© 2015 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
© 2015 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Deals in Vietnam Webinar Agenda
15:00 - 15:10 Introductions; Vietnam Macroeconomic Overview
15:10 - 15:25 Doing a Deal in Vietnam: What Sectors and Why
15:25 - 15:40 Getting a Deal Done: Key Considerations
15:40 - 16:00 Question & Answer Session
16:00 End of Webinar, Questionnaire
3
Question and Answer Session
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4
Key Presenter
John Ditty
Managing Partner, Advisory
KPMG Vietnam and Cambodia
John has been living and working in Vietnam since 1993,
and currently leads KPMG's Deal Advisory business in
Vietnam and Cambodia. During his time in Vietnam, John
has advised on more than 200 transactions and has a
great understanding of what works and why.
5
Vietnam Macroeconomic Overview
6
Vietnam continues to growVietnam’s GDP is expected to grow over 6% per year till 2025, one of the fastest growing
economies in the region
6.6%
6.6%
7.6%
6.2%
2.7%
4.5%
5.8%
3.8%
6.0%
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%
Laos
Cambodia
Myanmar
Vietnam
Singapore
Malaysia
Philippines
Thailand
Indonesia
GDP growth
2016 (%)
5.0%
2.9%
6.9%
4.2%
2.0%
6.2%
8.6%
6.9%
7.4%
Vietnam’s GDP versus ASEAN countries 2016
USD billion
Source:Economic Intelligence Unit and Economywatch
GDP forecast from 2015-25
In percentage
Expected to
grow above
6.0 per cent
per year
13.359
19.476
74.012
201.4
297
297
305
409.742
932
0 200 400 600 800 1000
Laos
Cambodia
Myanmar
Vietnam
Singapore
Malaysia
Philippines
Thailand
Indonesia
7
A Stable EconomyThe government shifted from a high growth strategy to one that would bring macroeconomic
stability
Note: GDP growth (% real change per annual
Inflation rate (% change per annum; average)
Source: Economic Intelligence Unit, GSO
20,649
20,85921,017
21,189 21,909
22,31722,801
23,33123,690
23,964
18,000
19,000
20,000
21,000
22,000
23,000
24,000
25,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Vie
tn
am
D
on
g
Exchange rate against USD (Average)
5.25.4
6.0
6.7
6.2
6.66.8
6.3 6.2
6.86.6
4.1
0.6
4.74
4.0
5.04.8
4.5
0
1
2
3
4
5
6
7
8
2012 2013 2014 2015 2016 2017f 2018f 2019f 2020f
Real GDP growth and inflation rate in 2016
Real GDP Growth rate Inflation rate
Forecast%
8
Exports Performed StronglyWhile the United States and China continue to lead export and import trading with Vietnam, trading
activities with other nations such as South Korea and Japan, have seen significant growth in the
past 5 years.
Source:KPMG’s analysis based on GSO data
63 57
72
97
115
132
150162
177
8170
85
107114
131
148
166174
0
20
40
60
80
100
120
140
160
180
200
2008 2009 2010 2011 2012 2013 2014 2015 2016
USD
Bill
ion
Exports, imports and trade balance in Vietnam
Exports Imports
9
Exports Performed Strongly
Top imported goods by Vietnam 2016 Top exported goods by Vietnam 2016
1. Machinery, instrument, accessory
2. Textile fabrics
3. Iron, Steel
4. Plastic materials
5. Auxiliary materials for textile, garment,
leather, footwear
6. Petroleum oil, refined
7. Articles of plastics
8. Parts and accessories for motor
9. Animal fodder and materials
10.Motor vehicles, assembled
1. Telephones and their parts
2. Textile, sewing products
3. Computers, electronic products and parts
4. Footwear
5. Other machinery, instrument, accessories
6. Seafood
7. Wood and wooden products
8. Means of transport and equipment
9. Coffee
10.Bags, pockets, wallets, suitcases, hats
and umbrellas
Source: KPMG analysis based on GSO data
While the United States and China continue to lead export and import trading with Vietnam,
trading activities with other nations such as South Korea and Japan, have seen significant
growth in the past 5 years.
