Trade pact sets up stronger M&A interest from Europe

Speaking at the Vietnam M&A Forum 2021 earlier this month, Vo Ha Duyen, chairwoman of Vietnam International Law Firm, said, “The EU-Vietnam Free Trade Agreement (EVFTA) is strongly benefiting trade between EU and Vietnam. Therefore we anticipate a boost in cross-border M&As and investments in Vietnam in general.”

Duyen noted that Vietnam has committed to phasing out the economic needs test with respect to retail outlets of foreign-invested enterprises (FIEs) five years after entry into force of the EVFTA.

“Wholly FIEs will be permitted to provide internet services such as data processing,” she said. “Within five years, Vietnamese authorities will favourably consider the proposal by the EU’s financial institutions to allow the total equity held by foreign investors in two joint-stock commercial banks of Vietnam of up to 49 per cent of the charter capital.”

De Heus Group, a leading global supplier of nutritional products for animals, is one such European group that has signed agreements for the purchase of the feed business of Masan Group, which includes ANCO, MNS Feed, and Proconco.

MNS Feed covers 13 animal feed mills and one premix plant, with a total combined production capacity of nearly four million tonnes, strengthening De Heus’ position in Southeast Asia’s largest animal feed market.

Meanwhile, STADA Service Holdings B.V., a subsidiary of German pharma company STADA Arzneimittel AG, has constantly increased its ownership at Vietnamese pharmaceutical firm Pymepharco over recent years. STADA initially teamed up with Pymepharco by transferring technology, allowing the Vietnamese pharmaceutical firm to produce a number of the German company’s branded products. STADA became a strategic shareholder in the Vietnamese company in 2008. In its latest move, STADA has acquired more shares to fully take over Pymepharco.

Meanwhile, Mainstream Renewable Power has acquired an 80 per cent stake in a local company seeking to develop a 400-plus-megawatt portfolio of solar power projects in Vietnam. This deal marks the latest indication of Mainstream’s continued role as an enabler of renewable electrification in Vietnam.

Gabor Fluit, vice chairman of the European Chamber of Commerce in Vietnam, said, “In the past few years, most European investors have funded through disbursement of foreign direct investment into new greenfield projects both in the fields of industry and services. We notice that mergers and acquisitions (M&A) have not been a field of great interest and involvement for European companies historically, but since the EVFTA was ratified, we expect that the market for acquisition of existing assets and/or company shares through M&As will increase in the future.”

According to the Ministry of Planning and Investment, M&A transactions in Vietnam in the last 10 years were mainly carried out by companies from Asian countries such as South Korea, Japan, Thailand, and Singapore. It is expected that Vietnam’s investment environment will improve further when it implements the commitments linked to the various FTAs like the Regional Comprehensive Economic Partnership and others.

Fluit noted that this development facilitates the expansion of export markets and creates a foundation for Vietnamese enterprises to restructure, participate more deeply in the global value chain, and improve competitiveness. This not only helps promote trade growth but also contributes to the flow of foreign investment, including investment through M&A activities into Vietnam.

This attraction will be boosted even further once the EU-Vietnam Investment Protection Agreement enters into force, which will increase the level of trust and confidence in the legal system and framework when European companies want to start and/or expand their business activities in Vietnam, according to Fluit.

This will also give investors greater confidence to invest here and better protection for the capital contributed to the market through an innovative dispute resolution mechanism and other guarantees, such as against expropriation without compensation.

“For that reason, we expect an increased level of interest from European businesses in a number of business segments going forward,” he stressed. “One key sector attracting more European buyers to Vietnam’s M&A market is renewable energy. Besides that, Vietnam will continue to attract interest from investors in agri-business, logistics, fast-moving consumer goods, and other industries and services.”