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Friday, September 30, 2022

Vietnam’s H2 M&A activity seen slowing over investor caution: EY

By Hong Ngan

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HCMC – Merger and acquisition (M&A) transactions in Vietnam may slow down a bit in the second half of the year as investors have grown more cautious about some macro trends impacting the local economy, according to an analysis of M&A data by EY.

Tran Vinh Du, EY Indochina strategy and transactions leader, said, “While the country’s fundamentals are still strong, we are not immune to negative movements, such as the downturn in the capital flow from developed countries to emerging markets, geopolitical tensions and high inflation. Those trends cast doubt on investors’ confidence in Vietnam and many other markets.”

The local market had witnessed strong growth of private equity and venture capital investments in the year to June despite some turbulence in the equity and debt markets. The total deal value in Vietnam during this six-month period was almost the same as the figure in the whole of 2021 at US$4.97 billion, Du continued, citing his company’s research.

On the global scale, despite major geopolitical and financial headwinds, global M&A activity in H1 has been resilient.

The global market recorded 2,274 M&A deals worth US$2.02 trillion in total from January to June, down 27% in value and 18% in volume against the year-ago figure, but activity is up compared to the average of the last M&A cycle, up 35% and 13%, respectively.

As for M&A activity by sector performance, technology again drove global M&A activity in H1 2022.

While M&A activity in the technology sector shed 20% from the record 2021 level of US$789 billion, it still accounted for nearly a third (31%) of global M&A activity. Deals focused on technology targets are now double the level of the previous cycle (up 95% against the 2015-2019 average of US$322 billion).

In Vietnam, however, the technology sector has fallen short of expectations, even though this sector receives much interest from investors.

According to Du, there were only four tech-related M&A deals announced in H1 as reported by Mergermarket, compared to seven deals seen in the same period last year.

The local market saw a sizable deal in H1 2022. OnPoint, a Vietnam-based e-commerce solutions provider, managed to raise US$50 million of capital from an indirect wholly-owned subsidiary of Temasek. The deal targeted Vietnam’s fast-growing e-commerce industry and became the largest private fundraising round in Southeast Asia’s e-commerce-enabler industry in the last five years.

In recent years, the main technology fields, including e-commerce, fintech, ed-tech, logistics and business automation, have attracted a large amount of investment capital in Vietnam.

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