M&A in the technology sector on the rise

VIETNAM, Nov 3 – HÀ NỘI – Mergers and acquisitions (M&A) in the technology sector have seen a surge in recent years as tech giants have used M&A to expand their ecosystems.

Data from VnEconomy showed that M&A in the technology sector has tripled in value and activity has nearly doubled in recent years, from 22 deals in 2020 to 42 deals in 2021, reaching around $1 billion.

Trần Vinh Dự, Strategy and Transactions Leader at Ernst & Young Indochina, noted that despite some turmoil in equity and bond markets, private equity and venture capital investments in the sector continued to show strong growth in the first half of 2022.

A notable deal during the period was the business of Vietnam-based e-commerce solutions provider OnPoint, which successfully raised $50 million from an indirect 100% subsidy from Temasek.

The deal targeted Việt Nam’s fast-growing e-commerce industry and became the largest private fundraising round in Southeast Asia’s e-commerce enabler industry in the past five years.

“According to our research, the total value of deals made in the country in the first half of 2022 was almost equal to the value of all of 2021 (US$4.97 billion),” Dự said.

Ernst & Young also said global M&A activity would remain robust in 2022, but further shocks could weigh on the outlook. The major technology fields in Việt Nam that have attracted a large number of investments include fintech, edtech, logistics and business automation.

Lê Hàn Tuệ Lâm, director of investment fund Nextrans Vietnam, claimed that few tech giants in Việt Nam could afford to directly own tens of millions of dollars worth of start-ups.

“Demand in the M&A market for start-ups in Việt Nam is high,” said Lâm.

Hoàng Thị Kim Dung, head of Genesia Ventures representative office in Việt Nam, shared this view, saying that most M&A deals by start-ups in the country are worth less than US$10 million each.

“M&A in the technology sector has had limited success, primarily due to the mismatch between buyers’ and acquirers’ expectations,” said Dung.

Some startups that are expected to reach unicorn status in the near term have been valued at $100 million to over $3 billion.

Dung believed such valuations were so high that not many buyers were financially sufficient to make acquisitions. She revealed that Genesia Ventures Vietnam is supporting a tech start-up in its M&A negotiations, but reaching an agreement on the price is no easy task.

Lâm, on the other hand, believed that technology companies are usually undervalued when they go public. She said it was difficult to predict how the market would move in the short term as many companies have started going public overseas.

Kiều Ngoan, Deputy General Manager of Fibo Capital Vietnam, highlighted several criteria for selecting M&A partners, including healthy cash flows, a growing customer base and a popular brand name.

“M&A partner selection is a four-tier, ten-step process that focuses on their business system, financial, legal, human and risk factors,” she said. — VNS


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