HOW IS 2024 & 2025 SHAPING UP FOR �MERGERS AND ACQUISITIONS (M&As)

HOW IS 2024 & 2025 SHAPING UP FOR �MERGERS AND ACQUISITIONS (M&As)

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HOW IS 2024 & 2025 SHAPING UP FOR
MERGERS AND ACQUISITIONS (M&As)
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DUANE MORRIS VIETNAM LLC

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DR. OLIVER MASSMANN
Partner, General Director
PAUL MARKS
Special Counsel

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AGENDA
•ECONOMIC FACTORS
•IMPACT OF GEOPOLITICS
•IMPACT OF DISRUPTION OF THE GLOBAL SUPPLY
CHAIN
•KEY TRENDS
•SECTOR SPECIFIC REGULATORY SHIFTS
•ROLE OF THE GENERAL COUNSEL
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Economic Factors Affecting M&A
•Estimated 2023 GDP: US$433 billion
•GDP per capita: US$4,284
•GDP Growth in 2023 increased by 5.05%
•Inflation: 3.25%
•Population: About 100 million
•Labor force aged 15 and above: 59.1%
•Vietnam’s median age: 32.8 years old
•Regional Minimum wage (Region I): VND
4,960,000 (US$ 198) per month (effective
from 1
st
July 2024)
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“Momentum” is
measured by:
•GDP growth
•sustainability initiatives
•smart urban solutions
•balanced development
•location
•other factors

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The 4th fastest-growing high net worth country
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Vietnam’s Free Trade Agreements
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ASEAN -China
ASEAN -Korea
ATIGA
ASEAN -India
ASEAN –
Australia –New
ZealandASEAN -Japan
Vietnam -Chile
Vietnam -Korea
Vietnam –Eurasian
Economic Union
Vietnam -EU
Vietnam –EFTA*
CPTPP
ASEAN –Hong Kong
Vietnam -Israel
Vietnam -Japan
Effective
In negotiation/
Negotiation
concluded
RCEP
Vietnam -UK
*European Free
Trade Area
ASEAN -China
ASEAN -Korea
ATIGA
ASEAN -India
ASEAN –
Australia –New
Zealand
Effective
In negotiation/
Negotiation
concluded

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Impact of geopolitical risk on Vietnam M&A

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How do the following geopolitical trends affect future M&A
opportunities?
GlobalFragmentation:Countriesaremovingawayfromglobal
reconciliationandpartiallydisengagingeconomicallywhilecreatingnew
alliances.Thistendencyiscausingeconomicisolationandescalating
tensionsamongstmajoreconomies.
DisruptiveTechnologies:AsdigitaltechnologieslikeAIandsocialmedia
developquickly,civilizationsbecomemoreunstable.Thesetechnologies
comewithhazardsaswellasopportunities.
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Identification

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•ExaminingCountry-SpecificFactors:Everynationhasadistinct
geopoliticalbackdrop.Investorshavetothinkaboutthingslike
internationalrelations,politicalstability,andtheregulatorylandscape.
•Examiningregionalrelationships:Geopoliticalrisksareoftenshaped
byregionalrelationships,includingalliancesandconflicts.
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Assessment

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•TradeandEconomicDependencies:Duetotheintegrationof
economiesbroughtaboutbyglobalization,tradeandeconomic
dependenciesarecrucial.Investorsneedtoevaluatehowtraderoutes,
tariffs,andcross-borderinvestmentsareaffectedbygeopoliticaltensions.
•Preparingscenariosandimplementingbackupplans:Geopolitical
dangersarebytheirnatureambiguous.Withscenarioplanning,business
ownerscanprepareforavarietyofsituations.Best-case,worst-case,and
intermediatesituationsaretakenintoaccountwhilecreating
comprehensivecontingencyplansforfirms.
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Assessment (cont.)

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•Theadverseeffectsofgeopoliticaltensionhaveimpededtheworldwide
economicrecoveryaftertheCOVID-19pandemic.Consequently,the
quantityandsizeofM&Atransactionshasfailedtodevelopasrapidlyas
projected.
•Dealvaluesremainbelowpre-pandemiclevelsandinourviewwillstay
suppresseduntilthere’smoreclarityonthemacroeconomicandpolitical
environment.
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Geopolitical risks and M&A in Vietnam

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Recommendations:
Gobeyondtraditionalduediligence:Conductgeopoliticalriskanalysis.
Engagewithpoliticalanalysts,usegeopoliticalriskassessmenttools.
ConsiderscenariosthatcouldimpactthestrategicobjectivesofanM&A
deal.
Stayupdated:Stayinformedonglobalpoliticsandbepsychologically
readyforchangesofM&Astrategies.
ConsidernewM&Athemes:Targetsectorswithstrongmarketoutlooks
notheavilyaffectedbygeopoliticalrisks.
Diversification:Spreadinvestmentsacrossmultiplesectors.
IncludegeopoliticalriskclausesinM&Aagreements:Provide
mechanismtodealwithgeopoliticalrisks.

