The Situation in 2023

Bloomberg’s latest data indicates a 25% decrease in the total value of M&A transactions worldwide in 2023, falling to $2.7 trillion. This marks the first time in a decade that the value has dropped below the $3 trillion threshold.

The M&A market in Vietnam reflected the global trend, slowing down in 2023. The Vietnam M&A Report reveals that in the first 10 months of 2023, the total transaction value of M&A in Vietnam was $4.414 billion, with over 260 deals averaging $54.5 million per transaction. This represents a 23% decrease in transaction value compared to the beginning of the year, and the number of deals was also lower than in the previous two years.

Despite the slowdown, KPMG Vietnam suggests that Vietnam’s intrinsic economic factors remain strong, with stable foreign investment flows and the government’s commitment to infrastructure development and economic reform. The temporary decline in the M&A market is seen as part of a broader economic cycle, with 2023 being a year for the market to regain balance and move towards sustainable development.

Major deals occurred in sectors such as banking, real estate, healthcare, and consumer goods. These include Japan’s Sumitomo Mitsui Banking Corporation (SMBC) acquiring a 15% stake in Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) for $1.45 billion, ESR Group Limited investing $450 million to acquire a strategic stake in BW Industrial Development Joint Stock Company, and Thomson Medical Group (Singapore) spending over $380 million to acquire a controlling stake in Viet Phap Hospital.

M&A Market Prospects for 2024

Experts from S&P Global suggest that although M&A activity was subdued for most of 2023, various catalysts are likely to encourage traders to join the market in 2024. For example, the Federal Reserve’s (Fed) pause on interest rate increases creates a stable interest rate environment.

Jens Kengelbach, the global head of M&A at Boston Consulting Group, is optimistic about the M&A outlook for 2024. He notes that while M&A tends to slow down during periods of economic volatility, these times often present more attractive valuations and new opportunities.

Vietnam’s market growth drivers for 2024 include strong FDI inflows due to political stability and trade agreements. With inflation controlled below the 4% target, the International Monetary Fund (IMF) forecasts Vietnam’s GDP growth to rebound to 5.8% in 2024 and 6.9% in 2025. Public debt is expected to remain below the legal ceiling of 60% of GDP. Domestic enterprises are also emerging as buyers, ready to acquire assets from domestic and foreign businesses to strengthen their ecosystems.

Tran Duy Dong, Deputy Minister of Planning and Investment, believes that Vietnam’s M&A market still holds many opportunities, thanks to increasingly consolidated foundational factors. The government continues to improve institutions and policies to facilitate investment and business activities, including M&A. It is also exploring timely and effective policy responses to the global minimum tax issue to enhance foreign investment attraction, especially from multinational corporations. The divestment and restructuring of the state-owned enterprise sector, which has been delayed, is set to accelerate.

Sectors Expected to Thrive in Vietnam in 2024

Warrick Cleine, Chairman and CEO of KPMG in Vietnam and Cambodia, observes that investment trends in green energy, technology, real estate, and healthcare are driven by infrastructure and technology growth due to digital transformation.

The healthcare industry is expected to grow due to demographic changes, while the real estate sector is likely to continue thriving due to demand for high-quality assets. Investors are returning to key sectors like agriculture and food. Additionally, the sectors attracting investors are evolving in response to regional shifts, such as industrial production and logistics.