Appeal in place – Vietnam is well-positioned to continue hosting a vibrant M&A space

The article was originally published in the September 2021 issue of Vietnam Economic Times

Huong Trinh

Managing Director, Head of Ho Chi Minh, BDA Partners

Despite Vietnam experiencing its fourth wave of Covid-19, merger and acquisition (M&A) activities will continue to remain strong. Since the beginning of this year, we at BDA Ho Chi Minh City have seen strong interest from large regional PEs (private equity firms) looking for sizable transactions. We are also observing strong 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.

Vietnam’s macroeconomic fundamentals remain strong. In the International Monetary Fund (IMF)’s revised forecast released in July, the country is still on track to remain the fastest-growing economy in Southeast Asia this year, with projected growth of 6.5 percent. Vietnam also has one of the fastest-growing middle-class populations, with rising discretionary spending power, leading to high pent-up demand for goods and services that will contribute to economic recovery as the country opens up again later this year.  

Key industries predicted to grow strongly

In general, Vietnam’s economy has remained resilient and maintained good momentum for growth across industries despite the recent surge of Covid-19. In addition to consumer and retail which has always been one of the most active sectors in Vietnam and is expected to rebound strongly in 2022 thanks to the recovery of consumer confidence, the following sectors have been attracting a lot of interest. 

We believe that IT & Technology and especially the internet-related segment will achieve the strongest growth in Vietnam, and that there will be a strong pipeline of opportunities for the sector in 2021 and upcoming years. Difficulties caused by the pandemic have driven growth in demand across all industries for technology-related services and digital solutions that help businesses function normally. In a post-pandemic world, there will be a continued push for swift digitalization, and M&As will be the fastest way for businesses to achieve this goal. Also, Vietnam’s internet economy has been growing rapidly during Covid-19, and we expect this trend to continue as there have been long-term changes to consumer habits and dynamics. The pandemic, for all its negative impacts on health, society, and economy, is propelling the growth of e-commerce and digital finance in Vietnam, paving the way for the country to fulfill its digital potential. According to the Ministry of Industry and Trade, Vietnam’s e-commerce market grew 18 percent year-on-year in 2020 to $11.8 billion, while traffic on e-commerce platforms was 150 percent higher than in 2019.

Pharmaceuticals is an industry that has attracted a lot of interest from foreign investors in recent years, with notable transactions including Taisho’s acquisition of a majority stake in DHG Pharma and SK’s recent investment in Imexpharm. According to BMI Research, Vietnam’s pharmaceutical industry could reach $7.7 billion in 2021 and $16.1 billion in 2026. A growing middle class, urbanization, and a young population are driving domestic demand for all aspects of healthcare, including expenditures on pharmaceuticals. As a defensive sector, pharmaceuticals will continue to achieve strong growth as Vietnam transitions out of the pandemic period. The industry is set to benefit greatly from the government’s national strategy to promote domestic manufacturing. To compete with imports, M&As with foreign strategic investors will continue to be crucial for local manufacturers, enabling them to meet global pharmaceutical standards through transfers of technology, R&D, and management expertise.

Renewable energy has also become an interesting sector for M&A activity in Vietnam over recent years, and we expect deal flow to resume as the country gradually opens up. With a rapidly growing economy, Vietnam has been at risk of power shortages as demand exceeds supply due to a lack of power infrastructure, and capital injections into the development of renewable energy could provide a good solution. Vietnam became the largest solar energy market in Southeast Asia in 2019, attracting foreign investors in mega plants in Binh Phuoc, Tay Ninh, and Ninh Thuan provinces, given the more attractive feed-in-tariff schemes compared to other countries in the region. Buyers have also been active with acquisitions of onshore and offshore wind farms in the central highlands and central coastal regions, which boast huge potential given their ample wind resources.

