The actual property M&A market in Vietnam has undergone nice adjustments lately. Domestic actual property traders have been bolder and extra energetic in mergers and acquisitions actions in quest of land funds.
Leading the market by way of the variety of profitable transactions are transactions between home traders and international traders working within the Vietnamese market. Experts stated that for a lot of causes, together with the results of Covid-19, the mission’s authorized completion schedule, a key issue figuring out the success or failure of an M&A deal, slowed down.
In the final 5 years, the actual property M&A market in Vietnam has undergone nice adjustments. Vietnamese actual property traders have been bolder and extra energetic in mergers and acquisitions in addition to in search of giant and small land funds for funding.
Foreign traders with a robust place in Vietnam come from Japan, Korea and Singapore, the highest three international locations in M&A actions on the mission or company degree in Vietnam’s actual property market. 15 years in the past.
Currently, international traders solely account for a small a part of Vietnamese traders on the subject of actual property mergers and acquisitions. Ms. Le Phuong Lan, Head of Investment Consulting, Savills Hanoi stated:
“In recent years, the number of successful M&A deals has mostly been between domestic investors. It can be said that in Vietnam, domestic investors still play an important role and foreign investors’ capital contributes to “activating” the market to become more vibrant. New investors that have not yet operated in Vietnam are paying great attention to the market, especially in the areas of urban housing, industrial parks and logistics, active real estate and resort hotels. . But for many reasons, including travel difficulties, they have not been able to successfully execute the deal.
In fact, in the past time, the financial capacity of domestic real estate developers has significantly recovered. In case if the business owns a land bank with good development potential, they can seek capital from other financial sources besides traditional financial sources. New financing is possible through cooperation with domestic and foreign real estate developers.
The epidemic affects M&A activities
However, in the first stage of M&A, domestic investors are able to do it themselves instead of depending on foreign investment. Foreign investors mainly participate in the investment when the project has a clear legal basis. Vietnamese investors can accept risks to complete legal procedures in parallel with project development, because they are more aware of local regulations and capital is no longer a big problem. . The problem that domestic and foreign investors are wondering now is how to make legal procedures more favorable.
In Vietnam, M&A deals are usually done through project companies. The transfer in the form of property transfer is mainly done with operated assets but also faces many difficulties in procedures and tax-related issues. For many reasons, including the effects of Covid 19, the project’s legal completion schedule, a key factor determining the success or failure of a deal, is delayed.
Commenting on the problems in conducting M&A deals today, Ms. Le Phuong Lan, Head of Investment Consulting Department, Savills Hanoi shared: “Many project investors have not yet restructured their businesses in the direction of separating projects into independent project companies, which greatly hinders the deal’s progress.”
She said that, in the past time and in the immediate future, difficulties from border closure regulations and travel restrictions have significantly affected cross-border M&A activities, especially new investors. in Viet Nam. In the deals that Savills is consulting, despite great support from a high-tech platform, travel restrictions still partly make Due Diligence activities difficult.
Real estate M&A is also a sensitive market and requires high security. Project transfer information cannot be made public on the market or through the mass media. This makes it difficult to directly find partners.
Therefore, project owners that need to transfer should look to reputable consulting units with a global investment network to connect directly with investors. This is to avoid information risks, save transaction costs and organize human resources for M&A activities.
Another difficulty to mention is the difference in project valuation approach between Buyers and Sellers. Ms. Lan analyzed: “From the seller’s perspective, the second half of 2020 and the first half of 2021, the price of residential real estate in Vietnam has not decreased, plus the loosened monetary policy has made many real estate owners still expect the epidemic to slow down. soon and the market will recover strongly, so they continue to keep properties or price them at a very high level.
Meanwhile, the Acquirer’s assessment and expectations are not so optimistic. They are more cautious when investing money at this time and often keep the mentality of “waiting” rather than making investment decisions. Therefore, Buyers and Sellers should find a common voice in project pricing.”
In addition, Vietnam remains to be categorized as a ‘frontier market’ – a marginal market, making international traders restricted within the worth of capital invested out there.
For traders, Ms. Lan assessed that there are at the moment two psychology: “The first is the psychology of wanting to participate in the market, because the majority of countries including Vietnam are loosening monetary policy to stimulate economic growth after the Covid period. Investment funds, real estate investors all have cheap sources of money and no one wants to be late in a market with great potential and room for price appreciation like Vietnam’s real estate market.
According to her, the pandemic is already an uncertain situation while real estate investment is a long-term investment, investors still need to consider many factors before making an investment decision, especially For new investors, many institutional investors tend to look to professional international consulting organizations, understanding the local market to seek evaluation information as well as advice to support. investment decision making.
“Investment selections will turn into clearer once they see indicators that the pandemic is properly contained.”