Vietnam ma research report 2019

FiinGroup is pleased to present our intensive report of Vietnam MA 2019, the 9th issue of this report. This report presents the extensive data mining of MA deals in Vietnam in the reviewed period, as well as analysis by key investors and industries where we recognize potential investment opportunities in the near future.The research provides latest information on market activities as well as competition landscape of MA in Vietnam. Three main segments of MA categories including (i) Inbound MA, which is when a foreign company merges with or acquires a domestic company) (ii) Domestic MA, which is when two domestic companies merge with or acquire other (iii) Outbound, which is when a domestic company merges with or acquires a foreign company.In addition, we provide indepth review for the 4 outstanding sectors: Real estate, Industrial goods Services and Food Beverage and banks and 3 trendy sectors: Health Care, Education and Utilities.We also reviewed the key themes that shaped the overall MA picture in Vietnam throughout 20181H2019 including Valuation of selected deals, Updates on progression of SOE IPOs and Divestments, FTAs and opportunities and notable regulatory changes that matter MA.Above all, we offer our perspectives on MA activities in the reviewed period as well as the key trends to watch for the years aheadKey financial figures on reviewed transactions are also included in the Appendices. 2018 MA activity plummeted in value by 44% to US7.54 bn from the 2017’s record due to the shortage of megadeals and delay in SOE ‘s IPO and divestment. The market has stayed calm in the first 6 months of 2019. Both the number and value of deals fell by 22% and 55% on 1H2018 levels. Inbound deals in 2018 registered US4.2bn, decreasing by 37% yoy compared to inbound value in 2017 without the mega SABECO deal. The inbound market remains quiet during the first half of 2019, but still accounted for 67% of total MA value. 1H2019 only recorded US1.45bn from 25 transactions, a 67% decrease compared to same period last year. Since 2018, investors from Singapore and South Korea escalated their investments in Vietnam and dominated the inbound market in terms of deal value. Meanwhile, despite the highest number of deals, Japanese investors usually contributed small and mediumsized deal. Meanwhile they key inbound investors from Thailand have reduced the size of their investments 2018 witnessed an upward in domestic MA scale, recording US3.26bn from 174 transactions, average deal size of nearly US19mn which is significantly improved from 2017’s level of US14mn. Half of domestic deal value in 2018 are made of mega deals in Real Estate, and Construction with active acquirors: Vingroup, Novaland, and An Quy Hung. Domestic MA activities ended the first half with a modest performance. Although 1H2019’s deal volume is comparable to 1H2018’s. total deal value of US700mn, equal to less than half of 1H2018’s. Outbound MA, despite accounting for an insignificant portion of the total MA value showed great prospects. The reviewed period 20181H2019 witnessed two big deals closed by Vietnamese companies oversea including FPT Corp’s acquisition of 90% stake in the USbased techadvisory firm Intellinet Corp and the transaction made by Yeah 1 to acquire 100% of Youtube multichannel network ScaleLab (although the deal value was later net off as Yeah 1 sold the acquired stake back to the previous owner). Real Estate continued to lead both the deal value and volume in 2018, followed by Banks, Industrial Goods and Services, FB, and Construction Materials. The sectors that stood out most so far in 1H2019, capturing 94% of total deal value were Industrial Goods Services, Health care, Construction Materials, FB, and Utilities. Migration of manufacturers from regional countries due to the ongoing trade war is expected boost the demand for industrial real estate, including warehouses and industrial parks. Shifting of foreign manufacturers to Vietnam due to FTAs and trade war will also boost the demand for Industrial Goods Services with key sectors such as logistics and transportation services. SOE IPOs and Divestments are lagging far behind targets. The government issued Official Dispatch requesting 127 SOEs to complete IPOs and Decision No 12322017NDCP for divesting state capital in 406 SÓE between 2020, By the end of 1H2019, SOE IPOs achieved 26% of the plan for 20172020, while SOE divestments fulfilled only 10% of the initial plan. It seems infeasible to complete the given plans by 2020. 2019 saw the signing of the EUVietnam Free Trade Agreement (EVFTA), the EUVietnam Investment Promotion Agreement (EVIPA), and the entry into force TransPacific Partnership (CPTPP). These signings is expected to stimulate foreign capital inflows and encourage foreign players to seek investment opportunities in Vietnam, given the increasing transparency and promising removal of 49% foreign ownership cap. The New Competition Law coming into force on 1 July 2019 and focusing on (1) competitionrestraining agreements, (2) market dominance (3) economic concentration, and (4) unfair competitive practices is poised to matter MA transactions with some notable changes, especially related to merger filing, merger control, the combined market share of deal participants and jurisdiction for competitionrestraining acts and economic concentration

VIETNAM M&A 2019

Research Report

Issue 9 | August 2019

Waiting for breakthrough

Financial Information | Business Information | Market Research

FiinGroup is pleased to present our intensive

report of Vietnam M&A 2019 In addition to

the M&A data mining, we also focus on M&A

opportunities by featuring some industries

where we recognize potential investment

opportunities arising given its new dynamics

and regulatory developments We also covered

the latest state of SOE IPOs and divestments,

in-depth sector reviews and outlook for the

years ahead

The report utilized our 9-year M&A historical

data in Vietnam In addition to data analysis,

the report also leverages on the authors’

extensive knowledge and experience in

advising various M&A transactions in Vietnam

We have surveyed relevant foreign and local

institutional investors as well as conducting a

number of in-depth interviews with

experienced M&A advisers and Government

officials during our preparation.

We strongly believe that this report will be

valuable to institutional investors, investment

companies and foreign players who are

considering M&A as a strategy to set a

foothold or to expand your business in

Vietnam.

About FiinGroup

This report is prepared by a team of experienced analysts, researchers and data clerks at FiinGroup FiinGroup is the Vietnam’s leading integrated service provider

of financial data, business information, industry research and other premium advisory services.

Our Mission is to Enlighten the Market We’re

on a mission to help investors and enterprises grow their businesses and gain competitive advantage with the trusted information and data provided by FiinGroup

FiinGroup is now serving thousands of corporate clients including securities companies, research houses, asset managers, investment companies, industry players as well as sophisticated individual investors

Our Market Research division has been established as the first independent research house in Vietnam, covering various major sector in Vietnam and providing local insights

to our clients at quality standards of the World’s prestige advisory firms More details can be found at http://fiinresearch.vn/.

If you have any questions about this report or our services, please do not hesitate to contact Dong Le, Director of Market Research Services

at dong.le@fiingroup.vn or +84 (24) 3562

6962, ext 110.

