Hanoi (VNS/VNA) - Real estate mergers and acquisitions (M&A) areexpected to be a good source of FDI in Vietnam this year, said Savills,and forecasting M&A activity is likely to increase in terms offrequency and value.

Le Thi Phuong Lan, head of Investment, Savills Hanoi, believes Vietnamhas enormous investment potential, saying: “Foreign investors should beaware of the potential obstacles within M&A deals.“

Vietnam has an active M&A market. In 2021, real estate businesses receivedmore than 31 billion USD of registered FDI. However, disbursed capitaldecreased by 1.6 billion USD year-on-year and reached 2.6 billion USD. 

The M&A outlook for 2022 is bright as Vietnam is an increasingly attractivedestination for international businesses, said Lan, adding that as bordersreopened on 15 March and travellers from 13 countries are now allowed to enterthe country without a visa, M&A deals are likely to increasealong with other real estate investments.

“The reason for this is that investors can now travel to properties and conductmarket research, understand business models, or evaluate the potential ofsites,” she said.

Savills research shows two factors that make Vietnam anattractive investment destination. They are the favourable macroconditions offered to investors, including steady economic growth,political stability, improving infrastructure links, increasing urbanisation,and a large and young workforce and attractive support policies,such as tax incentives.

According to FocusEconomics, Vietnam has one of the fastest-growingeconomies in the APAC region and will have the fastest growingeconomy in the region in 2022, and the momentum is expected to continue into2023. 

Vietnam is connecting to the region not only by a growing road system butalso by international seaports, airports, and land borders. The Ministry ofPlanning and Investment has announced plans to launch the mostextensive socio-economic development and recovery plan withmore than 100 trillion VND dedicated to infrastructuredevelopment. 

Real estate experts think it will increase the potential satelliteprovinces have to attract FDI enterprises. The improved transport linkswill allow FDI enterprises to expand further from established hubs like Hanoiand HCM City. 

In terms of human resources, Vietnam has a large and young workforcecoupled with competitive labour costs. At the same time, the increasinglyurban population also creates great potential for developing newurban area projects, mention experts.

In terms of supporting policies, the Government aimed to curbthe impact of the pandemic and offered support such as facilitatingthe circulation of goods, debt restructuring, and tax extensions andexemptions during the pandemic, together with supportive economicpolicies, a successful national vaccination campaign, which have helpedthe country gain investors’ hearts, said Lan.

“In 2022, we have seen encouraging M&A activities. Of industriesreceiving investment, real estate ranked second and has received nearly 1.52billion USD, or 30.4 percent of total registered FDI. These investmentsdemonstrate that foreign investors remain bullish on developing real estateprojects in Vietnam,” she said.

Showing enormous investment potential in Vietnam, Lan alsomentioned legal barriers, difficulties with joint venture partners,uncertainty with the M&A process, and different pricing approaches thatmight hurt the M&A, saying Vietnam had relatively complicated landlaws.

Lan considered the inconsistencies betweenlaws could result in wasted time and money despite institutionalreforms over the last few years.

The expert pointed out that when doing business in Vietnam, most foreignenterprises entered joint ventures. The foreign enterprise held the maindecision-making power and the Vietnamese investors provided legal support.However, negotiations may be time-consuming due to the differences inbusiness practices and legal structures. 

As M&A was still a relatively new concept in Vietnam, manybusinesses, especially small and medium-sized enterprises,were not prepared for the processes involved, said Lan, adding thatprojects may struggle to attract investment. 

“Although M&A deals are increasingly popular, there are still potentialobstacles for foreign investors. M&A transactions are a complex commodity;therefore, the involved parties need to research and develop detailed plans toensure long-term value carefully," Lan said.

"With our own experience of entering the Vietnamese market and aidinginternational clients, Savills understands the needs and concerns of FDIcompanies. Besides short-term profits, we aim to create long-term value inM&A deals.”/.