Foreign investors dominate Vietnam M&A market

Last week U.S. investment firm Nebula Energy’s liquefied natural gas subsidiary AG&P LNG acquired a 49% stake in the Cai Mep LNG Terminal in Ba Ria-Vung Tau Province, according to its owner, energy firm Hai Linh Company.

The terminal is valued at US$500 million and expected to become operational in the third quarter this year.

In late February, Siam Commercial Bank, Thailand’s fourth largest bank by assets, bought out consumer finance company Home Credit Vietnam for $865 million.

Like in 2023, when the top five M&A deals all involved foreign investors, this year too the market is similarly dominated by them.

There were over 3,450 deals worth $8.5 billion by foreign investors last year, according to the Ministry of Planning and Investment.

This represented a 66% increase in value from 2022.

According to audit firm KPMG Vietnam, Japanese investors led the M&A market as of October 2023 with $1.6 billion.

Foreign capital is flowing in since overseas investors see long-term potential in Vietnam and domestic businesses prefer overseas to local money.

At a conference on M&A on Tuesday, KPMG said foreign enterprises are switching from opportunistic investments to long-term strategic ones in some sectors.

Vietnam's favorable position in the global supply chain and its huge population are two factors that attract foreign investors, it added.

Huynh Thi Binh Minh, an executive at fund manager Tael Partners, said: "Indonesia and Vietnam are two destinations for investors looking to invest in Southeast Asia. As factories shift away from China, Vietnam has advantages due to its close proximity [to China] and numerous free trade agreements with other countries."

Concurring with this, Dao Tien Phong, managing lawyer at law firm InvestPush Legal, said: "In the southern region, [Chinese] investors favor M&A over direct investment to avoid the time-consuming process of building factories and meeting environmental and fire safety requirements."

Vietnamese businesses also prefer foreign capital, according to economist Pham Chi Lan.

"The cost of domestic capital remains relatively expensive and inaccessible. Moreover, companies need new technology, management skills and market opportunities, and so they are looking towards foreign capital."

Nguyen Tuan Anh, a lecturer in finance at RMIT University, said foreign investors would continue to dominate the M&A market.

Their focus would be on firms that have long-term product strategies, especially those in the agriculture, food, healthcare, and education sectors, he said.

Phong said foreign investors are also eyeing the retail and technology sectors and individual businesses that have ESG (Environmental, Social and Governance) strategies.