Decision 60/2015/NĐ-CP, together with other Dispatches empowered self-determination for public listed enterprises to remove the 49% cap on foreign capital, adding more “room” for foreign investors. Inbound M&A is expected to increase further if the official elimination of the 49% cap proposed in the new Securities Law is approved by the end of this year. ▪ Current policies tend to prevent inbound M&A deals to take the controlling interest of local enterprises, whereas providing preferential treatments for domestic pharmaceutical materials and products. In particular, the amended Pharmaceutical Law emphasised prioritising local firms in bidding activities. Meanwhile, the Decree No. 54 (taking effect from Jan and July 2017) forced foreign investors seeking to do business in distribution of drugs and medicinal materials to cooperate with local firms or to invest in existing local businesses (as FDI enterprises having from 51% foreign investment are prohibited to directly related to medicines transportation and preservation). In other words, regulations aim at “stimulating ” foreign investments into local institutions ▪ Nevertheless, Vietnam actively participating in the global market through a series of FTAs, many foreign investors like Taisho Pharmaceutical Holdings chose to hold just a little less than 51% local firm’s stake and wait for a more open policy in the near future. ▪ Another key factor which will strengthen the upward trend of M&A in the pharmaceutical sector is the State Capital Investment Corporation (SCIC) planning to divest from many pharmaceutical enterprises including notable brands such as Traphaco, Domesco Dong Thap, and Ho Chi Minh City Medical Technical Equipment JSC. ▪ Imexpharm (IMP) and Traphaco (TRA) are considered to be the next targets for inbound Healthcare M&A, given that their up-to-now foreign major stakeholders are holding 47.8% and 47.1% respectively. In case of TRA, the Korean investors Daewon & Mirae Asset who are holding 15% and 25% TRA stake respectively from the deal with Mekong Capital & other private shareholders last year, are still keen on occupying more stakes of the company this year. Awaited upcoming deals M&A activities over the medium term in Health care continues to be pushed by existing supportive factors. Furthermore, recent regulatory changes have brought out positive effects, encouraging the participation of foreign players with minority interest, while left some space for domestic players to grow. Health care
  53. 53. 53Vietnam M&A 2019 Research Report| Issue 9 | August 2019 M&A in education has become more active than ever amid tightening conditions for private institution establishment Figure 30: Education M&A Deal Volume, 2011-1H2019 Source: FiinGroup Section 4: Sector Review | Emerging Sectors for M&A Therefore, acquiring existing universities and colleges has become a more practical choice for new players, making M&A in this field become more vibrant than ever. • 2017 witnessed a peak of M&A activities with 6 deals, of which one mega-deal came from TPG Capital LP acquiring Vietnam Australia International School (VAS) at US$125mn. • The most remarkable deal out of the 3 deals signed in 2018 was the acquisition of Hoa Sen University (HSU) by Nguyen Hoang Educational Group (NHG). Although the deal value was not disclosed, owning 51% of HSU, NHG officially possesses four universities nationwide.. • Meanwhile, the 100% acquisition of Thanh Thanh Cong Education (TTCE) by Navis Capital Partners (NCP) marked the exciting start for Education M&A in 2019. While TTCE is a prestige private high- quality educational provider in Southern Vietnam, NCP is a 5-billion USD equity fund taking its first step in the Education sector in Vietnam. M&A EDUCATION&TRAINING 2011 - 1H2019 19 Deals EDUCATION • Decision No.64/2013/QD-TTg raised the minimum charter capital for establishing non-public higher education institutions from VND 50 (US$2mn) to VND250bn (US$12mn) • Under the Decree 46/2017/ND-CP which took effect on 21 April 2017, institutions requesting to establish a non-public higher education organisation must ensure the minimum capital of VND1,000 bn (exclusive of the value of land used for construction). • Under Decision No 37/2013/QD/Ttg approving the revised master plan on the university and college network during 2006-2020, Prime Minister asked not to establish new universities or colleges in Hanoi and Ho Chi Minh City until 2020. Private Investors have turned interest to education especially private higher education. M&A instead of new investments or JV have been preferred since the government issued tightening regulations on new establishments of private higher education institutions since 2013. 0 0 0 1 1 2 4 1 00 0 0 0 1 3 2 2 2 0 1 2 3 4 5 2011 2012 2013 2014 2015 2016 2017 2018 1H2019 Domestic Inbound

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