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Impact of disruption and restructuring of the global
supply chain

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•Globalsupplychaindisruptionsareslowingeconomicactivityandtrade,
drivenbyseveralkeyfactors:logisticsandtransportationissues,
semiconductorshortages,pandemic-relatedrestrictions,andlabor
shortages.
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Global industrial production and trade

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•Thelogisticsindustryisunderevenmorestrainthanservicesasa
resultoftheincreaseindemandforcommodities.Incertain
economies,includingtheU.S.andtheU.K.,wherelabormarket
tightnesshassurpassedpre-pandemiclevels,laborshortagesare
moreconcentrated.
•The"bullwhipeffect,"inwhichbusinessesoverstockinventoryas
aresultofanticipatedstrongdemandandshortagesofintermediates
andrawmaterials,intensifiesinterruptionsandmakeseffortsto
restorethesupplychainmoredifficult.
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Global industrial production and trade (cont.)

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•Increasedcosts:Containermishandlingandportbottleneckshave
allnegativelyaffectedglobalshipping,drivingupshippingrates,
especiallybetweenportsinAsia,theUnitedStates,andEurope.
•Inflation:Sinceproducersfacethedirectbruntofthesedifficulties,
supplychaininterruptionshaveraisedprices,particularlyinthe
producerpriceindex(PPI).Althoughtherehasbeenanincreasein
theconsumerpriceindex(CPI),theimpacthasbeenmoregradual
anddelayedthaninthePPI.Becauseofthesignificantlackof
intermediateitems,someindustriesaremorenegativelyimpacted
thanothers,suchastechnology,machinery,andequipment.
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Economic impacts

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Impacts on M&A in Vietnam
•“China+1”:U.S.andEuropeantradetensionwithChinaalongwiththedisruptions
causedbytheCOVID-19pandemichaveledmanycompaniestoderiskanddiversify
theirsupplychainsbyexpandingintoVietnam.Vietnamhasemergedasapopular
desinationduetoitsstrategiclocationandcompetitivelaborcosts.
•TechnologicalAdvancements:Theadoptionofnewtechnologiestoenhancesupply
chainefficiencyandresilienceisdrivingM&Aactivities.Companiesareacquiringfirms
withadvancedtechnologicalcapabilitiestostaycompetitive.
•FocusonSustainability:ThereisagrowingemphasisonsustainabilityinM&A
deals.Companiesareseekingtoacquirefirmsthatalignwiththeirsustainabilitygoals
andcanhelpthembuildmoreresilientsupplychains.

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Key trends

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•ThetotalnumberofM&AdealsinVietnamin2023was16.8%less
than2022.Inthefirsthalfof2024,Vietnamhadanotableincrease
inbigdeals,withstrongdealflowinimportantindustriesanda
surgeinstrategicacquisitions.
•However,manydealsplannedfor2024havefallenthroughbecause
oftheintimidatingmixofhighborrowingrates,presentvaluations,
andpoliticalunpredictability.
•M&Aactivitywillreturn,albeitmaybemorequicklyincertain
industriesthanothers.
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Vietnam M&A 2023-2024

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Energy:Vietnam'scontinuingshifttorenewableenergyisexpectedtodriveincreased
energyM&Adealsin2024and2025.Vietnamhaspledgedtoachievenetzero
emissionsby2050.
EXAMPLE:
BambooCapitalGroupandTamSinhNghia:OnJanuary31,BCGEnergy
Corporation,amemberoftheBambooCapitalGroup(BCG),announcedthatithad
signedaprincipalagreementtopurchaseshareswithTamSinhNghiaInvestmentand
DevelopmentCorporation.BCGislikelyenteringthewaste-to-energysectorasTam
SinhNghiaspecializesinwastemanagementoperations.
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Key trends 2024-2025: energy, healthcare, finance, retail and
manufacturing

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•Healthcare:Duetothegrowingpopulationandexpandingmiddleclass,
interestinhigherqualityhealthcareoptionsisincreasing.
•Pharmaceuticals:Duetoinexpensivelaborandproductioncosts,the
pharmaceuticalssectorisbecomingmoreattractive.
EXAMPLE:
WarburgPincusinvestmentinXuyenAGeneralHospitalSystem:On
April15,WarburgPincus,whichhasinvestedatotalofUSD2billionin
Vietnam,announcedaninvestmentintheXuyenAGeneralHospitalSystem.
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Financialservices:Vietnam'srobusteconomy,vibrantcorporatesector,andexpanding
consumerbasehavemadefinancialservicesattractivetointernationalinvestors.
EXAMPLE:
InQ1/2024,HomeCreditGroupsignedaconditionalframeworkagreementtotransfer
100%ofitscapitalcontributioninHomeCreditVietnamFinanceCompanyLimitedtoSiam
CommercialBankPublicCompanyLimited(SCB),amemberofThailand’sSCBXPublic
CompanyLimited(SCBX).Thetransferagreementisworthabout€800million($855.72
million)andthetransferprocessisexpectedtobecompletedinthefirsthalfof2025,after
approvalfromVietnameseandThaiauthorities.

