The M&A market is revealing a "blockbuster" deal.

After a sluggish start to the year, the Vietnamese M&A market is showing more positive data in the final months of the year.

Tasco Auto has the largest automobile distribution system in the country and aims for CKD assembly, while Mitsui is positioning information technology and mobility as its future flagship industries.

Expecting a big boost

After a period of rapid growth, foreign investment in Vietnam through capital contributions and share purchases has slowed down significantly. In the first seven months of this year, contrary to the increase in foreign direct investment (FDI) flows, capital contributions and share purchases by foreign investors decreased in both the number of transactions and the value of capital contributions.

According to data from the Foreign Investment Agency ( Ministry of Planning and Investment ), as of July 20, 2024, the total registered foreign investment in Vietnam reached over US$18 billion, an increase of 10.9% compared to the same period in 2023. Meanwhile, disbursed capital reached over US$12.55 billion, an increase of 8.4% compared to the same period last year. Specifically, foreign investors' capital contributions and share purchases totaled 1,795 transactions, with a value of US$2.27 billion, decreasing by 3.1% and 45.2% respectively compared to the same period.

However, as August began, the mergers and acquisitions (M&A) market showed many positive signs as companies simultaneously announced successful deals. One of the recently announced deals that attracted much attention was Mitsui & Co.'s official investment to become a strategic shareholder of Tasco Auto - a subsidiary of Tasco.

The value has not been disclosed, but the deal is expected to create a major boost in the mobility sector (information technology and transportation) in Vietnam, an area where both parties have strengths. The partnership between Tasco and Mitsui at Tasco Auto is seen as an important step in helping Tasco realize its strategic goals.

Besides mobilizing significant capital resources, Tasco Auto will have the opportunity to learn from international operational and management experience, optimize efficiency, and leverage the existing position and network of its partner. At the same time, Mitsui will provide technological solutions, consulting, and support to Tasco in improving operational efficiency, streamlining management structures, and creating a more efficient and effective organization.

From Mitsui's perspective, this is also an opportunity for Japanese businesses to become more deeply involved in rapidly developing sectors in a market of 100 million people like Vietnam.

In the current context, the strategic partnership between Tasco and Mitsui is driven by a shared vision of leveraging the strong long-term growth opportunities in the automotive sector. The combination of Tasco's leading advantages in automotive services in Vietnam with Mitsui's experience, international network, and strong global capabilities will maximize the strengths of both parties to develop and expand business, and increase operational efficiency.

In May 2019, Mitsui reached an agreement to acquire a 35.1% stake in Minh Phu Seafood Corporation (Minh Phu), the world's largest integrated shrimp producer, from farming to processing and sales.

In March 2024, according to Nikkei Asia, Mitsui also announced it would invest approximately 84 billion yen (US$560 million) in the Block B - O Mon gas-fired power plant project chain in Vietnam. This announcement came shortly after the Vietnam Oil and Gas Group ( Petrovietnam ) signed a series of commercial agreements related to the development of the Block B - O Mon gas-fired power plant project chain with partners, including Mitsui Oil Exploration (MOECO) - a subsidiary of Mitsui & Co.

Besides Japanese investors like the "giant" Mitsui, who have been indirectly investing in many promising sectors of Vietnam, South Korean investors are also making moves. A prime example is the recent deal by Samsung Engineering - a subsidiary of Samsung Group (South Korea).

Samsung Engineering invested US$41 million (approximately VND 960 billion) to acquire the entire convertible loan from the International Finance Corporation (IFC) in DNP Water Investment Joint Stock Company. Following the transaction, Samsung Engineering owns 24% of DNP Water's equity. The two parties have collaborated to improve the operational efficiency of water treatment and wastewater treatment plants, as well as to research and develop wastewater treatment projects in urban areas in Vietnam.

Another noteworthy transaction is that VIAC Limited Partnership (an investment unit of the Oman National Investment Commission's Vietnam Investment Fund - Sultanate of Oman, through the conversion of bonds into shares) will soon become a shareholder of Van Phu-Invest.

Over the past 15 years, this fund has disbursed approximately $300 million, focusing on sectors with competitive advantages and contributing to the long-term sustainable development of the Vietnamese economy, such as infrastructure, energy, education, real estate, and healthcare.

Attracting investment through unique competitive advantages.

The global environment for international investment remains challenging this year. Weak growth prospects, economic fragmentation, trade and geopolitical tensions, industrial policy, and supply chain diversification are reshaping both direct and indirect investment patterns for foreign investors.

This has made some multinational corporations more cautious about expanding overseas. However, the profits of these companies remain high, financial conditions are gradually easing, and the number of new investment projects announced in 2023 will positively impact FDI attraction this year.

Meanwhile, in 2023, the cross-border M&A market did not grow as strongly as predicted. Industry trends showed that investment in infrastructure and the digital economy decreased, but sectors related to global value chains, including the automotive, electronics, and machinery industries, experienced strong growth.

Against this backdrop, the Vietnamese M&A market was quite sluggish in the first few months of 2024. Previously, the question was whether this market would pick up in the final months of the year, given the uncertain impact of the global political and economic situation. At this time, however, signals from the aforementioned investment deals show many positive signs and opportunities for businesses to launch ambitious business plans.

In fact, a recently published report by HSBC's Global Research Department states that, with many competitive advantages, Vietnam remains a preferred destination for foreign-invested businesses.

According to HSBC, the interest of multinational corporations in Vietnam has increased significantly due to several factors, including competitive costs and policies supporting FDI. Compared to labor costs in the Asian region, manufacturing wages in Vietnam are lower, despite the population having a solid general education. Production capital costs across industries also demonstrate a competitive price advantage.

Furthermore, Vietnam has made significant progress in establishing various economic agreements with trading partners, such as the Vietnam-EU Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP). These advances have supported and facilitated foreign investment.

However, to maintain strong investment flows, HSBC experts believe it is crucial for Vietnam to move up the production value chain and increase the domestic added value in the production of these related products.

Furthermore, investment decisions by multinational corporations in the coming years will also be influenced by solutions such as leveraging digitalization to streamline trade processes, ensuring stable energy supply and green production, and improving infrastructure.

Notably, there are signs that more sophisticated knowledge and manufacturing processes are entering Vietnam. In 2022, Samsung established a research and development center in Hanoi to further develop its manufacturing capacity and began producing some semiconductor components. Meanwhile, Apple increased its influence in Vietnam, allocating resources to develop products for the iPad.

And as in the case of Mitsui, becoming a strategic shareholder of Tasco Auto is not only an opportunity to participate more deeply in the rapidly developing sectors of a market of 100 million people like Vietnam, but also to realize Tasco's vision of moving upstream in the industry with an automobile assembly project developed as early as 2024.

Positive outlook forecast

Global M&A activity slowed in Q2 2024. Prolonged high interest rates, an unfavorable regulatory environment, and an overinflated stock market leading to excessively high valuations impacted M&A activity in the early months of this year.

According to data from Dealogic, the number of deals signed globally in the second quarter decreased by 21%, to 7,949 transactions. However, the total value of transactions increased by 3.7%, to $769.1 billion, with the total value of transactions in the Asia-Pacific region decreasing by 18%.

Although large deals continue to occur regularly, experts believe that the number of mega-deals, valued at over $25 billion, has slowed compared to previous M&A cycles, due to tighter antitrust oversight by regulators.

However, leading investment banking experts and M&A lawyers have dismissed concerns about the health of the M&A market and forecast a positive outlook for the second half of 2024.

Source: https://baodautu.vn/thi-truong-ma-lo-dien-bom-tan-d223877.html