After a subdued period, the mergers and acquisitions (M&A) market is expected to pick up in 2024 with major deals across various sectors.
A bright spot in a bleak winter
Latest data from Bloomberg shows that the total value of M&A transactions and related deals fell by 25% in 2023, down to 2.7 trillion USD. This is the lowest level since 2013 and below the 3 trillion USD mark in a single year.
Mr. Warrick Cleine, Chairman and CEO of KPMG in Vietnam and Cambodia, assessed that in 2023, global M&A activity and deal value stalled as investors faced political and macroeconomic uncertainties worldwide. Rising global inflation has also affected investor sentiment, making them more cautious. In addition, tighter monetary policies in major economies, leading to higher interest rates, have impacted emerging markets as well, making transactions more expensive and negatively affecting both the quality and volume of deals in the market.
Following the global trend, Vietnam’s M&A market also slowed down in 2023. The report “Vietnam M&A: Transformation – From Opportunity to Strategy” by KPMG shows that in the first 10 months of 2023, total M&A transaction value in Vietnam reached 4.414 billion USD across more than 260 deals, with an average deal value of 54.5 million USD. This represents a 23% decline compared to the beginning of the year, and the number of transactions is also lower than in the past two years.
However, KPMG Vietnam notes that Vietnam’s underlying economic fundamentals remain stable, foreign investment flows are steady, and the government’s commitments to infrastructure development and economic reform have not weakened. The temporary slowdown in the M&A market can be seen as part of a broader economic cycle, with 2023 being a year in which the market rebalanced toward more sustainable development.
A highlight of the 2023 M&A market was a series of major deals. The largest among them was Sumitomo Mitsui Banking Corporation (SMBC) of Japan spending 1.45 billion USD to acquire a 15% stake in Vietnam Prosperity Joint Stock Commercial Bank (VPBank). Previously, this partner also acquired FE Credit, a consumer finance company from the same bank, in 2021.
In the real estate sector, a notable deal was ESR Group Limited’s purchase of a strategic stake worth 450 million USD in BW Industrial Development Joint Stock Company (BW Industrial), one of Vietnam’s largest and fastest-growing industrial and logistics developers. BW Industrial plans to use the new capital to maintain its leading position in developing critical infrastructure for the new economy and to capitalize on the shift of manufacturing to Vietnam.
Also in this sector, Gamuda Land (Malaysia) acquired 100% of Tâm Lực Real Estate Group for 316 million USD to expand its presence in Vietnam. The investor is planning a 1.1 billion USD high-end mixed-use project on the acquired land in the center of Thu Duc City.
In the healthcare sector, Thomson Medical Group (Singapore) stood out with a deal worth over 380 million USD to acquire a controlling stake in FV Hospital. This also marks the first time Thomson Medical Group has entered the Vietnamese market.
In the consumer sector, Bain Capital—a leading U.S. private equity fund—invested 200 million USD in Masan Group through equity financing. This deal represents an important milestone for Vietnam’s consumer industry and highlights its attractive growth prospects.
The driving force preventing Vietnam’s M&A market from declining more sharply in 2023 was investor confidence in the resilience of the economy, as well as in government policy responses and the internal strength and potential of Vietnamese enterprises.
Accordingly, the Government proactively responded and adapted more effectively to domestic and global challenges. It also focused on improving institutions and the investment and business environment; decisively addressing outstanding issues and bottlenecks; and implementing synchronized solutions, particularly in fiscal and monetary policies, to remove difficulties and support production and business activities.
The Government also promoted investment in strategic infrastructure projects. In addition, it has established and fostered new growth drivers such as the digital economy, circular economy, and green growth. As a result, macroeconomic stability has been maintained, inflation has been controlled, major economic balances have been ensured, and although growth has not fully met expectations, it remains relatively high compared to many regional and global economies.
Outlook for the M&A market in 2024
According to the report “The Big Picture: M&A Outlook 2024” recently released by S&P Global, although global M&A activity slowed down for nearly the entire year of 2023, there are many potential drivers that could help dealmakers accelerate activity in the coming year. The U.S. Federal Reserve’s decision to pause interest rate hikes has created a more stable interest rate environment, thereby encouraging deal-making and improving the outlook for the global M&A market in the year ahead.
