What sectors will witness the biggest M&A deals in 2023?

The consumption is one of sectors in Vietnam are expected to offer opportunities for mergers and acquisitions (M&A).

>> Rebalancing consumption and investment

According to PwC's "Global M&A Trends" report, the impact of macroeconomic fluctuations and geopolitical conflicts varies by industry. By 2023, six sectors in Vietnam are expected to offer opportunities for mergers and acquisitions (M&A). Technology, media, and telecommunications; automotive and industrial manufacturing; financial services; energy, utilities, and mining; the consumption and healthcare markets are among them.

Indeed, these industries have already played a role in major M&A transactions in Vietnam from 2021 to 2022. For example, The Sherpa Co. Ltd., a subsidiary of Masan Group, paid $280 million for 85% of Phuc Long Heritage in order to integrate the coffee shop and bank into the WinMart mini supermarket, completing the one-stop-shop model.

Masan Group has also made a significant contribution to the energy, utilities, and resources industries by acquiring HC Starck's entire tungsten business platform, which will make Vietnam the world's largest tungsten producer outside of China by 2020. By 2022, Masan and HC Starck have agreed to invest £45 million in Nyobolt, a company that specializes in providing fast-charging Li-ion battery solutions, thereby addressing the issue of battery supply to the vehicle market. As a result, PwC anticipates that mergers and acquisitions in the automotive and industrial manufacturing markets will become a growth trend in 2023.

Vinfast has also participated in international M&A transactions in order to prepare for competition in the electric vehicle market. Vietnam's energy sector has emerged as one of Asia's most appealing markets for M&A.

Japanese capital continued its pivot strategy in the financial services sector by investing in Vietnam's banking and finance. Sumitomo Mitsui Financial Group (Japan) bought 49% of VPBank's stake in FE Credit. SHB Finance was sold to Thai financial behemoth Krungsri, which is also a strategic member of the MUFG Group (Japan).

SK Investment Vina III (Korea) purchased Red Capital, the parent company of KBA Investment Joint Stock Company, which owns 7.37% of Imexpharm Pharmaceutical Joint Stock Company.

Despite the global M&A market experiencing a boom in 2021 and a decline in 2022, M&A transactions in Vietnam are ahead of the 2023 trend, making expansion and optimization of business operations a priority.

According to PwC's "Global M&A Trends" report, macroeconomic and geopolitical volatility can create both opportunities and challenges for various parties involved in areas where M&A is expected to grow. The report includes specific notes for each party involved in the transactions, including:

Enterprises: In the context of financial tightening, businesses with strong balance sheets will have more opportunities.

Private Equity (PE): Private equity funds are looking for new deals and focusing on creating value for portfolio companies by optimizing performance or divesting.

>> Investors urged to restructure investment portfolio amid challenging environment

Credit funds and private markets: If lending funds gain market share in M&A from banks, they could become key providers of liquidity, especially in mid-sized deals.

Venture capital: Some risky investments may be withdrawn, but investment in climate technology remains promising, particularly those focused on cutting emissions.

"The year 2023 is expected to be promising for the M&A market as CEOs focus on creating value through business innovation and transactional activities. In Vietnam, investors are interested in renewable energy, healthcare, logistics, and education, as well as expanding production facilities, capturing market share, and exploiting a qualified workforce, as well as developing client files," said Mr. Ong Tiong Hooi, Leader of PwC Vietnam Transaction Advisory Services.

He also shared that "the global economy is currently facing many pressures, such as inflation and economic recession, in which the M&A market in Vietnam is no exception. However, Asia-Pacific remains the 'best' spot for global growth due to various factors, including intergenerational wealth transfers, accelerating intra-industry modernization, trade flows between Asian nations, and a renewed interest in Environment, Society, and Governance (ESG)."

The PwC report shows that global M&A activity in 2022 will vary from region to region. EMEA recorded more transactions than the Americas and Asia-Pacific, despite higher energy costs and regional uncertainties. This indicates a shift in investors looking for opportunities and growth in foreign markets.

Despite macroeconomic impacts, such as recession fears, rising interest rates, plummeting stock prices, and geopolitical tensions (e.g., the war in Ukraine and supply chain disruptions), 60% of global CEOs have no intention of delaying transactions by 2023. This also leads to the expectation that the M&A market in 2023 will see large deals in the second half of the year.