In Vietnam’s real estate market, M&A remains the quickest solution for foreign developers to enter the country and for local developers to expand their land portfolio. An increase in real estate M&A activity is expected this year, as various projects will be approved thanks to new improvements in the Law on Investment, after lengthy delays in the review process in previous years. Investors have accumulated a lot of capital, which is waiting to be deployed as the economy recovers, while owners struggling from the impact of the pandemic are willing to sell at lower valuations. Within the sector, industrial real estate has seen more activity in 2021, as multinational companies continue to shift their manufacturing bases from China to Vietnam despite the ongoing pandemic. Meanwhile, deal flow in residential real estate is expected to recover in the latter half of the year, as postponed transactions are resumed when travel restrictions are loosened.

Manufacturing, one of the sectors temporarily hit by Covid-19, will also provide opportunities to buyers who are confident of a strong economic recovery. Vietnam has been emerging as a manufacturing hub in the region given its low labor costs, its strategic location and many seaports nationwide, and its increasing participation in free trade agreements. For these reasons, its manufacturing sector will remain attractive to foreign investors, especially given ongoing China-US trade tensions, resulting in the relocation of manufacturing hubs from China to Vietnam. Domestically, there could also be a pickup in M&A activity, as we might see a trend in the consolidation of struggling small and medium-sized players into respective market leaders. Demand for growth capital from businesses looking for internal transformation and rebuilding post-pandemic will also present opportunities for investors looking for high-quality assets at attractive valuations.

Common risks and opportunities

Some of the common risks include uncertainty in the legal framework, especially new laws that came into effect recently, quality of information, as some companies still do not apply best practices in bookkeeping, an unfamiliarity among Vietnamese sellers with M&As and the basic concepts and processes involved, and cultural differences during deal negotiation and post-deal integration.

M&A transactions in Vietnam are largely governed by the Law on Enterprises, the Law on Investment, and the Law on Competition. Recent changes in these laws have posed additional challenges to potential buyers. For example, under the new Law on Competition, a substantially higher percentage of M&A deals are subject to merger control filing requirements, and the evaluation process could potentially add months of uncertainty to the timeline of a deal. Quality of information is also a common issue for foreign buyers, as target companies do not always have an organized information system that meets their requirements.

The current postponement of inbound international flights due to the pandemic also makes it difficult for buyers to conduct in-depth due diligence through site visits and face-to-face meetings. Additionally, foreign buyers might be unfamiliar with cultural differences in corporate governance practices in Vietnam. Many target companies are founder-owned, family-run businesses, which may not yet see the value-added of foreign strategic and financial partners or be open to international corporate governance standards. Last but not least, Vietnamese sellers lack knowledge in terms of how the M&A process works and is structured, which will create uncertainties.

Despite the existing drawbacks, it is important to acknowledge that compared to a decade ago, the perception of M&As in Vietnam has changed dramatically among government agencies, business owners, and investors/buyers and in a positive way. Authorities are continuously improving their turn-around times and responsiveness, while working toward new guidelines for M&A transactions, with the new Law on Enterprises, Law on Investment, and Law on Securities having come into effect on January 1, 2021. Shareholders are now more open to adding M&A as a strategic option in their growth trajectory and are becoming more educated in terms of M&A processes and key concepts. We see that sellers are taking a much more structured approach for large domestic deals or cross-border deals by engaging relevant advisors, who will help mitigate risks for foreign buyers by working with them through a transparent process. As BDA has a local team in Vietnam, we have been fortunate and pleased to be trusted by many local business owners and have given them advice and helped them run structured deal processes along the way.

We remain confident in the availability of opportunities in Vietnam’s M&A market. From a macro level value creation process perspective, Vietnam will continue to enjoy: (i) stable, unparalleled economic growth compared to other Southeast Asia countries, especially amid Covid-19; (ii) an influx of advantages from recent free trade agreements; and (iii) a strong government push to equitize State-owned enterprises. From a micro-level perspective, Vietnamese companies are becoming more professional with stronger management teams and better corporate governance. They are more open to foreign investors as they see the different values that both strategic and financial investors can bring.