According to S&P Global experts, M&A activity remained subdued throughout most of 2023, but various catalysts could bring dealmakers back into the market in 2024. These include exchange rate stability and pent-up demand driving consolidation or divestment in certain sectors.
Mr. Jens Kengelbach, Global Head of M&A at Boston Consulting Group, shared: “We are relatively optimistic about the M&A outlook for 2024, as deal activity shows promising signs of recovery. Historically, M&A tends to slow during periods of economic volatility or uncertainty, but that is often when valuations become more attractive and new opportunities begin to emerge.”
Growth drivers for 2024 include strong FDI inflows supported by political stability and trade agreements. Moreover, with inflation being controlled below the 4% target, the International Monetary Fund (IMF) forecasts GDP growth to rebound to 5.8% in 2024 and 6.9% in 2025. Public debt remaining below the legal ceiling of 60% of GDP further provides a foundation for a favorable year for investors seeking strategic opportunities in Vietnam’s dynamic market.
A positive signal is that domestic enterprises are also emerging as buyers, ready to take over assets from both local and foreign companies in order to complete their ecosystems. Opportunities are becoming increasingly open for all parties to find common ground and work together toward prosperity, supported by economic recovery policies that the Government is vigorously implementing.
Mr. Tran Duy Dong, Deputy Minister of Planning and Investment, assessed that Vietnam’s M&A market still has many opportunities and prospects, thanks to increasingly strengthened fundamental factors. Institutional and policy improvements are being carried out in a direction that facilitates investment and business activities, including M&A. The Government continues to study and respond promptly and effectively to the global minimum tax issue, thereby enhancing foreign investment attraction, especially large-scale investments from multinational corporations. The divestment and restructuring of state-owned enterprises, which had slowed for a period, will also be accelerated.
The decisive and effective implementation of these measures will make an important contribution to a faster and more sustainable economic recovery, not only in 2024 but also in the years ahead. As the economy recovers, consumer confidence improves, the business growth outlook becomes clearer, and foreign investment accelerates, M&A activity is expected to become more vibrant again.
Hot sectors in 2024
“Vietnam’s M&A market is ready for growth in 2024, supported by various economic advances and reforms aimed at attracting FDI, with increased transactions expected in key sectors such as green energy, technology, real estate, and healthcare. The shift in investment toward these industries is driven by infrastructure growth and technological development accelerated by digital transformation,” said Mr. Warrick Cleine.
In the healthcare sector, activity is expected to be boosted by demographic changes. The real estate sector is likely to remain active due to demand for high-quality assets.
Ms. Khanh Nguyen, Business Development Director at Gamuda Land Vietnam JSC, shared: “We are optimistic that real estate will be a sector with strong M&A potential in 2024. In addition, there is a growing trend of financial groups entering Vietnam to seek real estate assets for short-term or long-term investment, with expectations of attractive returns. Foreign investors such as Gamuda Land typically prefer to acquire clean companies that own standalone projects and are not entangled with other projects within the same company. Therefore, when equity is transferred, the project is handed over to the new investor.”
According to Dr. Le Minh Phieu, Director of LMP Lawyers and LMP Capital, investors will target companies with stable and long-term product investment strategies. Currently, many investors are prioritizing a return to key sectors such as agriculture and food. This is followed by the healthcare sector, including hospitals, pharmaceuticals, and medical equipment. In addition, investors are also looking to complete deals in sectors that can take advantage of low valuations during Vietnam’s market downturn, notably real estate and construction. Moreover, attractive sectors for investors are also shifting in line with regional developments, such as industrial manufacturing and logistics.
Mr. Masataka “Sam” Yoshida, Global Director at RECOF, stated: “Japan’s economic situation is significantly affecting investors due to the weakening yen and various constraints in doing business with shareholders. As a result, investing abroad—such as in Vietnam—remains a better option. Currently, Japanese investors are very interested in logistics, especially cold chain supply systems. They are also eyeing the Vietnamese stock market, but have not yet made many concrete moves, as the market size is still small and regulations governing the acquisition of public companies are not yet fully developed.”