3 Vietnam M&A 2019 Research Report| Issue 9 | August 2019

4.5 Emerging sectors for M&A: Health care, Education and Utilities 50 – 57

@ 2019 FiinGroup JSC

5.4 Regulatory updates, barriers to M&A in Vietnam and expected changes 69-73

5 Vietnam M&A 2019 Research Report | Issue 9 | August 2019

Table of figures

1 Vietnam GDP Growth 2015-2021f 13

2 Vietnam Population structure 14

3 Vietnam urbanisation rate 1980-2018 14

4 Vietnam M&A Market size 2008 – 6M2019 16

5 M&A average deal size (US$mn) 2008-6M2019 17

6 Proportion of Deal Value (US$mn) and Number of Deal by value ranges 18

7 Total M&A Deal Value (US$mn) & Number of Deal by Top Sectors, 2018 19

8 Total M&A Deal Value (US$mn) & Number of Deal by Top Sector, 1H2019 20

9 Total Deal Value by Category, 2013-1H2019 21

10 Inbound M&A (US$mn) in Vietnam, 2013 - 1H2019 23

11 Top 8 Inbound M&A Deals, 2018 – 1H2019 23

12 Inbound M&A (US$mn) Deal by Country, 2018 24

13 Inbound M&A (US$mn) Deal by Country 1H2019 25

14 Inbound M&A (US$mn) into Vietnam by South Korean Investors, 2011 – 1H2019 26

15 Inbound M&A (US$mn) into Vietnam by Singaporean Investors, 2011 – 1H2019 27

16 Inbound M&A Activities (US$mn) by Top Sector 28

17 Domestic M&A Total Deal Value (US$mn) & Deal Number, 2011 – 1H2019 30

18 Domestic M&A activities by top sector 31

19 Domestic M&A Deal Value (US$mn) & Deal Number in Construction & Materials 32

20 Outbound M&A Activities (US$mn) 2011-1H2019 by Vietnam Domiciled Enterprises 34

21 Inbound M&A Activities (US$mn) in Real Estate, 2011 – 1H2019 36

22 Domestic M&A Activities (US$mn) in Real Estate, 2012 – 1H2019 38

23 Inbound M&A Activities (US$mn) in industrial goods & Services, 2011 – 1H2019 42

24 Total M&A Deal Value (US$mn) & Deal Number, Food & Beverage 45

25 Noticeable F&B deals in 2018 – H12019 46

26 Total M&A Deal Value (US$mn) & Deal Number, Banking 48

27 Recent Divestments in the Banking Sector 48

28 M&A Deal Value (US$mn) & Deal Number 2011-1H2019 51

29 M&A Deal Value Proposition, 2011-1H2019 51

30 Education M&A Deal Volume, 2011-1H2019 53

31 Education expenditure of Vietnamese people, US$bn 54

32 Vietnam's school age population (millions) 54

33 Outbound internationally mobile tertiary students (Thousands) 54

34 Utility M&A Deal Volume, 2011-1H2019 55

35 Number of Solar Power projects registered and completed 56

36 Top M&A deals in renewable energy 2018-1H2019 57

37 Valuation Multiples of 2018-1H2019 M&A Deals 59

38 Valuation Multiples of 2018-1H2019 M&A Deals by Sector 60

39 Number of successful IPO 2011-1H2019 62

40 Number of IPOs 2016-2020: Plan vs Actual 62

41 Divestment volume 2017-2020: Plan vs Actual 63

42 Top upcoming SOE Divestments under SCIC’s portfolio 64

43 Charter capital (US$mn) of upcoming IPOs 65

44 Number of upcoming IPOs by sector 65

45 Vietnam Inbound M&A Deal Value (US$mn) by Country 77

46 Total Deal Value (US$mn) in Vietnam by sector 77

47 Vietnam M&A Market by ICB Level II Sector, 2018 – 1H2019 78

48 Vietnam M&A Market by ICB Level IV Sector, 2018 – 1H2019 79-80

49 Valuation Multiples of M&A Deal by Sector, 2018-1H2019 82

50 Upcoming IPOs 2018-1H2019 84

No Word Stands for

3 CMSC Commission for the Management of State Capital at Enterprise

27 SCIC State Capital Investment Corporation (SCIC)

28 SEGs & SCs State Economic Groups and State Corporations

7 Vietnam M&A 2019 Research Report | Issue 9 | August 2019

Section 1: M&A in Vietnam at a glance

Accumulated deal

volume 2003-2018

3,103

Deal volume 2018

Banks 12%

Industrial Goods &

Services 11%

Food & Beverage 11%

Construction &

Materials 7%

Financial Services 4%

Others 17%

9 Vietnam M&A 2019 Research Report| Issue 9 | August 2019

Accumulated deal

volume 2003-2018

3,210

Deal volume 1H2019

107

M&A Deal value 1H2019

Decline in value y-o-y

% of Inbound M&A value

Deal <$50m as % of 1H2019 volume

M&A Top target sectors 1H2019 Top winner inbound investors 1H2019

Country Deal value (US$m)

Health Care 15%

Construction &

Materials 12%

Food &

Beverage 7%

Utilities 7%

Travel &

Leisure 3%

Others 3%

M&A deals are focusing on industrial goods & services, construction &

materials, retail and real estate This trend is predicted to continue

Besides, Education, health care and pharmaceuticals and renewable energy

which having been hot over the past 2 years will also be on the radar of

investors in the time to come

5

The signings of FTAs and CPTPP will stimulate foreign capital inflows and encourage foreign

players to seek investment opportunities in Vietnam, given the increasing transparency and

promising removal of 49% foreign ownership cap.

4

Migration of manufacturers from regional countries due to the ongoing

trade war will boost the demand for industrial real estate, including

warehouses and industrial parks

8

Shifting of foreign manufacturers to Vietnam due to FTAs and

trade war also boosted the demand for Industrial Goods &

Services with key sectors such as logistics and transportation

services

In order to accelerate SOE IPO/divestments in coming years, the

government is taking some aggressive steps, stipulating the deadline

for SOEs to hand over capital to SCIC to speed up divestment and

equitization First,108 SOEs slated to be sold by SCIC between now

and 2020.

Singapore, South Korea, Japan and Thailand are expected to remain the major

foreign investors, driven by sovereign wealth funds, private equity and large

conglomerates

Vietnam is thriving with robust economic growth and favourable social-economic conditions Young

population, rapid urbanization and emergence of middle-income class have reciprocally nurtured strong

domestic consumer demand In line with the upsizing economy, the M&A market size is facilitated to grow M&A activities in 2018 remained vibrant with the transaction volume being on par with previous years

However, M&A value cooled down a bit due to pending significant deals as well as slow process of SOE

divestments 2018 deal value reached US$7.54bn, decreased by 44% compared to 2017 Excluding US$4.7bn from Thai Brev-Sabeco megadeal in 2017, the decline was 14% y-o-y In other words, 2018’s deal value was equal to 86% of 2017’s value without the Sabeco deal

Although deal-making in 1H2019 was still quiet, achieving US$2.15bn (down 55% y-o-y), given on confidence

in realization of pending megadeals and speeding-up SOE divestment in 2H2019, we forecast M&A activities will recover the growth momentum to reach around US$6.64bn by the end 2019, hence the full-year value

would also be equal to approximately 86% of 2018 deal value

Key findings and trends to watch

Vietnam M&A market continued to be led by foreign investors However, domestic

investors are getting proactive and aggressive in order to enhance market position.

1

2

3

7

SOE IPOs and Divestments are lagging far behind targets; Banks are

struggling in raising capital to meet Basel II by 2020 due to FOL of

30%, hence government actions to propel restructuring and easing

FOL will be main drivers for M&A

Forecasted M&A value

Key themes that shaped M&A in 2018-1H2019 and trends to watch in the years ahead:

11 Vietnam M&A 2019 Research Report | Issue 9 | August 2019

Section 2: Business landscape

Macro-economic and business environment that foster M&A activities in Vietnam

67%

(2017)

84%

(2017) Average age: 32

13 Vietnam M&A 2019 Research Report | Issue 9 | August 2019

Upbeat outlook for international capital inflows

• Tightening monetary in line with disciplined fiscal policies helps Vietnam keep inflation below 4% since

2016, control the Dong within a narrow band and reduce public debt

• Since 2014, the Vietnam government has issued Resolutions on enhancing business environment and national competitiveness Resolution No.02/2019 prioritises four tasks: Simplifying business

procedures; reforming in specialised inspections, connecting the National Single Window Portal; enhancing electronic payment and developing innovation ecosystems and supporting startups

• The new Competition Law and the Anti-corruption Law entering into force from 1 Jul 2019 increase a transparent, fair and competitive environment

• If the new the Securities Law (proposed to be in force from 2021) is approved by the end of this year, foreign capital inflow is expected to soar in response

to the removing of the 49% foreign capital cap on listed companies

• Those remarkable efforts gave Vietnam the 69thin World Bank’s latest Ease of Doing Business rating, marking 30 steps advanced from 2014 (*) Within the East Asia Pacific region, Vietnam ranked 2nd after Malaysia World Bank acknowledged Vietnam’s positive progress in making doing business easier in three aspects: Starting a Business, Paying Taxes, and Enforcing Contract

* Based on 10 indicators: The ease in Starting a Business, Dealing with Construction, Getting Electricity, Registering Property, Getting Credit, Protecting Minority Investors, Paying Taxes, Trading across Borders, Enforcing Contracts, Resolving Insolvency.

