M&A insights in Vietnam

Huong Trinh, Managing Director and Head of Ho Chi Minh at BDA Partners, shares insights on Vietnam M&A market, including growth sectors, cross-border activity, digitalization, and the rise of SPACs.

Which industries do you see picking up in the SE Asia region, largely with the focus on Vietnam?

Internet-related businesses have been growing rapidly of late. Consumer behaviour is changing, and this is a long-term sustainable shift in consumer dynamics. Average order value on e-commerce sites rose by over 35% year-on-year in the first half of this year.

For the industrial sector, COVID-19 has been certainly a catalyst for business owners to consider a transaction. The underlying reason was the fundamental change in the economic outlook domestically and globally, which has urged a number of investors to look for a more stable and “safer” destination while its business owners see the
benefits of having a “big brother” who is financially stronger with them to grow the business, especially during unstable periods.

Healthcare is another attractive sector for investors. The sector will likely see lower cash flow compared to 2019. Hospitals face a huge negative impact on revenue as they have had to cancel many profitable surgeries and procedures, while investing more in staffing and getting extra protection equipment for work. In contrast, personal protective equipment companies are seeing a significant revenue growth and the pharmaceutical sector will continue to grow strongly post-pandemic.

Industrial real estate and logistics will also grow, thanks to multinational companies shifting their manufacturing base from China, and the requirement for logistics and supply chains to keep up.

Sectors that have been temporarily hit by COVID-19, such as food & beverage, hospitality and discretionary retailing, present opportunities at attractive valuations for buyers who are confident of a strong bounce back.

How do you see international investors completing transactions with Vietnam’s borders still shut?

We signed/completed 5 transactions so far since COVID-19 without the buyers coming into Vietnam for the signing/closing.

This has been a key concern when COVID-19 started, but as we came along it is really a matter of how much both sides like the deal and how we, as the advisor, add value. We see that people have been very creative in the process, for example the investor can hire a local advisor to do the site visit/management meeting on the ground in Vietnam, the local team can take high-quality video on the assets, etc. These creative approaches will help very much to get the deals done.

We at the BDA Ho Chi Minh City office are observing a large demand for growth capital and exits from both founder-backed and private equity-owned companies, evidenced by numerous current live deals and strong pipelines/opportunities for 2021.

What are the trends you see in cross-border activity?

Compared to a decade ago, perception towards M&A has changed drastically among business owners, government agencies and investors/buyers in a positive way. As Vietnam’s economy opens up, we have witnessed more and more large cross-border deals that brought positive growth to the target companies and benefits to all stakeholders. We see people are taking a much more structured approach for large domestic deals or cross-border deals which require the involvement of all relevant advisors as they see the benefits of having an official process and advisors in place:

• better positioning the company
• consistent and organised approach
• more competitive process can create better valuation and terms
• increase the certainty
• professional advice will definitely help get better outcome and reduce risks

As BDA has a local team in Vietnam, we have been fortunate and pleased to be trusted by many local business owners to give them advice and help them run a structured process along the way.

Discuss the growth of digitization especially in the M&A environment in SE Asia?

Overall – the digital economy has been growing exponentially. The COVID-19 pandemic, for all its negative impacts on health, society and economy, is expediting the growth of Vietnamese e-commerce and digital finance, paving the way for the country to fulfill its digital potential. Traffic on e-commerce platforms in 2020 was 150 percent higher than the previous year, with approximately 3.5 million visitors per day on various platforms.

Can you comment on the rise of SPACs?

There are tremendous benefits of considering a SPAC buyer in a sale process, opening opportunities for growing companies in developing markets that wish to participate in other established markets’ capital markets:

• Valuation: Robust public market valuation with retail participant
• Speed to market: Ability to secure capital commitments within 4-6 weeks vs. IPO with 3-4 months of market risk before roadshow
• Certainty: Less sensitive to general equity backdrop and market windows
• Flexibility: Ability to fully disclose financial forecasts to support investment case; Structural flexibility for integration of earn outs/conditional fees and more incentive driven deal constructs

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About BDA Partners

BDA Partners is the global investment banking advisor for Asia. We are a premium provider of Asia-related advice to sophisticated clients globally, with 25 years’ experience advising on cross-border M&A, capital raising, and financial restructuring. We provide global reach with our teams in New York and London, and true regional depth through our seven Asian offices in Mumbai, Singapore, Ho Chi Minh City, Hong Kong, Shanghai, Seoul and Tokyo. BDA has deep expertise in the Chemicals, Consumer & Retail, Health, Industrials, Services and Technology sectors. We work relentlessly to earn our clients’ trust by delivering insightful advice and outstanding outcomes. BDA Partners has strategic partnerships with William Blair, a premier global investment banking business, and with DBJ (Development Bank of Japan), a Japanese government-owned bank with US$150bn of assets.

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