Photo: Duc Anh/Illustration
"Dealmakers: Mid-market M&A in Asia-Pacific 2016" report from Baker Tilly International paints a positive picture for M&A deals in Vietnam and in the region.
Vietnam, with its emerging potential as an entry point to the CLMV (Cambodia, Laos, Myanmar and Vietnam) group, has been rated the second-largest market for mid-market M&A into Southeast Asia in 2015, according to a Baker Tilly International publication.
While M&A deal volumes and values are both down in 2016 year-to-date, it is anticipated that the year will close out across Asia-Pacific with overall solid performance and be up on the five-year average, Baker Tilly International wrote in “Dealmakers: Mid-market M&A in Asia-Pacific 2016”.
The publication was produced in cooperation with M&A intelligence provider Mergermarket and analyzes the trends and opportunities shaping the mid-market space in Asia-Pacific. The report examines individual markets and the drivers of deal activity, looking ahead to what the rest of 2016 and early 2017 will hold.
Vietnam enacted a law in July 2016 reducing the processing time for the acquisition of an investment license by roughly two-thirds to 15 days, the publication noted.
A patchwork of diverse economies growing at different speeds, Southeast Asia offers investment opportunities at every stage of economic development, from the early-stage potential of frontier economies like Vietnam and Myanmar to the knowledge and innovation oriented competition driven by highly-advanced economies like Singapore.
In the mid-market, Southeast Asia offers high-potential net interest margins compared to more developed economies. The sub-region also possesses a large and relatively young population that is upwardly mobile and contributing to rising consumer spending.
In the midst of economic uncertainty and volatility, dealmakers are taking a more cautious stance in valuations and deal making. As a result of this, the Asia-Pacific deal market has seen fewer headline-grabbing megadeals and more deals in the mid-market, valued between $10 million and $250 million.
Year-to-date, mid-market deals have made up 58 per cent of Asia-Pacific’s deal volume and 22 per cent of value, and have consistently contributed to more than half the deal count since 2011. This compares to global totals of 32 per cent by volume and 13 per cent by value.
For inbound mid-market M&A, Southeast Asia saw a modest 73 deals worth $4.4 billion in 2015. So far this year it has already posted 39 deals worth $2.6 billion. The top bidder for inbound deals in Southeast Asia is China, which overtook Japan in 2015.
With the establishment of the ASEAN Economic Community (AEC) in December 2015, the sub-region is likely to see increased inbound interest, having taken one of its biggest initiatives to promote and demonstrate commitment to seeking cooperation and cohesion as a unified and distinct regional entity.
Financial services is considered a sector of opportunity for investors. The report stated that investment in Southeast Asia’s financial services is motivated in part by consolidation in the banking industry amid tightening regulations and a tougher economic climate. Meanwhile, foreign banks and insurers looking for growth outside their overcrowded domestic markets are eyeing Southeast Asian countries for regional or global expansion.
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Key highlights from “Dealmakers: Mid-market M&A in Asia-Pacific 2016”
· Asia-Pacific mid-market M&A has grown its share of the world’s mid-market total activity by 11 per cent over the last five years, from 28 per cent in 2011 to 39 per cent in 2015.
· In 2015 the Asia-Pacific mid-market saw 2,405 deals worth $163.9 billion completed, for an 85.4 per cent increase in value and a 71.9 per cent increase in volume compared to 2011. Activity year-to-date in 2016 is following a similar trend, having seen 1,147 mid-market deals worth $78.5 billion.
· Sectors driving Asia-Pacific mid-market M&A from 2011 to year-to-date in 2016 include industrials and chemicals (22 per cent of total deal volume), technology, media and telecommunications (17 per cent of total deal volume), and consumer (11 per cent of deal total volume).
· Year-to-date the region has seen 364 cross-border mid-market deals worth $25.8 billion, or 32 per cent in volume terms and 33 per cent by value of all deals.