Figure 1: Vietnam GDP Growth 2015-2021f

Source: FiinGroup, World Bank

• 2019 saw the signing of the EU-Vietnam Free

Trade Agreement (EVFTA), the EU-Vietnam

Investment Promotion Agreement (EVIPA) and

the entry into force Trans-Pacific Partnership

(CPTPP), ASEAN-Hong Kong, China Free Trade

Agreement (AHKFTA)

• The EVFTA, CPTPP, AHKFTA along with other

bilateral and multilateral agreements Vietnam

have signed or is negotiating, will increase

foreign capital inflows and encourage domestic

enterprises seeking business opportunities

oversea

Commitment to macroeconomic stability and enhanced business environment that encourage investmentsEconomic resilience momentum

Huge opportunities from free trade agreements

Escalating global tensions: Opportunities in challenges

Section 2: Business landscape

6.7 6.2 6.8

7.1 6.6 6.5 6.56.5 6.3 6.5 6.3

5.9 5.9 5.8

0 2 4 6 8

2015 2016 2017 2018e 2019f 2020f 2021f

Vietnam East Asia & Pacific

In the context of escalating global tensions, Vietnam is emerging as one of the most attractive destinations for investors seeking markets with high growth prospect, stable economic and political environments Investment has also been encouraged by recent government’s policy aiming to stabilize macro-economy and improve business conditions

• The US increasing sanctions on Iran and the

US-China trade war have let to a deceleration

in global trade and global business

confidence Even so, Vietnam reached a

10-year high growth rate of 7.1% in 2018

• In 1H2019, Vietnam GDP growth was softened

to 6.76 % and is expected to moderate to

6.6% in 2019 due to credit tightening, slower

private consumption and weaker external

demand, still outperforming the region

• Over the medium term, Vietnam’s growth is

projected to stay resilient around 6.5%,

remaining one of the fastest-growing EAP

economies

• As tariff tensions between the US and China

showing signs of complexity, many

manufacturers consider moving their

productions to other countries Southeast Asia

wherein, Vietnam being a prominent candidate,

expected to gain the most benefits

• As of 20 Jun 2019, Vietnam granted 1,723 new

licensing FDI projects, an increase of 26.1%

year-on-year FDI capital inflows from January

to May 2019 hit a four-year high of $16.74

billion, up 61% year–on–year

The market expects to see more investments to serve Vietnam’s strong market demand

Without a doubt, the growth of investments in Vietnam is driven by foreign investors who are eager to enter a market of 100 million people, with the emerging urbanising middle-class Towards 2035,

favorable demographic factors will be the key resources of demand in consumer-oriented goods &

services High penetration of internet and smartphone also indicate high potentials for the development

of e-commerce, fin-tech and other internet-based businesses In the medium term, the fast aging

population will boost the demand for health care and other products & services aiming at elderlies

Vietnam‘s internet penetration rate and smartphone users reached 67% and 84% of population respectively as of 2017 Meanwhile, only more than 10% of people shop online, less than 40% of adult have a bank account, and over 90% of transactions are still made in cash

Altogether these figures indicate a potential for the future development of e-commerce, fin-tech and other internet-based businesses

Source: United Nation

The urbanising middle-class will be the key

resources of demand for future growth The

need for housing and infrastructure will boost

the real estate market, especially the property

market Also, increasing demand for high-quality

Health Care and Education, Travel, Retail, F&B,

and other consumer-oriented goods & services

are calling for multinational and large domestic

investors to enter the market

Source: World Bank

Figure 2: Vietnam Population structure

Figure 3: Vietnam urbanisation rate 1980-2018

Golden but fast aging population,

People loving the internet and smartphone

0 5 10 15 20 25 30 35 40

• Increasing per capita income has led to a rapid

expansion of the middle-income class

population By 2035, more than 50% of

Vietnam’s population will be middle-income

class as estimated by World Bank and

Vietnam’s MPI

• Additionally, in 2019 and by 2020, Vietnam’s

urbanisation rate is expected to reach

approximately 40% according to the Vietnam

Urban Development Association Thus, there

will be about 50% of Vietnam’s population will

live in urban areas until 2040s of the 21st

century

Growing & urbanising middle-income class

• Vietnam is in the period of “golden

population” with the average age of 32, and

nearly 70% of the population are in

working-age (15-64) (UN) Abundant labour resources

will be a significant force for the growth of

the entire economy

• ‘Golden population’ era is also witnessing

Vietnam become one of the fastest aging

nation in the time to come, driving demand

for Health Care and other products & services

0-14 15-64 65+

15 Vietnam M&A 2019 Research Report | Issue 9 | August 2019

Section 3: 2018-1H2019 M&A in Review

3.1 2018-1H2019 M&A in a nutshell

Shortage of megadeals and delayed SOE IPOs and divestments drove a sharp decline in deal value

Source: FiinGroup

Figure 4: Vietnam M&A Market size 2008 – 6M2019

The deal-making has finally leveled off after hitting

an all-time high of US$13.43bn in 2017 In 2018, the

total M&A value plunged 44% to US$7.54bn The

slump spread into 2019 that saw only 107 deals

completed at a value of US$2.15bn within the first

six months, translating into sharp decreases of 22%

in deal volume and 55% regarding deal value

compared to the same period last year

This cooling-down does not really mean a crash,

however With 266 deals completed, M&A volume

in 2018 was on a par with 2017’s total of 268

transactions M&A activities were strong at the

beginning of 2018 with a flurry of large-scale

transactions by big names including the

Singapore-based GIC Private Limited acquiring a minority

stake in Vinhomes JSC for US$1.3bn or Vingroup’s

investment of US$500.8mn in 98% stake of Berjaya

VIUT LLC Similarly, deal-making stayed busy in

2H2018, exceeding 24 deals from 2H2017

The deceleration was largely attributed to the

absence of blockbuster deals like the

Sabeco-ThaiBev at US$4.7bn, which standalone made up

51% of 2H2017 and 35% of 2017’s total deal value

Total M&A value in 2018 actually recorded a 14%

y-o-y decline from the 2017’s value excluding the

mega Sabeco deal

2018 M&A activity plummeted in value by 44% to US$7.54 bn from the 2017’s record due to the shortage of megadeals and delay in SOE ‘s IPO and divestment The market has stayed calm in the first 6 months of 2019 Both the number and value of deals fell by 22% and 55% on 1H2018 levels.

2H2018 recorded a few big-ticket marque deals, noticeably 10% of Masan by SK investment at US$472.6mn

Megadeals appeared sporadically in 1H2019 The most notable case was the transaction of SK Investment to acquire 6% of Vingroup for US$1bn.Slow progression of SOE IPOs and divestments was another reason for the drastic decline in deal value since 2H2018 A series of large names such

as PetroVietnam, Agribank requested for a delay

of divestments and IPOs

Deal value was not disclosed for around 30 deals in 2018 and 15 deals in 1H2019

118 34 61 299

1,719 1,117 1,140 1,750

6,314 5,131 3,472 4,851

6,388 10,188 13,429

7,544

2,153 - 120 240 360 480 600

17 Vietnam M&A 2019 Research Report | Issue 9 | August 2019

M&A activities in 2018 and 1H2019 were flavored with sized transactions

bite-Source: FiinGroup

Throughout 2018 and 1H2019, the M&A market was not as characterized by megadeals as 2017, but bite-sized transactions Figure 4 reveals a deep fall in the average deal size over the past 18 months After skyrocketing to US$50mn in 2017, the average deal value plunged to US$28mn and US$20mn by the end of 2018 and 1H2019 respectively This was indeed a return to regular scale in the absence of megadeals The drop in the average deal value was also affected by the fact that more than 30 deals were completed last year, and 15 deals took place this year without disclosure of transaction value Regarding key areas of focus, Real Estate continued to lead both the deal value and volume in 2018, followed by Banks, Industrial Goods and Services, F&B, and Construction Materials The sectors that stood out most so far in 1H2019, capturing 94% of total deal value were Industrial Goods & Services, Health care, Construction & Materials, F&B, and Utilities