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Retail:Growingincomesandagrowingmiddleclassaredrivinginterestin
successfulretailers.
EXAMPLES:
MobileWorldInvestmentCorporation,listedontheHoChiMinhStockExchange
asMWG,inearlyAprilrevealedthesuccessfulsaleofa50%stakeinBachHoaXanh
TechnologyandInvestmentJSC-theowneroftheBachHoaXanhconsumergoods
retailchain-toChineseinvestmentfundCDHInvestments.
VingroupandSDITradingDevelopmentandInvestmentJSC:OnMarch17,
Vingroup'sBoardofDirectorssignedanagreementtosellallitschartercapitalinSDI,
whichownsover99%ofthechartercapitalofSadoTradingCommercialJSC,the
largestshareholderofVincomRetail,todivestfromVincomRetail,themalloperator.

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Manufacturing:Vietnam’sroleasanalternativetoChinaforbothhi-techandtraditional
manufacturingcontinuestogrow.
EXAMPLE:
ThanhCongTextile-GarmentInvestmentTradingJSC(HoSE:TCM)announcedthatit
spentaboutVND468billionor$18.47million(excludingVAT)tobuySYVinaTextileand
GarmentCo.,Ltd.fromE-LandGroup,amajorshareholderowning47%ofTCM’scharter
capital.SYVina,coveringnearly7.5hectaresintheNhonTrachIIIndustrialPark,the
southernprovinceofDongNai,hasweaving,dyeingandsewingfactories.
EXAMPLEOFHOWVIETNAM’SREGULATIONSINFLUENCEM&A:
MasanHigh-TechMaterialsandH.C.StarckHolding:OnMay30,MasanHigh-Tech
Materialsannouncedthesaleof100%ofH.C.StarckHolding(HCS)toMitsubishiMaterials
CorporationGroupfor$134.5million.MasanhadplannedonusingStarcktorecycle
tungsteninVietnambutwasprohibitedfromdoingsobyVietnam’simportlaws.

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Sector specific regulatory shifts

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Energy:PowerDevelopmentPlan8(PDP8)outlinesthetransitionawayfromcoal.
ThisshiftisattractingM&Aactivityintheenergysectorascompaniesinvestin
renewableenergy.
Financialservices:NewLawonCreditInstitutions:(i)reductioninshareholdingof
shareholdersinacreditinstitutionthatisajoint-stockcompany(ii)lowerlimitationon
totalbalanceofextensionofcredit(iii)enhancementofregulationsforbankoverhaul
andmasscashwithdrawal(orbankrun).Fintechcompaniesmaytestcreditscoringand
peer-to-peerlending.
RealEstate:NewLawonLand,LawonRealEstateBusiness,andLawonResidential
Housing:fosteringamoretransparentandhealthierenvironmentforrealestateM&As.
Telecomms:NewLawonTelecommunicationswillfacilitatetheentryofforeign
investorsintodatacenterservices,cloudcomputingservicesandcommunications
services.Underdecreeonhigh-techzones,investorsreceiveexemptionsfromlandlease
feesandreimbursementforlandclearanceexpenses.
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Role of GC in the success of
an M&A deal

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•GeneralCounsels(GCs)playanincreasinglycriticalroleinensuring
thesuccessofM&Adeals.
•ToensurethesuccessofanM&Adeal,GCsmust:
Providestrategicadvice(assessthelegalrisks)
Obtaininternalapprovals
Workonthedealdetailsandinformation
Reviewtransactiondocuments
Reviewallduediligence
Overseeregulatorycompliance
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•ToensurethesuccessofanM&Adeal,GCsshould:
Establishagoodworkingrelationshipwithyourleadershipteam:GCs
shouldestablishagoodworkingrelationshipwiththeleadershipofthe
organizationtofullygraspthepurposeofthedealandtheinterestsofthe
organization.
Findandhirecapablelegaladvisors:M&Adealsarenotordinary
transactions.“Thedevilisinthedetails”–whileGCscanworkoutthe
goalsfortheM&Atransaction,legaladvisorscanprovidethesupportfor
GCsandtheorganizationtoachievethegoalsandprotectthebest
interestsoftheorganization.
Doyouradvisorscaptheirliability?
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•GCsshould(continued):
Managepeople:Post-dealintegrationrequiresmorethanpost-completion
obligations.Thingswillnotbedoneiftheintegrationfails.Payattentiontothe
peopleissues!
Manageexpectations:Whileitiscrucialthatthegoalssetoutbeachieved,
sometimesitisbettertoskiponeortwoofthegoalstoachievethebest
possibleresult.Consultyourlegaladvisorandexpecta“no”fromthemin
certaincasesifskippingparticulargoalswillensurethesuccessofthedeal.
Neverstoplearning:Hiringalegaladvisorismorethangettingthedealdone.
Learningfromcapablelegaladvisorsisoneofthebestpracticalwaysto
develop.
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