15^th May 2020

Asia Business Builders – Vietnam

Amidst Covid-19, which issues of the M&A in the real estate sector did you think that needed attention?

Covid-19 has introduced additional uncertainty and risk into M&A transactions in all sectors including in real estate. The real estate market has been very resilient despite Covid-19.

As the 2020 GDP growth rate declines, the primary uncertainty in real estate M&A relates to estimating the future yield of the assets that investors are looking at and which is the basis for the purchase price.

What about the market prospect?

We expect the foreign M&A demand to come back strongly in Q2/Q4 of 2020.

Moreover, we expect, as more companies perform restructuring, the stronger domestic Vietnamese corporate champions would take advantage of their relative stronger position to carry out M&A. About the abroad side, foreign investors from Japan, Korea, Thailand, Europe will put some decisions on hold as they deal with domestic issues.

Regarding the legal framework for M&A in Vietnam, do you recognize any obstacles that should be removed?

We have been involved in a number of transaction in financial services, logistics, pharmaceuticals and retail and the main obstacle that we encounter from the legal framework for M&A in Vietnam relates to the obstacles of foreign ownership limitations.

Several M&A deals fail to succeed because of the “difference” in price expectation?

Valuation is effectively a function of risk and return. However, sellers often do not see the risk in the same way as investors. Hence there may be a valuation gap. There is often a gap that needs to be bridged for investors in order to understand the peculiarities of the Vietnamese market with respect to ownership limitations, tax practices and transparency.

When advising investors, the enormous role of the consulting entity in making impacts on each sides is apparent. So what should the consulting entity do to harmonize the interests for both buyers and sellers?

As a consulting entity should be a fair arbiter in the process of discussions between buyer and seller. Of course, we act with our client’s interest in mind, but ABB is able to look longer term and advise clients to steer away from short termism and focus on long term value appreciation for the benefit of both parties.

Businesses / projects valuation is not always an easy problem. Do you think that the valuation work in Vietnam has been well done, is on par with the region and the world?

Valuation is more an art than a science. Vietnam valuation practice has improved considerably in the last 10 years and our view is that it is now on par with the Asian region and the rest of the world.

In your opinion, how should the business be approached to avoid being sold / bought at unfair values, especially in the current context when the seller is likely to be pressured?

Sellers who feel they are under distress as a result of Covid-19 should appoint an experienced adviser like ABB Merchant Banking to protect them and ensure that they enter into a fair transaction with investors. Similarly, buyers should be tactful in their approaches and use impartial advisers such as ABB to make the approach.

The original source document can be found here in Vietnamese https://bds.tinnhanhchungkhoan.vn/bat-dong-san/khoang-cach-trong-dinh-gia-dang-la-rao-can-ma-238695.html

http://www.abbmb.com/