Inbound and domestic deals remain the two key sources of capital Outbound M&A, despite

accounting for an insignificant portion of the total M&A value showed great prospects The reviewed period 2018-1H2019 witnessed two big deals closed by Vietnamese companies oversea including FPT Corp’s acquisition of 90% stake in the US-based tech-advisory firm Intellinet Corp and the transaction made by Yeah 1 to acquire 100% of Youtube multi-channel network ScaleLab (although the deal value was later net off as Yeah 1 sold the acquired stake back to the previous owner)

Overall, M&A activities in the last 18 months were portrayed by key foreign investors including

Singapore, South Korea, US, Japan, and Australia seeking minority stakes in large domestic

corporations such as Vingroup or Masan Meanwhile, active local acquirers like Vingroup are

aggressively expanding their market share by buying majority shares in smaller domestic players

Figure 5: M&A average deal size (US$mn) 2008-6M2019

Section 3: 2018-1H2019 M&A in Review | 2018-1H2019 M&A in a nutshell

Deal size analysis: Megadeals dropped, while bite-sized deals expanded

Figure 6: Proportion of Deal Value (US$mn) and Number of Deal by value ranges

Source: FiinGroup

BY DEAL VALUE

BY NUMBER OF DEALS

In terms of deal value

Megadeals valuing over US$100mn maintained the major contribution to total M&A activities over the last 3 years However, 2018

witnessed a shift in the value contribution among deal value ranges in which medium sized transactions posted significant increases against megadeals In particular, 2018

recorded 16 megadeals worth US$4.93bn, accounting for 62% of total M&A value and representing a sharp decrease of 12% on 2017’s level In contrast, the value portion of transactions ranging US$5-25 and US$25-50 jumped from 7% each to 10% and 13%

respectively

H2019 continued to see the rise of medium sized deals ranging between US$5-25mn To date, the value contribution of this segment jumped up to 15% As the total number of deals sharply decreased, megadeals like SK Investment-Vingroup showed more significant portion to total M&A value which is 66% in 1H2019 Deal value is expected to recover along with the closure of more megadeals in the second half of this year

In terms of deal volume

Despite driving total M&A value, megadeals

accounted for a minimal proportion of total M&A

volume The percentages have hardly changed

over the past 3 years, ranging between 4% and

7% Meanwhile, most M&A deals during

2018-1H2019 were less than US$30mn as

afore-mentioned Notably, micro deals being less than

US$1mn soared from 4% in 2017 to 18% in 2018

before reaching 24% after the first half of 2019

1H2019 also recorded more deals ranging

between US$1-5mn, making proportion of this

segment climb to 30% of total deal volume

Megadeals are expected to come back amid

increasing M&A activity Evidently, around 15

on-going deals announced in 1H2019 are all

acquisitions of majority stakes Additionally, the

fact that our database recorded around 30

pending deals since 2018 to date with notable

names such as the merger of PGBank to HDBank

which has recently received approval from SBV

for the acquisition These clues spark the hope

for an improved performance for the M&A

activities by the end of 2019 and the years

19 Vietnam M&A 2019 Research Report | Issue 9 | August 2019

2018 M&A: Real estate dominated M&A scene

Sectors with highest M&A value

• Real estate continued to be the most vibrant sector, generating US$2.84bn, equivalent to 38% of the year’s M&A activities Apart from GIC Private Limited’s acquisition of 5.7% in Vinhomes, this sector also witnessed three other megadeals closed by two key players Vingroup and Novoland Megadeals amounted

to US$2.1bn contributing to 74% of the entire sector M&A value Overall, M&A activities in sector are currently driven by the expansion

of key players like VinGroup and Novaland to accelerate their land bank for future

projects

Emerging sectors in M&A

• Recently foreign investors have been keen

on some emerging sectors including Health care (especially pharmaceuticals , Utilities, (especially renewable energy) and

Education (*) As a results, M&A deals have been flowed into these sectors over the past

18 months

Sectors with highest M&A volume

• Industrial goods and services scored third

highest in deal value (reaching US$801mn

accounting for 10%), but the highest in deal

volume These sectors are benefited by

strong domestic demand amid growing

population and rapid urbanization that

enhance investor confidence The most

active subsectors include Electronic

components and equipment, container

packaging and transportation services In

2018, industrial goods and services saw

around 45 deals closed or approximately 17%

in total M&A deal number in 2018

• Banks & Financial Services, Construction &

Materials and F&B and Utilities maintain

stable growth over the last few years These

sectors combined account for more 37% of

total M&A market value Besides the

Warburg Pincus LLC-Techcombank, 2018

recorded two more completed inbound deal

in which standard chartered sold minority

stakes of 6% to Alp Asia Finance (Hong Kong)

at US$220mn and 5% to Estes Investments

Limited (US) at US$152mn

Figure 7: Total M&A Deal Value (US$mn) & Number of Deal by Top Sectors, 2018

Source: FiinGroup

Section 3: 2018-1H2019 M&A in Review | 2018-1H2019 M&A in a nutshell

(*): Education is classified as Business Training & Employment Agencies in ICB Level 4.

2,844

928 801

798 521

1H2019 M&A: Domestic consumer-oriented sectors on the rise

Industrial goods and services secured the top

position

• Industrial goods and service remained the

most active sector for M&A activities with 25

deals worth US$1.13bn, accounting for 52.5%

of total deal value and 23% in total number of

deals in 1H2019 Notably, this period

recorded a megadeal worth more than US$1bn

completed by the Korea-based SK Investment

Vina acquiring 6% of Vingroup

• Other domestic consumer-oriented sectors

such as Construction & Materials, F&B and

Utilities continued to be among the key

attractions for M&A due to consistently

growing demand from the local market The

increasing of young households, rapid

urbanization and emerge of the

middle-income population segment are expected to

remain the key drivers of growth in these

sectors

• Health care, Renewable Energy, F&B,

Utilities, Personal & Household Goods

maintained their attraction in 1H2019 In

fact, deal makers of some transactions in

these sectors kept in secret the deal value;

hence the total M&A value in these sectors

should have been higher

Real estate, Banks and Financial Services had a pause

• Real Estate was drastically silent and disappeared from top 5 most active sectors due to SBV’s credit tightening to real estate which caused domestic capital inflows to projects to reduce sharply, but potentially attract foreign capital later on

• Similarly, Banks and Financial services were quiet within the first due The total number of deals and deal value were strongly impacted by pending deals from

2018 Banking and financial services belong to the list of businesses that required special approval from government bodies, hence the process usually takes time Evidently, our database recorded 5 pending deals from last years to date with notable names such as the merger of PGBank to HDBank which has recently received approval from SBV for the acquisition Therefore, M&A activities in these sectors are expected to recover soon upon the materialization of these pending deals, along with the movement of banks under pressure of raising capital to meet Basel II in 2020

Figure 8: Total M&A Deal Value (US$mn) & Number of Deal by Top Sector, 1H2019

21 Vietnam M&A 2019 Research Report | Issue 9 | August 2019

Vietnam on track for strong revival in domestic consolidations

Figure 9: Total Deal Value by Category, 2013-1H2019

Source: FiinGroup

• 2018 was marked with the revival of domestic

consolidations In 2017, the value contribution

of domestic M&A slumped to 12%, while deal size

also registered a record-low due to the flow of

inbound megadeals The growth momentum was

regained in 2018 as Vietnamese investors

doubled the M&A deal value to US$3.25 from the

2017’s number, thereby making an impressive

contribution of 43% to the total transaction

value, such a strong rebound after a steep fall

that brought domestic acquirors back on track to

closely approach foreign players

• Throughout 2018-1H2019, the domestic sector

appeared to dominate the market, considering

the deal volume However, in terms of deal

value, inbound M&A remained the dominator of

the Vietnam M&A market After a year staying

calm, moving into 1H2019, foreign investors

swiftly stepped back the pace and scale of their

merger and acquisition to account for 68% of

1H2019’s total deal value Meanwhile, domestic

deals were still active but accounted for a

humbler proportion of 32.5% in terms of value

contribution

• In terms of average deal value, foreign investors tend to seek for sizable deals to quickly get a foothold in the market Thus, the inbound sectors were usually marked with megadeals

