The exit landscape in Vietnam is looking good for investors as the mergers and acquisitions (M&A) segment continues its positive momentum from last year. The International Financial Law Review’s (IFLR) M&A Report 2022 predicts that the country will see significant M&A activity in 2022, with venture capital (VC) firms searching for viable investment opportunities.

Despite the fact that the COVID-19 virus continues to have an impact on the economy, for example, through trade restrictions, local and foreign investors are undeterred. Current Vietnam VC trends point to significant deal-making this year as the economy bounces back and bureaucratic hurdles to entrepreneurship diminish. Moreover, Southeast Asia’s digital transformation is improving local services and creating ecosystems that address citizen challenges.

Other factors that will contribute to an increase in M&A activity include the development of supply chains in Vietnam and the country’s ability to offer a stable investment environment. Some companies have suffered due to the pandemic, making them prime targets for mergers or acquisitions. The government is also reviving and bolstering the economy, which is crucial for the growth of Vietnam’s tech startups.

Vietnam witnessed an increase in mega-deals in 2021. What’s next?

Several significant deals completed last year demonstrate that Vietnam’s M&A market is recovering and poised to grow further.

FE Credit

Vietnam Prosperity Joint Stock Commercial Bank (VPBank) announced in October that it had completed the sale of a 49% stake in VPBank Finance Company Limited, known as FE Credit. It sold it to SMBC Consumer Finance Co., Ltd, which is wholly owned by Japan’s Sumitomo Mitsui Financial Group, Inc. (SMBC Group).

The investment will enable both SMBCCF and VPBank to expand in Southeast Asia and work together to develop the financial sector in Vietnam. VPBank will also be able to improve its financial capabilities.

SHB Finance

In a deal worth approximately $157 million USD,, Saigon-Hanoi Commercial Bank (SHB) looks set to sell a 50% stake in its financial consumer arm SHB Finance to Thailand’s Bank of Ayudhya Public Company (Krungsri). In terms of total assets, Krungsri is the fifth-largest lender.

The deal will be split into two parts: a 50% stake now and a 50% stake in three years. Krungsri will be able to expand throughout Southeast Asia and gain access to SHB’s 200,000 borrowers as a result of the acquisition.

The CrownX

Masan Group Corporation, which owns integrated retail consumer arm The CrownX, announced an agreement to acquire a 5.5% stake in The CrownX from Alibaba Group and Baring Private Equity Asia (BPEA).. The deal is worth $400 million USD, meaning the 100% equity valuation is $6.6 billion USD.

The partnership to make The CrownX a one-stop shop for meeting the needs of customers. It plans to collaborate with the popular eCommerce platform Lazada to strengthen the company’s digital presence and the country’s retail landscape.

VinCommerce

South Korea’s SK Group, the country’s third-largest conglomerate, announced that it had agreed to purchase 16.3% equity in Masan Group’s retail affiliate VinCommerce. The deal is valued at $410 million USD for Vietnam’s largest consumer retailer, which has a 50% market share and over 2000 convenience stores and supermarkets. The funds raised will aid in the acceleration of strategic interests, such as ePayments, online and offline distribution, and logistics.

Factors influencing Vietnam’s business climate

As with any economy, there are a variety of issues to address and components to consider, such as: 

Regulatory changes

The following laws govern how startups operate in Vietnam: Investment Law, Enterprise Law, Competition Law, and Securities Law. Some statutes have been updated to remove investment restrictions, expand investment incentive beneficiaries, and empower management boards to approve M&A transactions.

Other laws govern how companies approach Initial Public Offerings (IPOs) and the standard best practices for listed businesses. Merger filings must also meet certain thresholds and adhere to environmental protection policies.

Trade agreements and international IPOs

Trade agreements, such as the UK-Vietnam Free Trade Agreement (FTA), EU-Vietnam FTA, and the Regional Comprehensive Economic Partnership (RCEP), are in place to boost the economy and make Vietnam an attractive investment destination. Companies are also pursuing international IPOs, bringing greater attention to startups back home in Vietnam for foreign investors to track.

Russia-Ukraine War

Russia’s invasion of Ukraine has hampered the global supply chain, potentially affecting Vietnam’s economy. Vietnam joined Russia’s free trade zone and hoped to continue its strong trade relationship in 2021, with around $3.2 billion in exports and $2.3 billion in imports. The newly imposed sanctions on Russia have made trade much more difficult.

Recent Vietnam VC trends indicate that the country has the potential for long-term growth, making it a viable choice for foreign investors. While the COVID-19 pandemic and the Russia-Ukraine war pose challenges, investments and the exit landscape in Vietnam may not be heavily affected.

Regulatory changes, low labour costs, tech talent increases, a growing population, and the use of smartphones will continue to help the growth of Vietnam’s tech startups and attract attention from investors.