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M&A: Vietnamese businesses being acquired amid Covid-19 crisis

M&A: Vietnamese businesses being acquired amid Covid-19 crisis

Friday 03, 04 2020
There has been a sharp increase in foreign investors' purchase of shares and capital contribution in Vietnam during Covid-19 outbreak.

SaraminHR, the recruitment platform listed on KOSDAQ, has recently entered the Vietnamese market through its strategic investments in IT recruitment platform TopDev.

The value of the deal has not been disclosed, however, according to TopDev, SharaminHR will take part in formulating the company's development strategy in the near future.

The reason SaraminHR poured capital into TopDev is because it is a recruiting and employment platform dedicated to information technology (IT), which owns hundreds of thousands of developer profiles, with clients being technology companies in Vietnam and the region.

One person's difficulties, the other's investment opportunities

The investment of this Korean investor is easy to understand because Vietnam's IT industry is considered to be on a strong development momentum, resulting in a sudden increase in the demand for human resources.

>> Top 10 technology companies in Vietnam 2019

SaraminHR has been successful in Korea with its Big Data and Artificial Intelligence (AI) technology platforms. The representative of this company said that the strategic investment in TopDev is the first step in SaraminHR's global market expansion plan.

SaraminHR is only one of hundreds of foreign enterprises that have invested or purchased shares of Vietnamese enterprises amid Covid-19 outbreak. In March, when the Covid-19 epidemic outbroke in Vietnam, the number of foreign investors pouring capital into or buying shares of Vietnamese enterprises increased.

Specifically, according to the Foreign Investment Agency, there were 940 times of capital contribution and share purchase by foreign investors with a total value of contributed capital worth more than USD 1,172.

Compared to the same period last year, the number of foreign businesses acquiring or investing in domestic enterprises has increased to 324 (an increase of nearly 35%) and the value has increased to more than 662 million dollars (an increase of more than 56%).

The amount of capital contributed and bought shares by foreign investors in March has also left that in the previous two months far behind.

Lawyer Truong Thanh Duc (Basico Law Firm) said that many stocks falling dramatically due to Covid-19 epidemic have been acquired by foreign investors who had strong financial resources and had much experience on the stock market.

M&A: Vietnamese businesses being acquired amid Covid-19 crisis

It is obvious that no one can avoid being affected by Covid-19, however, according to Lawyer Duc, the "health" of the majority of foreign investors is more persistent than domestic enterprises, which are mainly small-scale and vulnerable.

Under normal business conditions, it is difficult for foreign investors to buy stocks at low prices or even at high prices because domestic businesses do not sell. However, Covid-19 has changed the situation. Investors with financial potential can now buy any stocks that they want, Duc said.

How domestic enterprises respond?

In fact, according to many companies listed on the stock market, in the midst of this Covid-19 epidemic, the market price of shares fell really sharply, and many of which fell too far from their real value.

Therefore, businesses listed on the market must not only worry about organizing business activities, but also must deal with stocks being sold off by shareholders. Many large-scale businesses have had to buy their own stocks to reassure investors.

In addition, several businesses have planned to spend trillions of dongs to buy treasury shares, considering it an emergency "prescription" to save stock prices, and to increase "antibodies" to avoid the risk of being acquired.

According to many experts' warnings, domestic enterprises are now facing many difficulties caused by Covid-19, including the risk of being acquired by foreign enterprises. It is no coincidence that recently, the HCMC People's Committee Office has informed that the city's leadership has assigned the Department of Construction to evaluate the real estate market as foreign businesses are rushing into the Vietnamese housing market.

Ho Chi Minh City People's Committee requested the Department of Construction to clarify investment trends in the market, and inadequacies in management to advise appropriate management and monitoring solutions.

There could be advantages

According to Lawyer Truong Thanh Duc, if the epidemic is prolonged, the possibility of being acquired will be very high. Looking back on economic growth in recent years and looking to the near future, Vietnam has had many prospects for economic development, and political stability is a favorable condition for investors.

Lawyer Duc predicted that when the Covid-19 epidemic is over, the number of M&A deals in the domestic market will increase significantly. Earlier this year, Nikkei news agency also said that M&A will increase strongly in Southeast Asia in 2020 and that Vietnamese companies will become the top favorite target of big corporations.

Capital contribution and share purchase deals will help businesses increase their charter capital, which is considered to be positive as it helps increase the financial resources, expanding and diversifying shareholder structure to take advantage of management capabilities, business relations, supply chains, and to increase competitive advantage.

In contrast, deals that do not increase charter capital often take place in the form of divestments by domestic shareholders. The reason may be because the company owner realized that their competitiveness has weakened in the current fierce environment, so they decide to transfer the business before it is too late.

​>>  Top 10 M&A deals in 2019

Source: thesaigontimes


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