The M&A forecast is likely to increase in terms of frequency and value in 2022, as well as huge investment potential, said Le Thi Phuong Lan, Head of Investment at Savills Hanoi.
“Foreign investors need to be aware of the potential obstacles within M&A dealsshe added.
Vietnam has an active M&A market† In 2021, real estate companies received more than $31 billion in registered foreign direct investment. However, the capital disbursed declined $1.6 billion year-over-year, reaching $2.6 billion, the Vietnam News Agency reported.
The prospects for mergers and acquisitions for 2022 are bright as Vietnam is an increasingly attractive destination for international companies, Lan said, adding that as borders reopened on March 15, travelers from 13 countries are now allowed to enter the country without a visa. coming in, mergers and acquisitions are likely to take place. are rising along with other real estate investments.
“The reason for this is that investors can now travel to properties and do market research, understand business models or evaluate the potential of sites,” she said.
Savills research shows two factors that make Vietnam an attractive investment destination. These are the favorable macro conditions offered to investors, including steady economic growth, political stability, better infrastructure connections, increasing urbanization, and a large and young workforce and attractive support policies such as tax breaks.
According to FocusEconomics, Vietnam has one of the fastest growing economies in the APAC region and will have the fastest growing economy in the region by 2022, with momentum expected to continue into 2023.
Vietnam is connected to the region not only by a growing road network, but also by international seaports, airports and land borders. The Ministry of Planning and Investment has announced plans to launch the most comprehensive socio-economic development and recovery plan, with more than UN 100 trillion for infrastructure development.
Real estate experts think it will increase the potential satellite provinces to attract FDI firms. The improved transport links allow FDI firms to expand further from established hubs such as Hanoi and HCMC.
In terms of human resources, Vietnam has a large and young workforce coupled with competitive labor costs. At the same time, the increasingly urbanizing population also creates great potential for the development of new urban area projects, experts say.
In terms of supportive policies, the government sought to contain the impact of the pandemic and offered support such as facilitating the movement of goods, debt restructuring and tax extensions and exemptions during the pandemic, along with supportive economic policies, a successful national vaccination campaign, which have helped the country win the hearts of investors, Lan said.
“In 2022 we have seen encouraging M&A activity. Of the sectors that received investment, real estate ranked second, receiving nearly $1.52 billion, or 30.4 percent of the total recorded foreign direct investment. These investments show that foreign investors remain optimistic about developing real estate projects in Vietnam,” she said.
Lan showed huge investment potential in Vietnam, also citing legal barriers, problems with joint venture partners, uncertainty with the merger and acquisition process and various pricing approaches that could harm the mergers and acquisitions, and said Vietnam had relatively complicated constitutions.
Lan believed that the inconsistencies between laws could lead to a waste of time and money, despite the institutional reforms of recent years.
The expert pointed out that most foreign companies entered into joint ventures when doing business in Vietnam. The foreign company had the main decision-making power and the Vietnamese investors provided legal support. However, negotiations can be time consuming due to differences in business practices and legal structures.
Because mergers and acquisitions in Vietnam was still a relatively new concept, many companies, especially small and medium-sized enterprises, were unprepared for the processes involved, Lan said, adding that projects may struggle to attract investment.
“While mergers and acquisitions are becoming increasingly popular, there are still potential hurdles for foreign investors. M&A transactions are a complex matter; therefore, the parties involved should research and develop detailed plans to carefully ensure long-term value,” Lan said.
“With our own experience entering the Vietnamese market and helping international clients, Savills understands the needs and concerns of FDI companies. In addition to short-term profit, we strive to create long-term value in mergers and acquisitions.”
Through Vietnam News Agency