Steady Growth Expected in Private Equity Investment

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August 22, 2016

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In Grant Thornton’s 15th semi-annual Private Equity sector carried out in July 2016, a majority of respondents (55%) have expressed positive views about Vietnam. Respondents expressing a neutral view towards Vietnam’s economy have continuously increased since H2 2014 and reached 40% of respondents in this survey. However, whilst 72% of our participants anticipate the level of investment activities to increase in Vietnam in the next 12 months, this represents a reduction of 14% compared to 6 months ago.

In regard to sources of transactions, it is notable that Private/Family owned entities have replaced SOE privatisations as the most significant source of deals, as noted by 33% of the participants.
The Retail sector and the Food and Beverage (F&B) sector continue to be considered the two most attractive sectors for Private Equity transactions in our recent surveys. It is also highlighted that Private Equity investors are increasingly interested in the Education sector, whose rating of “very attractive” increased by 16% compared to our last survey.

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The survey emphasises that “Economic growth” and “Sector specific opportunities” continued to be critical for deal success. “Difference in valuation expectations” and “non-disclosure of material items at the appropriate time” topped the list of critical factors contributing to deal failure.

Finally, with the establishment of AEC, the anticipated ratifications of the EU Vietnam Free Trade Agreement and the TPP agreement as well as the continuing improvement in the business climate being championed by the new Government, we are looking forward to steady growth in Private Equity investment in the coming 12 months.

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In terms of investment attractiveness, the trend is quite similar to our last survey, where PE investors see Vietnam as “attractive” and “more attractive” accounting for the largest proportion, with 69% selected, an increase of 10% compared to H2 2015. The fact that China is no longer the ideal destination for manufacturers with more expensive labour and low productivity has created opportunities for Vietnam. With favourable conditions such as abundant labour resources, low operation costs, diverse population structure, and a stable political environment, Vietnam is becoming an attractive investment destination for foreign investors.

When asked to rank Vietnam and other neighbouring countries in terms of investment attractiveness, 27% of the respondents rooted for Vietnam, once again granting it the second place after the long-standing number one investment destination Myanmar.

To access the full survey, please click here.

Kenneth M Atkinson
Executive Chairman, Grant Thornton Vietnam

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