New M&A wave set to hit Vietnam: analysts

By Thao Vi, Thanh Nien News

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An ambitious plan to privatize more than 400 of Vietnam’s state-owned enterprises (SOEs) by the end of next year will fuel a new wave of mergers and acquisitions in the country, analysts say.
Vietnam may see M&A deals worth hundreds of millions of dollars next year as its government accelerates its partial privatization process (also known as equitization), said John Ditty, General Director of financial advisor KPMG Vietnam.
“M&A activity in Vietnam has risen sharply since 2008, but started to drop in 2013, and this year will also be a subdued year. The trend is expected to pick up in 2015 when the market sees more realistic expectations and transparency from sellers,” Ditty said at an M&A forum called “The Second Wave” in Ho Chi Minh City on Thursday.
He said sectors of high interest in M&A activities will be fast-moving consumer goods, pharmaceuticals, agriculture, and retail.
The privatizations of large, attractive SOEs like mobile network operator MobiFone, national air carrier Vietnam Airlines and garment firm Vinatex this year and next year will be a driving force behind the new wave of M&A, according to Ditty.
He suggested that the government continue to reduce its stakes in SOEs that have already been partially privatized in recent years such as BIDV, Sabeco, PV GAS and Bao Viet to provide further impetus for the investment market.

Foreign analysts chat at a networking break of the M&A forum, titled "The second wave", in Ho Chi Minh City on August 7. Photo: Diep Duc Minh.
Andy Ho, managing director of investment fund VinaCapital, says though the government’s plan to offload shares in more than 400 state-owned enterprises (SOEs) in 2014-2015 is “ambitious”, it is “achievable”.
Ho said poor performance in the country’s stock index in the past offered “less motivation to sell the assets that the government owns.”
“The stock market has come up very nicely over the last three years (2012-2014), up 20 percent every year, which is a very good indicator for the equitization process,” said Ho.
Ho pointed out some challenges that foreign investors may face when planning to buy shares in Vietnam’s SOEs, including lack of information and transparency.
All relevant data about the equitization process should be released in both Vietnamese and English so that international investors can evaluate its progress, he said.
In addition, consolidated financial reports should be prepared, audited, ahead of any IPO, he said.
Between 2008 and 2013, a wave of M&A deals hit Vietnam with a total value of US$15 billion. The market is expected to receive a higher value of $20 billion during the 2014-2018 period on the improving economy and the impressive SOE privatization plan.

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