The merger and acquisition (M&A) market since last summer has witnessed a surprising switch among top segments, with major activities in real estate overcoming consumer goods, leading to positive signs for the market for the next 12 months.

Nam Long Waterpoint township in Long An province is one of the major
real estate M&A deals powering the market, Photo: Le Toan

Vingroup retained its top position in large-scale transactions, with moves such as selling stakes equivalent to $1.3 billion to Singaporean sovereign wealth fund GIC and $1billion to SK Group of South Korea.

SonKim Land meanwhile also carried out a major transaction with a group of investors including EXS Capital, ACA Investments, and Credit Suisse AG valued at $121 million.

State Capital Investment Corporation also diverted 57.7 per cent of capital in Vinaconex with the value of VND7.4 trillion ($321 million). Vinaconex is contractor and developer of many real estate and infrastructure projects across Vietnam.

The latest investment took place in July when Keppel Land Vietnam acquired 60 per cent interest in three land parcels spanning 6.2 hectares in Nha Be district of Ho Chi Minh City from domestic Phu Long Real Estate Corporation for VND1.3 trillion ($56.5 million). 

The two sides will pour a total of more than VND7.4 trillion ($321 million) to develop the project, which will provide more than 2,400 premium apartments and shophouses to the market

After five years of co-operation with Japanese partners, including Hankyu Hanshin Properties Corporation and Nishitetsu Group, Nam Long Group so far has six projects implemented under M&A format, from a single residential building to townships.

In 2019, Nam Long Group continues expanding to northern and southern key economic zones with a range of projects under M&A format. Among those, Nam Long Waterpoint township in Long An province, Nam Long Waterfront and Nam Long Dai Phuoc township in Dong Nai province, and Nam Long Haiphong township are the latest projects owned by Nam Long.

Andrew D Kim, manager at the Global M&A Centre of the Korea Trade Investment Promotion Agency (KOTRA) said that M&A activities from South Korean companies have been very active in the Asian market. 

“We have seen a rising trend from South Korean investors recently, moving from manufacturing to real estate and service sectors where Vietnam’s huge population is offering much opportunity,” Kim said.

Nguyen Hoang, director of research and consultancy from DKRA Vietnam, also confirmed that M&A in real estate is becoming a major chunk of the whole market. 

“M&A activities in real estate are diverted with many large-scale transactions not only in Vietnam but in Asia also. M&A also helps push up the stock market to be more flexible and attractive,” Hoang said. 

“With the international integration of Vietnam’s economy as well as Vietnamese businesses in particular, M&A activities in real estate will be more and more exciting. Through this channel, Vietnamese real estate businesses can also enhance their professionalism, transparency, and management capabilities when implementing projects.”

According to the Vietnam M&A Forum Research Group and the Merger and Acquisition Research Centre, M&A in the real estate sector will remain high in the coming time, focusing on large-scale projects, newly-developed urban areas, resort and hotel projects in central areas of the country.

Real estate M&A is attracting both domestic and foreign investors. International groups from Japan, South Korea, and Singapore are in the race to seek the best investment opportunities with the expectation of cash flow with stable profitability and high interest rates.

Along with stable macroeconomic growth, effective bilateral and multilateral co-operation agreements, high population growth, and urbanisation are factors that are motivating Vietnam to become the most attractive market in the region.

The form of acquisition to create a joint venture, meanwhile, is mainly being carried out among foreign investors with strong and experienced financial capabilities that will partner with local corporations – investors who are holding land in the market. The capital flow for acquisition is being seen in most segments including housing, offices, retail, hotels, and industrial parks.

Domestic investors, though not participating in the deals with the greatest value, are gradually transforming themselves to master large M&A deals thanks to the advantage of accessing land funds, understanding the market, and improving competitiveness.

While there are many successful cases, others do find themselves with hurdles to overcome. Some potential deals occur in which the two sides fail to have the same voice, mainly caused by the differing mindsets on evaluation and post-M&A strategies.

The risk in implementing deals with regards to M&A strategy, valuation, legal compliance, and human resource risks are also lessons that can still be learned from such deals.

Andy Ho, chief investment officer at VinaCapital, said that in order to avoid risks whenever they want to take into M&A in Vietnam, investors must choose consultants and advisors carefully. 

“I suggest consultants or advisors who have a track record of at least five successful transactions in the field in which the buyers are operating. Otherwise, these consultants may not have enough experience for this Vietnamese market,” Ho said.

“Benefits always come along with risks and investors must learn very fast and seize the opportunity,” he added.