• Both cross-border acquisitions and domestic consolidations are expected to maintain a strong momentum during 2019-2021, fueled

by new progressions from the State's roadmap to divest from large corporations, adoption of FTAs as well as government’s upcoming plan to remove 49% foreign ownership cap on listed companies

• To date, outbound M&A remained consistently inconsiderable, with a negligible contribution to the total M&A activities throughout the years from 2013 to 1H2019 Nonetheless, 2H2018 and 1H2019 saw Vietnamese technology players FPT Corp and Yeah 1 expanded with significant deals in the

US as afore-mentioned

Average Deal Value

Deal value (US$bn)

3.1 2018-1H2019 M&A in a nutshell

3.2 Inbound M&A

23 Vietnam M&A 2019 Research Report | Issue 9 | August 2019

Inbound M&A slowed down during 2018 – 1H2019

Source: FiinGroup

Figure 10: Inbound M&A (US$mn) in Vietnam, 2013 - 1H2019

acquiror

(US$mn)

2018 Hanwha Vietnam Opportunity Private Fund 1 South Korea Vingroup 400

2018 Alp Asia Finance Vietnam Ltd Hong Kong Asia Commercial Bank 220

2019 Fitness & Lifestyle Group Pty Ltd Australia CMG Asia 200

Figure 11: Top 8 Inbound M&A Deals, 2018 – 1H2019

Source: FiinGroup

INBOUND M&A

2011 - 1H2019 US$38.06bn

Accumulated inbound M&A deal value into Vietnam since 2011 reached US$38.06bn from 756

transactions After a record year in 2017 with 148 inbound deals, the inbound market contracted significantly in 2018 with only 82 deals In terms of value, inbound deals in 2018 registered US$4.2bn, decreasing by 37% y-o-y compared to inbound value in 2017 without the mega SABECO deal

Particularly, medium value deals become predominant as foreign investors tend to acquire minority stakes As a result, inbound deals only accounted for 57% of total M&A transaction value in 2018, compared to a staggering 88% in 2017 Real estate, banks, and industrial goods & services were the key inbound sectors in 2018, driven by significant investments in Vinhomes, Vingroup and Masan Group The inbound market remains quiet during the first half of 2019, but still accounted for 67% of total M&A value 1H2019 only recorded US$1.45bn from 25 transactions, a 67% decrease compared to same period last year The slowdown of real estate sector, industrial goods & services and healthcare sectors were the main drivers during 1H2019

Section 3: 2018-1H2019 M&A in Review | Inbound M&A

Deals with undisclosed buyers are not counted

3,548 3,632

1,794 3,096 3,429

5,134 11,753

4,221 1,453

91

113 102 148

82

25

0 30 60 90 120 150

Majority stake Minority stake

Inbound M&A in 2018: Singapore led the market in terms of deals value

Figure 12: Inbound M&A (US$mn) Deal by Country, 2018

Capital inflows for M&A from Singapore reached

US$1.4bn in 2018, accounting for 33% of total

inbound value into Vietnam As such, Singapore

has replaced Thailand as the leading investors in

Vietnam via M&A The majority of completed

deals from Singaporean bidders focused in the

real estate sector, contributing over US$1.37bn

in value The largest deal was the acquisition of

5.74% stake in Vietnam’s leading real estate

development conglomerate Vinhomes by GIC Pte

Ltd valued at US$1.3bn Other notable deals

include the acquisition of Phu An Khang Real

Estate JSC from Frasers Property Limited for

US$18mn, followed by US$11.4mn investment

from Keppel Land to fully acquire Saigon Sport

City project Given the high demand for

residential real estate, investment into real

estate sector from Singapore is expected to keep

growing in the upcoming years

South Korea also emerged in 2018 as an active investor with over US$1.26bn capital inflows into Vietnam via M&A transactions, accounting for nearly 30% of total inbound value South Korean investors eyed on various sectors, including Industrial Goods & Services (US$920.2mn), Financial Services (US$226.6mn) and Food & Beverage (US$36.3mn) Highest value deal was the US$472.5mn acquisition of 10% stake in Masan Group from SK Investment

In particular, South Korean bidders tend to acquire reputed and established names to quickly capture market share in their respective industries Within the financial services sector, consumer finance companies were highly pursued as South Korean investors aggressively penetrated this growing market Major deals include the 100% acquisition of Prudential Vietnam Finance from Shinhan Card for US$151mn and US$74.7mn purchase of 100% stake in Techcom Finance from Lotte Card

Since 2018, investors from Singapore and South Korea escalated their investments in Vietnam and dominated the inbound market in terms of deal value Meanwhile, despite the highest number of deals, Japanese investors usually contributed small and medium-sized deals.

25 Vietnam M&A 2019 Research Report | Issue 9 | August 2019

Majority stake Minority stake

Inbound M&A in 1H2019: South Korea strengthened its

presence in Vietnam with over US$1bn capital inflows

Figure 13: Inbound M&A (US$mn) Deal by Country 1H2019

Given the strong momentum in the 2H2018, South

Korean investors continued to solidify their

footholds in Vietnam via M&A transactions

During 1H2019, capital inflows from South Korea

surpassed US$1bn, a quadruple increase

compared to 1H2018 Following the strategy in

2018, South Korean investors continued to invest

in high-profile names with established market

share In particular, after the US$472mn

investment in Masan Group, SK Investment spent

another US$1bn to acquire 6% stake in Vingroup

-the giant conglomerate in Vietnam In fact, from

2018 to 1H2019, South Korean investors have

already poured in over US$1.4bn into Vingroup,

accounting for 25% total inbound deal value

during this period These investors saw high

potentials from Vietnamese firms as an ideal

strategic partner to accelerate their regional

objectives while benefiting from the promising

growth trajectory

After an impressive year in 2018, capital inflows from Singapore decelerated in 1H2019 with only US$60mn from 2 minor deals As the real estate sector started to cool off,

Singaporean investors have been shifting to Food & Beverage and Industrial Goods &

Services sectors, which will gain significant benefits from the CPTPP and upcoming EVFTA Japan remains the most active investor in terms of volume Inbound M&A from Japan totaled US$128.3mn from 10 deals during 1H2019, suffering a 49% decrease from 1H2018 With a conservative investment strategy, Japanese investors tended to acquire minority stakes at a small value The largest deal was worth US$106.5mn, in which Taisho purchased additional 20.6 million shares of Hau Giang Pharmaceutical to lift its stake to 51%

1H2019 also witnessed the appearance of Australian investors with the acquisition of CMG Asia from Fitness and Lifestyle Group, Australia's most significant gyms business, for over US$200mn

Inbound M&A in 1H2019 recorded 25 deals, down from 27 deals in same period last year In terms of inbound deals value, 1H2019 only achieved US$1.45bn, a 54% decrease compared to 1H2018 Apart from South Korea, frequent investors such as Singapore and Thailand have reduced the size of their investments

Source: FiinGroup

INBOUND 1H2019

25 deals

Section 3: 2018-1H2019 M&A in Review | Inbound M&A

CAPITAL INFLOWS

2011 - 1H2019 via M&A US$4.57bn

68 Deals

Figure 14: Inbound M&A (US$mn) into Vietnam by South Korean Investors, 2011 – 1H2019

Spotlight: South Korea solidified its presence in Vietnam

Investment waves from South Korea

In light of recent government’s efforts and

blooming economy in Vietnam, South Korean

investors accelerated their investments into

Vietnam via M&A with large-scale acquisitions

Ever since the 2H2015 when Decree 60 was

imposed to raise the foreign ownership level to

100% and VKFTA was officially signed to reduce

tariff barriers, capital inflows from South Korea

experienced a steep upward trend In particular,

inbound M&A from South Korea recorded

US$3.5bn in value during 2016-1H2019,

registering an outstanding CAGR of 28.5%

South Korean companies have primarily invested in

industrial sectors, evidenced by US$2.1bn

investment in Industrial Goods & Services sector

since 2016 Main bidders in this sector were giant

business conglomerates that sought large-scale

deals to acquire high-profile enterprises, namely

Gemadept, Masan Group and Vingroup This

strategy allowed South Korean giants to rapidly

gain direct access to local markets, enjoy

sustained growth while mitigating risks

Besides manufacturing, South Korean buyers also targeted banking and consumer finance sectors Given the booming digital finance in South Korea, these financial investors sought

to quickly capture the robust growth of Vietnam with the support of technology Shinhan Bank pioneered in 2017 with 100% stake acquisition of ANZ Bank (Retail division) for US$240mn Subsequently in 2018, Shinhan Card and Lotte entered the local consumer lending market with 100% buyouts of local finance companies Considering the pervasion of South Korean retails, the appearance of finance companies would complement existing chains and create a strong ecosystem in Vietnam Moreover, as the South Korean government is tightening the consumer lending market due to enormous household debts, South Korean financial institutions is expected to keep invading into Vietnam, exploiting the untapped consumer lending market for over 90 million people.Recently, a third wave of investments, in which South Korean’s SMEs take the form of strategic alliances with local firms, is arriving Particularly, South Korean partners will offer modern technology, while Vietnamese companies could assist with brand presence and distribution

Capital inflows to Vietnam from South Korea escalated since 2016, peaked in 2018 and followed by an outstanding 1H2019.

