Vietnam’s bureaucrats and politicians are slowly shifting their way towards reducing the role of the state in the economy, by relaxing foreign ownership limits and reining in activities by state-owned enterprises.
This is creating opportunities for leaders in the private sector but only a handful of players are likely to realise initial benefits, as they gain the scale, expertise and vision to prosper from such an opening. Some of these businesses have already been active in both restructuring and acquiring new businesses.
“We’re going to see deals get bigger,” said Nguyen Lam Dung, chief executive at VPBank Securities in Hanoi.
Masan Group, one of the country’s largest privately run conglomerates with interests in the consumer and agricultural sectors, last year bought 40% of Proconco, an animal feed company, from Prudential for $96 million.
Global private equity firm KKR sees profits in backing private companies in the consumer sector and acquired an 18% stake in Masan Consumer, valued at $355 million. Masan Group is looking to divest some underperforming real estate assets, according to several bankers; through a spokesperson, Masan says it does not have a real-estate business.
Vingroup, the country’s biggest private real estate developer, this year sold a $200 million, 20% stake in Vingroup Retail, a consumer affiliate, to global investment firm Warburg Pincus. It has also been busy selling non-performing properties.
Another developer, HAGL, announced a $440 million development project in Myanmar. It also has interests in rubber plantations and hydropower, which it is said to be restructuring to raise cash and shed some assets (although it has not appointed investment banking advisors).
“A handful of companies will continue to get financing because of their depth of management and strategic vision,” said Bang Trinh, Vietnam-based managing director for investment banking at Morgan Stanley.
Such companies will continue to drive domestic M&A, and their prospects only expand if state-owned enterprises are restrained in going into new areas, or if the private sector is welcomed into areas such as infrastructure that are traditional SOE haunts.
Indeed, one foreign investment banker suggests such companies may even be considering what he terms “transformational transactions”, implying allowing in more foreign strategic or private-equity investors.
Such a move would involve getting the family owners to agree to give up a measure of control, so this may be just excited banker talk. But the need for such companies to raise more money to pursue deals is real. “There will be a trade” next year, said the banker, referring to these leading companies, “but we just don’t know what kind of trade.”