Anticipated M&A deals and volume in next six months

Companies looking to position themselves for recovery in the post-pandemic economy will need new capital injections for internal transformation and further growth to remain competitive, and they will be eager to restart conversations with buyers for deals that were put on hold or lost. Within businesses in industries such as F&B, manufacturing, and industrials that have been negatively affected by the pandemic, there are still a lot of sizable and high-quality assets in the market. This environment will create opportunities for an increase in deal flow linked to dislocation, as sellers are more willing to close deals at a lower valuation in exchange for immediate access to growth capital. Until travel restrictions are loosened, local investors will have an advantage over foreign counterparts in such transactions, given their presence in Vietnam and their ability to run quicker processes and provide liquidity to businesses in need. We also expect to see a consolidation trend in M&A transactions, as market conditions have become challenging for small and medium-sized enterprises (SMEs).

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:

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:

We spoke to Huong Trinh, Managing Director and Head of the BDA Partners Ho Chi Minh City office, about the latest exciting developments in M&A in Vietnam.  


You worked on the largest inbound private sector industrial transaction in Vietnam in the last three years, the sale of Thipha & Dovina to Stark Corporation, for US$240m. Why were Thipha & Dovina such an attractive investment opportunity for an international buyer?

Thipha & Dovina are a leading electric cable and non-ferrous metal group with a 30-year history. The companies grew revenues at an average 20% per annum for the period 2015-2019, and revenue exceeded US$500m.

This asset offers direct exposure to Vietnam’s economic growth. Vietnam has been emerging as a manufacturing hub in the region given its relatively low labor cost and strategic location. In 2019, Vietnam recorded GDP growth of ~7%, and is expected to remain a regional outperformer. Significant investment in infrastructure is underway. The government and business led spending will drive demand for cable and wiring for the foreseeable future.

Thai buyers are consistently interested in Vietnamese assets, and have made several significant investments in Vietnam over the last few years.[1]


Do you think there will continue to be inbound interest in Vietnamese companies from the rest of Asia and further afield in the future? If so, what are the key reasons?

Obviously yes, as we have received lots of indications of interest for high-quality industrial assets, as well as other sectors, from both global and regional buyers. We believe the strong inbound interest is mostly driven by the following factors:


Are there opportunities in Vietnam for BDA to sell founder owned businesses in the future?

We believe there are still many more opportunities in Vietnam to advise founders on the sale of their businesses in the short term. There are still a lot of sizable and high-quality assets in the market that have grown into market leaders over the course of several decades and which have undergone different phases of development. They may need a new “growth engine” or investment to remain competitive and in some cases the founders are simply looking to exit and step back from the company they founded.

In addition, improved legal framework and corporate governance are making it easier and more transparent for foreign investors, giving them greater confidence to acquire majority stakes.

We are currently mandated on a number of projects thanks to: (i) a combination of our strong relationship with both strategic and financial sponsor buyers because of our global network; (ii) a senior team on the ground in Vietnam (especially important during COVID-19); and (iii) excellent execution capabilities which are laser-focused on delivering the best outcome for our clients.


Which will be the most attractive sectors in Vietnam for M&A in the post COVID-19 environment and why?

Internet-related businesses have been growing rapidly during COVID-19. Online, or online-to-offline, products and services have seen significant growth. This is not just a short-term effect; 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 percent year-on-year in the first half of this year.

People are still spending money on shopping, a good sign given the fears that demand would fall during the COVID-19. The best performer was the groceries and fresh food, following by household supplies, homecare and healthcare products. Shopping malls are now packed with people like COVID-19 was never here.

For the industrials 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 whilst business owners see the benefits of having a “big brother” who is financially strong together with them to grow the business, especially during the unstable periods.

Healthcare is another attractive sector for investors. Some of the healthcare sub-sectors are performing well during COVID-19, while some are not. The sector will likely see lower cash flow in 2020 compared to 2019. Hospitals face a huge negative impact on revenue as they have had to cancel many profitable surgeries and procedures, while spending more on staffing and getting extra protection equipment for work. In contrast, personal protective equipment companies are seeing 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 after COVID-19.


