Viet Nam among top 3 ASEAN destinations for private equity investment

Friday, May 24, 2019 14:57

Inside the lab of DHG Pharmaceutical JSC, which sells 66.4 million shares to the Japanese pharmaceutical firm Taisho. The healthcare and pharmaceutical sector is among top six sectors that will attract private equity investment for the next 12 months. — Photo

Viet Nam is among the top three ASEAN countries attracting private equity (PE) investment in terms of deal value, according to a report released by the auditing and business consulting firm Grant Thornton.

The report noted that Viet Nam saw 38 PE transactions in 2018 with total value of more than US$1.6 billion, after Singapore and Indonesia. The figures showed a 41 per cent increase in the number of transactions and a nearly three-fold rise in value compared to 2017.

Notably, PE investments in start-ups made up 71 per cent of the total number of transactions, up 56 per cent compared to 2017.

Technology remains at a high momentum, accounting for 40 per cent of the total deals.

The report cited the firm’s survey results which showed the top six most attractive private equity investment sectors in Viet Nam for the next 12 months to be fintech, education, green/renewable energy, healthcare and pharmaceuticals, e-commerce, and transportation and logistics.

According to the report, Viet Nam’s e-commerce market size (GMV – gross merchandise value) grew swiftly at a CAGR of 87 per cent during the 2015-18 period. By 2025, it is forecast to reach $15 billion.

Viet Nam’s ratio of e-commerce economy GMV/GDP is 4 per cent, far surpassing ASEAN’s average (2.8 per cent) with very strong competition among market participants.

A rapidly emerging middle class is a key driver for investment in education in Viet Nam. Viet Nam's education expenditures are 5.7 per cent of GDP, ranking 29th among 126 countries in the world.

Despite the market’s attractiveness, the Grant Thornton survey showed that high valuation and lack of attractive deal opportunities remained the top two challenges for target identification to most PE firms looking at Viet Nam, which is consistent with the region.

Another key challenge is the low acceptance of companies’ owners for PE funding. Concerns about potential conflicts in vision and mission, together with difficulty in sharing power, have caused private firms to hesitate co-operating with PE investors.

Strict binding terms and conditions were the next significant concern.

Excessive demand for financial and non-financial disclosures was also another critical concern of private company owners.

If those challenges could be solved, Viet Nam would rise higher in the region’s PE attraction ranking, experts said. — VNS

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