Source: FiinGroup

533

107 159

43 193 493 734

1,260 1,047

3 6 8

21

14

3

0 5 10 15 20 25

27 Vietnam M&A 2019 Research Report | Issue 9 | August 2019

CAPITAL INFLOWS

2011 - 1H2019 via M&A US$5.55bn

85 Deals

Figure 15: Inbound M&A (US$mn) into Vietnam by Singaporean Investors, 2011 – 1H2019

Spotlight: Singapore escalated its investment scale in Vietnam’s real estate sector

The “Asian Tiger” Singapore remained the most

active cross-border investor in South East Asia

Singapore remained active in pursuing investment

opportunities in the region via M&A transactions

Led by GIC Private - the world’s eighth-largest

sovereign wealth fund managing over US$390bn

and numerous PE funds, Singapore possesses

abundant sources of foreign reserves As such,

Singaporean investors are aggressive in their hunt

for acquisition abroad, especially in emerging

markets like Vietnam

Since 2011, Singapore has poured over

US$5.55bn into Vietnam via M&A

transactions, concentrating in 2016-2018 period In

particular, inbound capital inflows from Singapore

spiked up in late 2016 through mega deals in real

estate sector, exploiting the growing property

market As an emerging market with rapid

urbanization rate, Vietnam offered high-yield

opportunities that were unavailable in developed

countries The investment wave in real estate was

triggered by US$442.5mn investment from

CapitaLand and Keppel Land in 2017 into

residential properties, followed by the

US1.3bn acquisition of Vinhomes from GIC

Private in 2018 In total, during 2016-1H2019, M&A

transactions in real estate sector contributed

US$2.39bn, accounting for 43% of total

inbound value from Singapore since 2011

However, as foreign investments into real estate started to cool off, capital inflows from Singapore into this sector also experienced a downward trend in terms of volume, recording only 5 deals in 2018 and zero deal in 1H2019 Apart from real estate, M&A transactions from Singapore spanned across multiple sectors yet at insignificant value, including Food &

Beverage (US$20mn) and Travel (US$18.7mn)

1H2019 was a dormant period for Singaporean investors, contributing merely US$39mn from only 2 deals - lowest level since 2012 The deceleration of investment capital from Singapore was a strong

reflection of the global slowdown in M&A activities in 2019, attributed to greater market volatility and US-China tensions As

a result, large cross-border deals, even from market leaders like Singapore almost disappeared during the first six months of 2019

Capital inflows to Vietnam from Singapore surged rapidly since the 2H2016, hit record in 2017 and remained strong in 2018.

Section 3: 2018-1H2019 M&A in Review | Inbound M&A

Source: FiinGroup

595 141

1,049 433

1,794 1,412

39

4

2

13 9 11 15 17

12

2

0 4 8 12 16 20

Source: FiinGroup

Figure 16: Inbound M&A Activities (US$mn) by Top Sector

Inbound M&A: Sector Analysis

BY NUMBER OF DEALS

BY TOTAL DEAL VALUE

In 2018, inbound deals are highly concentrated as top four sectors attracted over 75% of total

inbound deal value: Real Estate (US$1.4bn), Banks (US$742mn), Food & Beverage (US$584mn) and Industrial Goods & Services (US$454mn) Capital inflows into real estate sector were attributed to rapid urbanization with expanding middle class that stimulated the demands for residential

property Meanwhile, large foreign investments into two leading conglomerates namely Vingroup and Masan Group drove the industrials goods & services sector Particularly, considering the upcoming CPTPP, EVFTA that will reduce tariff barriers and the movements of manufacturers from China,

subsectors such as electronic equipment, heavy construction and transportation services will likely attract high interests

1H2019 saw a significant shift in appetite of foreign investors Real Estate, Banks and Financial

Services contributed only US$15mn, equivalent to merely 1% of total inbound value during this

period Meanwhile, Industrial Goods & Services sector dominated with over US$1.02bn in just six months, accounting for 71% of total inbound transaction value

1,394 742

584 454 238 147 135 120 104 90 69

Real Estate Banks Food & Beverage

Industrial Goods & Services

Financial Services

Basic Resources

Utilities Personal & Household Goods

Construction & Materials

Oil & Gas Health Care

2018 1H2019

8 3

8 7 8 4

8 9 2

2 4

Real Estate Banks Food & Beverage Industrial Goods & Services

Financial Services Basic Resources Utilities Personal & Household Goods Construction & Materials

Oil & Gas Health Care

2018 1H2019

29 Vietnam M&A 2019 Research Report | Issue 9 | August 2019

Section 3: 2018-1H2019 M&A in Review

3.3 Domestic M&A

Domestic M&A 2018: Continued upward trend, but got off a slow start in 1H2019

2018 Domestic M&A Overview

Accumulated domestic M&A value since 2011

recorded 1,385 deals valuing US$20.94bn

Remarkably, 2018 witnessed an upward in

domestic M&A scale, recording US$3.26bn from

174 transactions, average deal size of nearly

US$19mn which is significantly improved from

2017’s level of US$14mn 1H2018 recorded 80

deals at US$1,806mn while 2H2018 saw a more

than double performance, in terms of both deal

value and volume Half of domestic deal value in

2018 are made of mega deals in Real Estate, and

Construction with active acquirors: Vingroup,

Novaland, and An Quy Hung

Real estate is the most active sector in 2018,

fueled by the race to collect good land among

active domestic investors like Vingroup or

Novaland The situation is that "clean" property

spots are getting scarce, while domestic

enterprises are facing fierce competition foreign

capital inflows Furthermore, the real estate

procedure requires 3 - 5 years to finish and

property-transferring fee is increasing by 30 - 50 %

over the year are additional factors to the surge

of domestic M&A Real Estate market Taking

advantage of local expertise, domestic players

see the urge of acquiring land areas for future

projects and enhancing their foothold in the

market

1H2019 Domestic M&A Overview

Domestic M&A activities ended the first half with

a modest performance Although 1H2019’s deal volume is comparable to 1H2018’s total deal value of US$700mn, equal to less than half of 1H2018’s

Nam Long Investment Corp’s acquisition of 70% stake in Dong Nai Waterfront City for US$100mn was the only one mega-transaction completed by domestic investors Overall, domestic M&A value contributes 33% to the total M&A value in this period 1H2019 registered an average deal size of modestly US$9mn, with 73 out of 81 acquired deals ranging from less than US$1mn to US$25mn However, 63% of total deal value amounting to US$442mn are constituted by 8 deals larger than US$25mn

During the first half of 2019, the “ever hot sector” Real Estate experienced a cooling time with only US$3.91mn from 5 deals Recently, many M&A real estate failed to be executed, despite achieving agreements with foreign partners due to problems in the legal evaluation stage This originated from inconsistencies in regulations such as complicated land use rights, which is regarded as the biggest barrier in M&A activities in real estate, especially for foreign

