Foreign investors conducted a whopping 5,720 merger and acquisition (M&A) deals worth US$5.59 billion in Ho Chi Minh City this year, 4.3 times higher than the number of foreign direct investment projects in the city, according to the municipal Department of Planning and Investment.

An aerial view of HCMC at night. Real estate is among the sectors
that have attracted more foreign investors – PHOTO: LE HOANG

They made a total of 9,842 M&As in the country this year, stated the Foreign Investment Agency, under the Ministry of Planning and Investment, in a report.

This indicates that HCMC attracted the largest number of foreign investors through this indirect investment channel nationwide, making up a staggering 60% of the country’s total transactions.

Meanwhile, foreign investors poured a modest US$1.84 billion into 1,320 newly licensed projects in the city. The year also saw 309 operational FDI projects increasing their capital by roughly US$859 million, taking the total FDI pledges to some US$2.7 billion.

The municipal Department of Planning and Investment did not name the sectors that had attracted the foreign investors to M&A deals. As observed by the Saigon Times, they could be largely involved in real estate, retail, food production, fast-moving consumer goods and finance.

A number of experts ascribed the surge in M&As to a more favorable legal framework that allows foreign firms to make deals with their local peers in Vietnam.

With a population of 95 million, the country’s high economic growth and sustainable development in recent years have helped attract foreign indirect investment through M&As, enabling foreigners to penetrate the Vietnamese market.

The experts pointed out the acquisition of stakes in or brands of local firms would help foreign investors to save significant amounts in initial costs and make instant use of advantages on the local market.

Meanwhile, a number of local firms are in dire need of finances to expand their business activities, so they could use the proceeds from their deals with their foreign partners to fund these activities.

Also, they can have foreign investors inject capital into their firms and get involved in their management and administration activities. Otherwise, they are at risk of falling behind firms with a larger scale and better management capacity.

Given the deeper integration of Vietnam in the global economy, many domestic firms are finding it hard to compete with their foreign rivals with strong brands, technologies and finances. Therefore, they have decided to sell their businesses.

In addition, the ongoing trade war between Washington and Beijing is pushing China-based manufacturers and their U.S. clients to move or expand production to Southeast Asian nations, including Vietnam.

The increase in stake acquisition in Vietnamese firms is also a way for foreign manufacturers to stabilize their operations quickly and export their goods to the United States.