M&A deals spur Vietnam’s retail market

Good growth

Ong Tiong Hooi, transaction services partner of PwC Vietnam, said Vietnam’s mergers and acquisitions (M&A) landscape is likely to remain active this year. In demand, assets have commanded high valuations amid fierce competition driven by macroeconomic factors. These include low interest rates, a desire to acquire innovative, digital or technology-enabled businesses and an abundance of available capital from both corporate (over US$7.6 trillion in cash and marketable securities) and private equity buyers (about US$1.7 trillion).

Asia’s retail sales of goods and services, which decreased by 27 percent in April 2020 compared to a year ago due to the impact of social distancing, have strongly recovered since May 2020. According to the General Statistics Office of Vietnam, total retail sales of consumer goods and services in 2020 increased by 2.6 percent compared to 2019, reaching VND5,059 trillion. In the first two months of this year, this figure reached VND904.5 trillion, an increase of 5.49 percent compared to a year ago. Of which, retail sales of consumer goods stood at VND722.1 trillion, a year-on-year increase of 7.8 percent, accounting for 79.8 percent of the total.

The Covid-19 pandemic has accelerated the shift towards a more digital world, with consumers minimizing purchases in physical stores and maximizing online buying. According to a We Are Social report, as of January 2020, there were over 68 million internet users and about 146 million mobile connections in Vietnam, opening up opportunities for retailers to re-examine consumer preferences and habits, and then re-consider their strategies.

Hopes for increased M&A deals in retail sector

Under the impact of the Covid-19 pandemic, small businesses are greatly affected due to lack of finance and output for their products. Therefore, large firms will continue to increase their market share by acquiring small businesses. M&A deals help them save time to establish a new legal entity and access an established workforce.

In addition, Vietnam remains an attractive destination for foreign investors in the medium and long term. Many major international brands have opened stores in Vietnam. Japanese clothing retailer, Uniqlo, announced expansion in the capital city with two new stores located at Vincom Center Metropolis and Aeon Mall Long Bien, after its first Hanoi store located at Vincom Center Pham Ngoc Thach in Dong Da District. Together with three stores in Ho Chi Minh City, the Japanese clothing retailer has six stores in Vietnam. Major Japanese retailer, Muji, which sells a wide variety of household and consumer goods, opened its first store in Ho Chi Minh City and is planning to open another in Hanoi.

The expansion of the retail network of international brands in Vietnam will boost the commercial real estate sector, said Neil MacGregor, managing director of Savills Vietnam.