Figure 17: Domestic M&A Total Deal Value (US$mn) & Deal Number, 2011 – 1H2019

Source: FiinGroup

Domestics M&A to 1H2019

US$20.94 bn1,385 Deals

Deals with undisclosed buyers are not counted

2,767

1,225 1,671

1,750 2,947 5,032

1,597 3,255

113 174

81

0 60 120 180 240 300

31 Vietnam M&A 2019 Research Report | Issue 9 | August 2019

Domestic M&A 2018 - 1H2019: Real Estate dropped,

Construction & Materials, Industrial Goods & Services heat up

Source: Fiingroup

• During the first half of 2019, the “ever hot sector” Real Estate experienced a cooling time with only US$3.91mn from 5 deals Recently, many M&A real estate failed to be executed, despite achieving agreements with foreign partners due to problems in the legal evaluation stage This originated from inconsistencies in regulations such as complicated land use rights, which is regarded

as the biggest barrier in M&A activities in real estate, especially for foreign investors

• While Construction & Materials took the whole year 2018 to achieve 15 deals totaling

US$418mn, it needs only 6 months in 2019 to reach US$217mn from 13 deals, accounting for 31% of total domestic deal value in 1H2019, thereby replacing Real Estate to become the most active sector after within 1H2019

• Industrial Goods & Services decreased by half

in deal volume and three times in deal volume, mainly focusing on Transportation Services, Containers & Packaging, Electronic Equipment This can be explained by the increasing capital flow from Chinese enterprises as an impact of the US – China trade war as well as other beneficial Free Trade Agreement terms

Section 3: 2018-1H2019 M&A in Review | Domestic M&A

• Real estate is the most active sector in 2018

fueled by the race to collect good land among

active domestic investors like Vingroup or

Novaland Total real estate deal value was at

US$1.45bn (US$56mn higher than that of

Inbound deals) from 38 deals, 3 of which are

mega deals, 2 from Vingroup & 1 from

Novaland, amounting to US$811, making up

for 56% of domestic M&A in real estate The

situation is that "clean" property spots are

getting scarce, while domestic enterprises are

facing fierce competition foreign capital

inflows Furthermore, the real estate

procedures requiring 3 - 5 years to finish and

property-transferring fee increasing by 30 - 50

% over the year are additional factors to the

surge of domestic M&A Real Estate market

Taking advantage of local expertise, domestic

players see the urge of acquiring land areas

for future projects and enhancing their

foothold in the market

• Construction & Materials is the 2nd largest

sector recording US$418mn from 15 deals with

stable domestic investments throughout the

year The 58% acquisition of Vinaconex Corp

by An Quy Hung LLC at US$316.5mn makes up

for 76% of the sector-wide deal value

Industrial Goods & Services

Food & Beverage

Banks Chemicals Financial Services

Personal & Household Goods

Utilities Others

2018 1H2019

32 15

38 13

1 7 9 5 14

40

Real Estate Construction & Materials Industrial Goods & Services

Food & Beverage

Banks Chemicals Financial Services Personal & Household Goods

Utilities Others

2018 1H2019

Domestic Spotlight: Construction & Materials heat back to the race

Source: FiinGroup

Figure 19: Domestic M&A Deal Value (US$mn) & Deal Number in Construction & Materials

Construction & Materials ended 1H2019 as the most dominant sector among Domestic M&A activities with

13 deals totaling US$217mn, constituting 31.43%of total domestic M&A deal value – highest figures since 2011 The average deal size was also very impressive at US$16.7mn

Construction & Materials seems not to be an attractive sector for M&A ever since it was first recorded in

2011, with the proportion of the total domestic deal value never passing 10% Especially, 2017 witnessed the sector’s lowest point of deal value, volume, and contribution to total domestic deal value of

US$30mn, 9 and 1.86% respectively However, 2018 saw the Construction & Materials deal value rocke by

15 times with deal number almost doubled, compared to those of 2017 This upward trend continued throughout 1H2019, but mainly on the domestic side as the same figure of Inbound deal value is 10 times lower

This surge of Construction & Materials resulted from the active Real Estate sector with M&A value (worth US$1,311mn in 2018) High demand from the property market raised the demand for Building Materials, Fixtures and Heavy Construction (in which the domestic investment flow mainly focuses on) 1H2019 Construction & Materials recorded only one mega-deal of 58% acquisition of Vinaconex Corp by An QuyHung valuing at US$317mn, besides the transaction of Vingroup-Thai Son Investment at US$78mn and other 13 deals of being less than US$20mn

In 1H2019, Vinaconex Corp has successfully divested its state capital after its first attempt failed in

2018, thereby welcoming three new major shareholders Star Invest LLC, An Quy Hung LLC & Cuong Vu Real Estate LLC owning 8%, 58%, 21% for US$36.45mn, US$317mn and US$85.4mn,respectively

33 Vietnam M&A 2019 Research Report | Issue 9 | August 2019

Section 3: 2018-1H2019 M&A in Review

3.4 Outbound M&A

Source: FiinGroup

Figure 20: Outbound M&A Activities (US$mn) 2011-1H2019 by Vietnam Domiciled Enterprises

Outbound: Vietnamese key tech players ‘footprints in the US

Outbound M&A by Vietnamese companies remains

insignificant, in both deal number & deal value

Outbound M&A, since recorded, has been much less

significant than Inbound and Domestic M&A during

2011 – H12019 Specifically, Outbound M&A peaked

in 2012 with US$274.6mn from only 3 deals, and

then plunged over the next 3 years However, from

2017 onwards, overseas investment showed

prospects with 1 deal each year Noticeably, 2018

and 1H2019 witnessed the significant capital

outflows from Vietnamese technological giants

Noticeable deals in 2018 & 1H2019

In July 2018, FPT acquired 90% stake of the

US-based technological consulting company Intellinet

at an initial deal payment of US$30mn for total

estimated deal value of nearly US$50mn This is

FPT’s strategic move in its ambition to provide

comprehensive digital transformation services to

enterprises, and boost operations in the US market

The acquisition of Intellinet is expected to raise

FPT’s revenue in U.S market from US$65mn to

US$100mn after one year It is forecasted that in

the next 3 years, FPT's US revenue may double

Currently, the US is FPT's second-largest processing

market after Japan

One year later, in July 2019 (*), FPT has announced

the strategic investment in Homa Techs Inc., with

specific figures notified later This acquisition sets

FPT’s first foot in joining the Asia’s smart home

market which is worth US23,078mn

CAPITAL OUTFLOWS

2011 - 1H2019 via M&A US$431mn

16 Deals

1H2019 welcomed an outbound deal when Yeah1 acquired 100% of ScaleLab, #1 fastest-growing media company by Yeah1 at US$20mn 400mn-subscriber ScaleLab is expected to raise Yeah1 monthly Youtube views to 6.9bn and subscribers to 610mn throughout the world This follows Yeah1’s strategic plan to go global.However, 2 months later, ScaleLab was sold back to its original CEO at US$12mn This is followed by an incident when Youtube accused SpringMe - a Yeah1 subsidiary – of violating Youtube policies in selecting and managing channels & videos, resulting in Youtubeterminating its Content Hosting Agreement (CHSA) with Yeah1 & its subsidiaries Following that, Yeah1 & its subsidiaries cannot make any earnings from third-party businesses’

advertisement on their channels.As further negotiations with Youtube did not work, Yeah1 had to sell off ScaleLab to protect Yeah1’s capital investment and preserve the investors’ interest

Prospects for 2H2019

Technology continues to witness huge capital outflows when Vietnamese technological giants are expanding their influence in advanced markets such as the U.S, Japan, etc., Also, the energy sector, with policies encouraging investments is expected to see oversea expansion of large corporations such as Hoang Anh Gia Lai, Thanh Thanh Cong, etc.,

0 0 1 2 3 4 5

Vietnam M&A 2019 Research Report| Issue 9 | August 2019

Section 4: Sector Review

4.5 Emerging Sectors for M&A: Health care, Education & Utilities

Source: FiinGroup

• Notwithstanding interests from multiple foreign investors, Real Estate sector is highly concentrated Particularly, top four bidders accounted for 76%of total real estate inbound value during 2011-1H2019: Singapore (US$2.3bn), Hong Kong

