VPBank sells 15 percent of its stakes to Sumitomo Mitsui Banking Corporation (SMBC - Japan) collecting US$1.5 billion. (Photo: SGGP)

In the context that inflation and interest rates increase, capital flows are being tightened, and many businesses are struggling, so mergers and acquisitions (M&A) activities have taken place in many sectors, with real estate and finance being the most prominent ones.

A boost for the real estate market

According to estimates by Cushman & Wakefield (a global real estate company headquartered in the United States), the total value of officially announced real estate M&A deals in Vietnam in 2022 exceeded US$1.7 billion - the highest in five years. In 2023, M&A in the real estate sector is expected to continue to be "hot" and be a "boost" for the market, which is facing many challenges.

The proof is that in Q1-2023, several real estate M&A deals took place in the market. Recently, Nam Long Corporation completed the transfer of 25 percent of the charter capital of Paragon Dai Phuoc Co., Ltd. After the transfer, Nam Long Corporation owns 75 percent of the charter capital of Paragon Dai Phuoc Co., Ltd - the developer of Nam Long Dai Phuoc Urban Area, with a scale of over 45 hectares. The company currently has a charter capital of nearly VND1.67 trillion.

Similarly, the news that CapitaLand Group (Singapore) is negotiating a deal worth about $1.5 billion with Vinhomes is also drawing investor interest. The group is considering buying a portion of Vinhomes' Ocean Park 3 project in Hanoi or another project in Hai Phong City. Although no official confirmation has been made by either party in Vietnam, a member of the CapitaLand Group stated that Vietnam is one of their core markets, so they continually evaluate investment opportunities to expand their presence in Vietnam. If successful, this deal would be one of the largest real estate transactions in Southeast Asia in recent years.

In addition to commercial real estate, according to the statistics of the commercial real estate research firm Real Capital Analytics (RCA), there have been five industrial real estate M&A transactions recently in Dong Nai, Bac Giang, Bac Ninh, and Vinh Phuc, as well as two industrial development land plots in Ho Chi Minh City and Gia Lai, with a total estimated transaction value of over $100 million.

"Clearly, when domestic credit sources are tightened, and other channels for capital raising such as bonds and stocks are not favorable, it has prompted M&A activities in the real estate sector. It is noteworthy that this activity is not only happening between domestic enterprises but also involves the participation of foreign investors with strong capital sources, who are seeking investment opportunities in Vietnam," a financial expert commented.

According to the Ministry of Planning and Investment, in the first two months of 2023, an estimated $397 million of foreign investment flowed into the real estate sector, contributing 12.8 percent of the total foreign direct investment (FDI) into Vietnam. Currently, real estate is the second largest FDI-attracting sector in Vietnam. In the current context, unlocking capital sources is an important factor to revive the real estate market, and M&A is the most feasible choice among channels.

"Many foreign investors have great confidence in the potential of Vietnam's real estate market. Meanwhile, M&A activities will play a crucial role in rescuing domestic real estate developers, so when M&A continues to be strengthened, it will be a driving force for this market's recovery," said David Jackson, CEO of Colliers Vietnam, a company specializing in real estate management and investment services.

Foreign investors interested in the banking sector

Not only in the real estate sector but in the early months of 2023, M&A activities in the banking sector have also become vibrant again after a quiet year. The positive point is that many foreign investors are interested in this field. In addition, many bank executives are seeing M&A as an important method to change to a more efficient business model.

Specifically, in early March 2023, UOB Singapore announced the completion of the acquisition of Citigroup's consumer banking division in Vietnam, including the transfer of 575 Citigroup employees to UOB Vietnam. The leaders of UOB Group said that after acquiring Citigroup's consumer bank in Vietnam, UOB would expand its retail business operations in Vietnam - one of the fastest-growing economies in the region.

Recently, the financial market has also witnessed a record-breaking M&A deal in which VPBank official sold 15 percent of its shares to Sumitomo Mitsui Banking Corporation (SMBC - Japan) through a private placement. This deal brought VPBank VND35.9 trillion, equivalent to $1.5 billion, and SMBC has become a strategic investor of VPBank now. This "blockbuster" deal also broke the record value that VPBank set in 2022 when it sold 49 percent of FE Credit's capital for nearly $1.4 billion. After this deal, VPBank became the second-largest bank in terms of shareholder equity in Vietnam.

Mr. Ngo Chi Dung, Chairman of VPBank's Board of Directors, said that with the strategic investment from SMBC, VPBank would make a leap in terms of capital scale in the Vietnamese banking system. In addition, as a strategic investor, SMBC will contribute to the growth of VPBank by sharing the secrets and experiences that the group has accumulated over many years in many markets in Asia while expecting to attract FDI from over 200,000 customers, who are multinational corporations and large enterprises around the world of the SMBC Group and SMBC Bank. These large corporations and enterprises, when investing or expanding investment in Vietnam, may become potential customers of VPBank.

Speaking of the M&A trend in the financial market, KPMG Vietnam evaluates that M&A activities in the finance and banking sector slowed down in 2022 but will return because this sector always attracts many foreign investors who are large financial corporations worldwide. Meanwhile, Vietnamese banks need to increase capital and seek strategic partners to enhance risk management capabilities, operational efficiency, technology, and digitalization. The reality shows that these M&A deals are opportunities for banks to increase capital, but not for all of them.

However, experts believe that M&A in the financial sector is not only limit ed to foreign companies buying stakes in domestic banks, but also domestic bank M&A activities will be lively this year and in the years to come due to the compulsory transfer plan for weak banks.