Do you see any changes in perception towards M&A processes in Vietnam? Have handshake deals been completely replaced by more structured processes?

Compared to a decade ago, the perception towards M&A has been changed drastically among business owners, government agencies and investors/buyers in a positive way. As Vietnam’s economy has opened up, we have witnessed more and more large deals that have brought positive growth to the target companies and benefits to all stakeholders. As awareness of the positive benefits of M&A has grown, shareholders are now more open to adding M&A as a strategic option in their growth trajectory and strategy. Sellers are becoming more educated in terms of an M&A process and key concepts. I still remember 15 years ago, it took me a lot of time to explain to the business owners how investors would value a business, which was not only based on how many land use rights the company held or how famous their company was.

For small deals, or deals between two domestic parties, handshake deals are still common, with all the decisions being made quickly, top down. However, we see people are taking a much more structured approach for medium and large domestic deals or cross-border deals. These deals will involve a variety of advisors as shareholders see the benefits of having an official process and professional advice: (i) better positioning the company; (ii) consistent and organised approach; (iii) a more competitive process will result in better equity valuation and terms; and (iv) increase the certainty of the deal completing and reduce the associate deal risks. 

As BDA has a local team in Vietnam, we are happy to be trusted by local business owners to give them advice and help them to run a structured M&A process.


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

BDA has signed and/or completed three transactions so far in 2020 without the buyers coming into Vietnam for the closing/signing.

This was a key concern when COVID-19 started, but as things have progressed, it is really a matter of how much both sides like the deal and how we, as the advisor, add value. We have been very creative with our sale processes. For example, helping the investor hire a local advisor to do the site visit/management meeting on the ground in Vietnam; arranging for the seller to take high-quality videos of the factories and assets, and so on. These creative approaches help to get deals done.


According to the AVCJ, 2019 was a record year for the number of PE / VC investments in Vietnam. Do you expect to see a rise in domestic and international private equity investment in Vietnam continuing in 2020 and 2021?

From a macro level value creation process perspective, Vietnam will continue to enjoy: (i) stable, unparalleled economic growth compared to other Southeast Asia countries, especially amid the COVID-19 situation; (ii) an influx of advantages from the recent free trade agreements; and (iii) strong government push to privatize state-owned enterprises. From a micro-level perspective, Vietnamese companies are getting more professional with stronger management teams and better corporate governance. They are more open to foreign investors as they see the different values that both strategic and financial investors can bring to the companies. 

There is increasing demand for growth capital in 2020-2021. The private sector in Vietnam, with its strong momentum, will need more capital to pursue transformational changes and achieve further growth. The start-up ecosystem is seeing robust expansion, with internet related companies as the most attractive sector.

We, at the BDA Partners Ho Chi Minh City office, are seeing strong demand for growth capital and exits from both founder-backed and private equity owned companies. This is visible from our numerous live deals and strong pipeline/opportunities for 2021.


Contact us for more details on the insights



[1] In 2014, Berli Jucker Pcl announced a US$879m transaction to acquire Metro Cash & Carry Vietnam. In 2015, Central Group through its subsidiaries, Power Buy, bought 49% stake in Nguyen Kim Trading Company. In 2016, Central Group acquired Big C Vietnam, a supermarket chain, with a transaction value of US$1.0bn. In 2017, ThaiBev Group, through its subsidiary Vietnam Beverage, has acquired majority stake in Sabeco, Vietnam’s largest brewery company, with a deal size of US$4.8bn. SCG, a Thailand conglomerate, has done a number of transactions in construction materials and packaging in Vietnam.

[2] HSBC research shows Vietnam enjoying very strong internal domestic demand even during COVID-19. Nielsen research indicated that Vietnamese consumers remain 2nd in ASEAN in terms of being positive.