(US$2.1bn), South Korea (US$934mn) and Japan (US$827mn), with diverse appetites and investment scales Specifically, Singaporean investors eyed the residential segment with the intense penetration of Keppel Land and CapitaLand, altogether adding nearly 30 large-scale projects over a five-year span Meanwhile, South Korean investors, led by Lotte Group, aimed at commercial properties to provide office and retail spaces for South Korean firms, along with housing for expatriates Notable transactions was the acquisition of Landmark 72 Tower by Mirae in 2016

• With the imminent arrival of manufacturers relocating from China due to the trade war, industrial real estate is expected to heat up

in 2H2019 and attracted more foreign interest

• Real Estate sector has always been the main

contributor for inbound M&A in Vietnam, driven

by high demand for all real estate segments From

2011 to 2018, the sector attracted over

US$8.29bn from inbound deals, registering

an outstanding 37% CAGRand accounting for

22%of the total inbound value Nonetheless, as

the sector started to attract rising interests from

the domestic market, foreign investments into

real estate plunged in terms of both deal volume

and value In 2018, the sector only recorded

USS$1.4bn from 8 deals, lowest volume since

2012 Apart from the US$1.3bn megadeal of GIC

Private to acquire Vinhomes, the market did not

witness any other large-scale transactions that

exceeded US$50mn The market remained

inactive in 1H2019 as no inbound transactions

occurred

• Despite a slowdown in 2018 and 1H2019, Real

Estate sector still posted huge opportunities with

solid growth trajectory, driven by the following

factors: (i) rapid urbanization rate; (ii) growing

middle-class with rising disposable income; and

(iii) increased demands for industrial real estate

amid US-China trade war

Figure 21: Inbound M&A Activities (US$mn) in Real Estate, 2011 – 1H2019

Inbound Real Estate transactions posted strong growth during 2011-2018 but decelerated in 1H2019

INBOUND M&A IN REAL ESTATE

2011 - 1H2019 US$8.29bn

8

0 0 6 12 18 24 30

37 Vietnam M&A 2019 Research Report | Issue 9 | August 2019

Singaporean investors dominated major inbound real estate

deals

Date4/2018

Size (US$ mn)1,300

Acquired stake5.7%

Acquirer

• GIC Private Limited, a Singapore sovereign wealth fund, purchased ordinary shares and extended debt instrument for Vinhomes at combined value of US$1.3bn, including US$850 million for 5.74% stake The deal expanded GIC’s portfolio in Vietnam, which already owned stakes of large companies such as Vinamilk, Vietcombank and Masan.Target

Date5/2018

Acquirer

• Singapore-based Frasers Property acquired 75% of the issued share capital of Phu An Khang Real Estate JSC, a wholly-owned subsidiary of Tran Thai Group The US$18mn acquisition allowed Frasers Property to participate in residential-cum-commercial projects in HCMC

Target

Size (US$ mn)18

Acquired stake75%

Acquirer

• In early April 2018, VinaCapital Vietnam Opportunity Fund (VOF) made

a US$21mn private equity investment to purchase 12% stake in Cenland, one of Vietnam’s leading real estate brokerages The deal helped VOF jump in a growing market with unexploited potentials Target

Date4/2018

Size (US$ mn)10

Acquired stake12%

Acquirer

• In March 2018, Keppel Land acquired the remaining 10% stake in Saigon Sport City project for US$11.4mn After the acquisition, Keppel Land has consolidated full ownership of the prime township, solidifying its presence in Vietnam

Target

Date3/2018

Size (US$ mn)11.4

Acquired stake10%

Section 4: Sector Review | Real Estate

to capture majority stakes of real estate developers and projects, notably including Berjaya Financial Centre and International University Town These acquisitions provided Vingroup and Novaland with solid foundation prior to a strict real estate market in 2019.

• Compared to inbound transactions, domestic M&A

deals within the Real Estate sector occurred at

much higher volume with total 192deals In

terms of value, domestic M&A mainly comprised

of small-scale transactions, yielding only

US$7.34bn during 2011-1H2019 Despite

that, Real Estate sector remained the key driver

for domestic M&A, accounting for 36% of total

domestic value during 2011-1H2019

• The market stayed stable during 2013-2015, then

abruptly skyrocketed in 2016 to surpass US$2.9bn

The sudden rise could be explained by the

conclusion of 30,000bn VND credit package, which

prompted real estate developers to rapidly

expand and accelerate their investments The

ending of disbursement package significantly

reduced the demand for residential housings in

2017, causing developers to reduce their

investment scale to the lowest level since 2012

Figure 22: Domestic M&A Activities (US$mn) in Real Estate, 2011 – 1H2019

Domestic Real Estate transactions occurred at high volumes but lower deal value

DOMESTIC M&A IN REAL ESTATE

2012 - 1H2019 US$7.5bn

4

21

40 32 43

18

32

5

0 12 24 36 48 60

39 Vietnam M&A 2019 Research Report | Issue 9 | August 2019

Vingroup and Novaland actively increased their land banks via M&A

Date12/2018

Size (US$ mn)69

Acquired stake100%

Acquirer

• Novaland completed the acquisition of 100% of Thinh Vuong Real Estate JSC with a consideration of US$69mn The purchase allowed Novaland to control other real estate subsidiaries of Thinh Vuong, increasing its land banks and projects

Target

Date8/2018

Acquirer

• Along with the acquisition of Thinh Vuong, Novaland also purchased Dinh Phat Real Estate JSC with a consideration of US$152mn, which strengthened its portfolio prior to a tightened real estate market in

2019

Target

Size (US$ mn)152

Acquired stake100%

Acquirer

• In August 2018, Vingroup completed the USS$506mn purchase of 98% stake in Berjaya Vietnam International University Township The acquisition aimed to accelerate the long-delayed project in HCMC.Target

Date8/2018

Size (US$ mn)506

Acquired stake67.5%

Acquirer

• Prior to the acquisition of Vietnam International University Township, Vingroup contributed approximately US$86mn to own 67.5% stake in Berjaya Vietnam Financial Center limited Through this deal, Vingroup will develop a project comprised of an office building, a five-star hotel, serviced residences, and a shopping mall

on a 6.6ha land plot in HCMC

Target

Date3/2018

Size (US$ mn)86

Acquired stake67.5%

Dinh Phat Real Estate

Joint Stock Company

Thinh Vuong Real

Estate Joint Stock

Company

Section 4: Sector Review | Real Estate

Outlook for Real Estate sector in 2H2019

• 1H2019 turned out to be a quiet period with only 5 small-scale deals for both domestic and inbound markets In particular, the domestic real estate market were less vibrant due to the issuance of new lending policies by SBV and tightened grant of land use rights

• In order to reduce non-performing loans and limit lending for high-risk sectors, including real estate, Circular 19/2017/TT-NHNN lowered the maximum ratio of short-term funds for long-term loans from 45% to 40% In addition, Circular 19 also raised the risk coefficient of real estate loans from 150% to 200%, discouraging capital

inflows into real estate sector.

• Circular 37/2018/TT-BTC imposed tightened regulations on the management and disposition of public real estate

• Directive 11/CT-TTg, which provided solutions to foster a stable real estate market, required competent authorities to issue regulations for condotel market

Implication

• In 2H2019, the pipeline supply is expected to decrease in light of restrictions in downtown area, slow licensing process from HCMC and strict scrutiny for divestment of SOE’s real estate

• Nonetheless, long-term outlook remains optimistic with strong fundamental, fueled by high urbanization rate of nearly 40% and steady population growth of 2% per annum Further, given the improved infrastructure with newly built highways, residential projects expanded further away to suburban areas, posing huge opportunities for real estate M&A activities outside of HCMC and Hanoi

• In addition, the office sector emerges as a potential driver for M&A activities The appearance of flexible workspace, which registered 109% y-o-y growth in terms of leasing area, provided a new wave of supply for the sector Looking forward, office supply volume during 2019-2021 is expected to escalate, driven

by solid expansions of IT/Tech sectors and persistent growth of flexible workspace

Commercial

sector