M&A opportunities for foreign investors in an emerging
Presented by Mr. Le Song Lai
Deputy General Director
Rome, 21st January 2013
1. Vietnam M&A overview
2. Challenges
3. Where opportunities exist
- Private equity
- Infrastructure
- SOEs
4. SCIC and M&A opportunities
1. Vietnam M&A overview
M&A activity in Vietnam has risen sharply in recent years despite the macro economic
2011 M&A activity reached USD4.4 billion
• Foreign inflow made up USD2.6 billion (65%) in
the value of deals
2012 The total transaction value of published
M&A transactions were estimated at USD4,17
billion in which the first quarter activity was
strong at USD1.99 billion
• Sectors of greatest activity:
• Foreign participation continued to expand
• Consumer goods
• Sectors of great activity:
• Banking
• Consumer goods
• Real estate
• Banking
• Japan was the largest contributor towards M&A
Vietnam M&A overview
Total value and number of closed M&A deals increasing with time
Recent M&A activity
Transaction numbers by key sectors
Most prominent M&A deals in 2012
Most prominent M&A deals in 2012
Top M&A deals in 2011
9 out of the top 10 deals involved foreign buyers
2. Challenges
Cost of capital
• Relative to other countries, Vietnam’s cost of
capital remains extremely high
• If inflation does not continue on its path or
easing, the risk of prolonged high levels of cost of
capital will remain. In fact, due to drastic
measures taken by the Vietnamese Government,
inflation was reduced significantly from 18.58% in
2011 to 6.81% in 2012 and is expected to be 9% in
2013 by Fitch rating estimate).
• VND denominated debt is greatly restricting
domestic M&A activity
• Targeted businesses for acquisition will see their
value negatively impacted by increased discount
• Almost all M&A activity will come from foreign investors, who’s cost of capital is much lower relative to the
Vietnamese market
• Foreigners will favor purchasing existing companies rather than spend time and money developing its own
business organically
• Only cash-rich domestic businesses will have the capability to execute successful M&A transactions
3. Opportunities
Private Equity
 Stable macroeconomic situation, inflation under control, monetary
tightening policy continued etc.
 Vietnam’s stock exchange is forecast by Bloomberg to be the world best
exchange in 2013
3. Opportunities
Private Equity
Private equity is an attractive area for M&A investment in Vietnam
Fragmented markets
Larger quantity of appropriate sized SMEs
A substantial increase in the quantity of SMEs which could handle a meaningful
investment of USD5-10 million
SMEs are increasingly aware of and understand private equity structures
300,000 small and medium-sized enterprises in Vietnam.
Minority protections can now be negotiated
More significant M&A transactions recently include:
Diageo acquired 45% stake of Halico
Unicharm bought 95% stake of Diana
C.P Pokpland acquired 70.8% of CP Vietnam
Fortis Healthcare acquired 65% stake of Hoan My Medical Corporation.
Infrastructure is emerging as an alternative
asset class with stable and consistent returns
 Shortages occur in every infrastructure sector in Vietnam
 Port congestion is particularly acute
About USD4.5 billion to be invested in ports
in the next five years
 Traffic congestion is just as bad
Approximately 13 expressways are planned
for construction by 2015, with total cost of
around USD6.5 billion
 Government is encouraging investment in the power
 An expected USD14 billion in to flow into this area
over the next several years
Over the past decade infrastructure investments have
not kept pace with GDP growth of 7-8%
Vietnam needs to invest approximately USD140 billion
between now and 2020.
Government with limited capacity and decreasing
access to Official Development Assistance (ODA).
Attractive opportunities for private sector to
strategically invest in this asset class.
SOE equitisation and capital markets
SOE IPOs 2012-2015
Vietnam Airlines
The equitisation of state-owned enterprises
is an important aspect of Vietnam’s
emerging capital markets
Vietnam Paper Corp
Vinafood 1
Consumer foods
The government is entering the final phase
of equitisations
Song Da Group
Equitisation of state-owned enterprises
Many opportunities remain within
Vietnam’s listed assets
YTD 2012, VN Index up 36% with increasing liquidity
2011 Revenue (USDbn)
Increased liquidity could foster more M&A activity
Potential for SOE IPOs opportunities over the next 3 years
MobiFone: total revenue of USD2.1bn and EBIT of USD286mn
Satra: strong financial performance since it operates in defensive sector such as food
SCIC as a key player in the M&A market in Vietnam
A brief introduction of SCIC
SCIC role in the M&A market in Vietnam
SCIC as a key player in the M&A market in Vietnam (cont.)
A brief introduction of SCIC:
 Est. since 2005 and started operations in 2006 along the line of
Temasek of Singapore and Khazanah of Malaysia
 Seen as a purely profit oriented entity and a financial investor
Main missions includes:
Managing state capital in post-equitised companies
Investing in both green field and brown field projects inside and outside
Vietnam, with a special focus on infrastructure
Providing financial advisory services
SCIC as a key player in the M&A market in Vietnam
A snapshot of SCIC performance (as of 31 December 2012)
 Total assets: USD 3 b
 Charter capital: USD 900 m
 Before tax profit; USD 250 m
 ROE: 15.5%
 Number of portfolio companies: over 900 units
 Largest investor in the stock exchanges in Vietnam with significant
shareholding in over 70 listed companies
 Having a strong presence in a number of sectors including: pharmaceuticals,
plastics, foods and beverages , construction and trading etc.
SCIC as a key player in the M&A market in Vietnam
SCIC role in the M&A
 Acting as the largest seller in the OTC market with over 200
businesses available for divestment each year
Active buyer with focus on energy and infrastructure sectors
 Helpful facilitator/advisor for M&A deals thanks to its roles in the public
SCIC as a key player in the M&A market in Vietnam (cont.)
Major closed M&A deals involving SCIC
 Daiichi Life (Japan) purchase of an entire life assurance JV from SCIC and its
Australian partner for USD 25 m in 12/2006
 Qantas acquisition of a 30% stake in Pacific Airlines for USD 50 m (4/2007)
 Swiss Re acquisition of a 25% stake in Vietnam National Reinsuarnce
Corporation for USD 80 m (1/2008)
 AXA acquisition of a 16.65% stake in Bao Minh Insurance Corporation for
€54 m (9/2007)
 Etc.
M&A and investment
prospects in Vietnam