M&A offers big gains for foreign investors in Vietnam’s market
Updated at Thursday, 07 Feb 2019, 09:24
The Hanoitimes - According to experts, many foreign investors consider M&A the most effective and fastest way to penetrate and expand operations in the Vietnamese market.
Merger and acquisition (M&A) deals have helped many foreign investors enter the Vietnamese market rapidly to cash in on the potential outlet.
Just a few months after acquiring the largest foreign stake in Vietnam’s Masan Group Corp for about US$470 million, South Korea’s SK Group saw initial positive results from the deal with Masan’s core profit jumping by 57.1 percent to VND3.478 trillion (US$151.2 million) in 2018.
Foreign investors earned big profits from acquiring Vinamilk’s stake
According to Masan’s management accounts for the financial year 2018 released recently, its core net margin for the 2018 financial year expanded 322 basis points to 9.1 percent while delivered record post-minority interest (Post-MI) was VND4.916 trillion (US$213.74 million).
With strong growth momentum across all operating businesses, Masan expects net revenue growth of 18-30 percent and core net profit after tax post-minority interest (NPAT Post -MI) of 44-58 percent in the 2019 financial year.
“We delivered on the first year of our five-year growth plan and this is just the start. Our strategic bets are yielding strong results. Masan Consumer will continue value-added innovations to deliver more than 20 percent long-term growth,” Nguyen Dang Quang, Masan chairman and CEO, said.
Quang expected with the launch of new product Meat Deli late last year, Masan Nutri-Science will become a branded FMCG business by converting the US$10.2 billion pork meat market via setting the new standard for safe fresh and processed meat products.
“This will eliminate growth cyclicality and deliver FMCG profit margins. Masan Resources will continue its transformation from a miner to global processor by acquiring technology to go downstream,” Quang said.
Besides SK Group, many foreign investors have been also beneficiaries in the Vietnamese market through M&A with local leading firms such as Vinamilk, Mobile World and Hoa Binh Construction.
According to experts, many foreign investors consider M&A the most effective and fastest way to penetrate and expand operations in the Vietnamese market.
Economist Nguyen Tri Hieu said instead of directly investing in new projects, which requires registration procedures and uncertainty, foreign investors choose to buy shares of companies with existing strong brands in the market.
In addition, foreign investors have also boosted their indirect investments though M&A after the government issued Decree No. 60/2015/ND-CP, which allows the increase of foreign ownership in listed and public companies from 49 percent to 100 percent, except for some companies operating in conditional business lines.
Together with foreign investors, local firms have been also beneficiaries of M&A deals thanks to significant supports in capital, experience and governance from foreign shareholders.
According to Danny Le, head of strategy and development for Masan Group, Masan admires how SK Group has evolved into a global diversified powerhouse and expects the two companies will actively pursue strategic M&A opportunities to deliver exponential growth over the long-term.
Sharing the same view, CEO of Deloitte Vietnam Pham Van Thinh said M&A deals have indeed helped local enterprises to attract a reasonably large amount of funds from investors, and this also helps them in reorganizing their operations for further development. Thus, M&A activities have become an increasingly important channel to draw capital into the country’s economy.
Meanwhile, Dominic Scriven, executive chairman of fund manager Dragon Capital, said M&A deals between foreign investors and domestic businesses signal confidence of foreign investors in the Vietnamese market because this tends to be a long-term partnership.
Experts believe Vietnam’s process of economic integration and restructuring has accelerated SOE equitization as well as the development of private sector and foreign investment, which will open up more M&A opportunities in Vietnam in the time ahead.