Vietnam has experienced vibrant and fast-expanding M&A in public and private markets. Since the open policy in the mid-1980s, the Vietnam economy has modernized and liberalized, then foreign investors have much space and more opportunities to invest in Vietnam.
Vietnam M&A big picture in 2019
M&A activities in Vietnam have been more abundant thanks to new policies of investment, business environment improvement, bilateral and multilateral agreements namely Trans-Pacific Partnership Agreement (CPTPP), Europe Vietnam Free Trade Agreement (EVFTA).
2019 witnessed a lot of giant investors coming from Korea, Hongkong, Singapore, Japan and so forth. Vietnam recorded US $1.9 billion in M&A deal in 2019. Singapore ranks the third major among foreign investors in M&A transactions during 2018-1019 with the total value of USD 1.6 billion in the first 10 months of 2019.
Singapore – the third investor in Vietnam
M&A transactions usually take place in fields such as consumer goods, retail, real estate, telecommunication, energy, infrastructure, pharmaceuticals, and education. Singapore has invested in almost all sectors of Vietnam, the processing industry with 574 projects and USD 20.17 billion for total registered capital. Besides, many Singapore investors are interested in other sectors like household electronics, textile and garment, food production, automation and logistics.
GIC is a typical example of a major Singapore investor in Vietnam. GIC has poured money in the initial public offerings (IPO) of Vietjet Air, Vinhomes, Pan Group, Vinasun, Techcombank, Vietcombank, FPT. Furthermore, the investor recently conducts the acquisition of Vinaphone shares and provides a loan to Vinaphone.
General legal framework related to M&A activities in Vietnam
In general, M&A activities in any country relate to a lot of parties and regulations such as corporate law, foreign investment law, land law, and competition law. Additionally, the process also requires commitments in WTO and agreements. Vietnam is not an exception. Here are things that foreign investors should be aware of when doing acquisition and merger in Vietnam:
- M&A for public companies: Because the restriction of holding 49% shares by foreign investors was removed in 2015, public companies can increase the limitation on foreign ownership up to 100%. However, this rate can be modified depending on the purchase and sale of shares.
- Restrictions on shares transfer within the three years since the business registration certificate: after getting a business registration certificate, within 3 years, founding shareholders can only transfer their shares to other founding shareholders if the General Metting of Shareholders approves the transfer.
- Restrictions on subjects conducting M&A: Some fields restrict investor’s conduction M&A. For instance, only security investors can buy stocks and contribute to security domestic companies.
- Not keeping updated with the M&A cases based on international standard: In fact, the current legal framework for M&A transactions into Vietnam has not caught up with the flexibility and advanced regulations or concept like other countries.
- Delay approval: Any M&A transaction into Vietnam has been approved by the authorities. The approval process may take several times if the transaction relates to conditional businesses and even take a longer time to be approved by different authorities.
- Anti-competition: According to the Competition Law, foreign investors (in M&A transaction) holding 30% to 50% of the marketing share in “a relevant market” must be reported to the Administration Department of Competition and Customer Protection (Ministry of Industry and Trade).
These rules pose challenges and risks to both investors and Vietnamese businesses due to the unclearness of what so-called “a relevant market”. Participants have to make their judgments and decide whether they should invest and undergo the sluggish process of M&A transactions.
To have the overview of Vietnam FDI, please visit Vietnam FDI guide 2019 – 2020.
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