10
Discovering the Consumer SocietyA young population and rapid adoption of modern technology make Vietnam an exciting market for
consumer/retail-focused customers
…Together with rising disposable incomes, a golden demographic
structure and higher living standards have set Vietnam apart as one
of the most attractive investment destinations in Asia
62.3%
11
Discovering the Consumer SocietyA young population and rapid adoption of modern technology make Vietnam an exciting market for
consumer/retail-focused customers
7.8 8.3
10.812.2
13.1 13.815.1
16.017.2
18.619.9
6.9%6.2%
7.0% 7.2% 7.1% 7.2%7.4%
7.3% 7.3% 7.3% 7.3%
0%
2%
4%
6%
8%
5
10
15
20
25
% G
DP
US
D b
illi
on
Vietnam Healthcare expenditure in 2010 - 2020
Healthcare spending
Healthcare spending (% of GDP)
Stable growth at 7.3% of total GDP
Projected Vietnam healthcare expenditure 2010-2020
86 103
115 128
141 147 154
164 175
185 196
-
50
100
150
200
250
US
D B
illi
on
Vietnam personal disposable income in 2010 - 2020
12
14.0
21.6 21.9 22.8 24.4
10.511.5 12.5 14.8 15.8
-
5.0
10.0
15.0
20.0
25.0
2012 2013 2014 2015 2016
US
D B
illio
n
Registered
FDI – Important Drivers of GrowthVietnam's participation in FTAs and the TPP process has helped it attract investment from abroad.
Registered And Disbursed FDI
Top 5 Countries for New FDI In 2016 (USD, Billion)New Registered FDI By Sectors In 2016 (USD, Billion)
Source: General Statistics Office, and Foreign Investment Agency – Ministry of Planning and Investment
Electronics4.05 , 36%
Textile, 1.94 , 17%
TMT, 1.25 , 11%
Real Estate, 1.13 , 10%
Manufacturing, 0.70 , 6%
Other2.20 , 20%
South Korea,
7.0, 29%
Japan, 2.58, 11%
Singapore, 2.4, 10%China,
1.87, 8%
Taiwan, 1.86, 8%
Others, 8.6 35%
13
Document Classification: KPMG Confidential
Doing a Deal in Vietnam:What Sectors & Why
14
0.1 0.4 1.5 1.0 1.2
3.2
4.7 5.2
2.9
1.6
3.4
4.8
1.0 21
36
107 94
111
229 226
275
252
217
286
199
48
-
50
100
150
200
250
300
350
0
1
2
3
4
5
6
Total deals by volume and value 2005 - May 2017
Value (USD billion) Volume
Driving to an M&A market of USD10 Billion in 2020A new wave of M&A and foreign direct investment is coming into Vietnam due to macroeconomic
stability, an emerging middle class and changes in Asia’s manufacturing landscape.
Note: Deal value not disclosed for a large number of transactions
Deal means M&A or private placement transaction that have been closed or effective
*KPMG Forecast
Source: KPMG analysis
Capital IQ, accessed on 22 July 2016, 02 June 2017
Although the country has seen impressive growth,
Vietnam could have grown faster if the importance of
corporate governance, transparency and preparation had
been better understood.
15
Document Classification: KPMG Confidential
20%
17%
14%12%
10%
8%
3%3%
2%
11%
18%
23%
13%
11%
11%
6%
4%
2%
2%1% 9%
Deal volume breakdown by sector 2015-16 and last 10 years
Industrials Financials
Consumer Discretionary Consumer Staples
Materials Information Technology
Energy Healthcare
Utilities Telecommunication
Others
Attractive sectors
Source: KPMG analysis
Capital IQ, accessed on 22 July 2016 and 02 June 2017
Industrial Markets: Construction & Engineering
Financial Services: Banks, Real estate,
Insurance & Brokerage
Consumer Discretionary: Education, Hospitality services
& E-commerce retailConsumer Staples: Packaged Foods &
Meats
Health care: Pharmaceuticals
16
Recent selected transactions Sector Buyer Seller Target %
Deal
value
(USD mil)Year
Ind
ustr
ials
ANA Holdings Inc. Vietnam Airlines Company Limited Vietnam Airlines JSC 8.8 109 2016
Dragon Capital, VinaCapital, SSI AM,
KITMC
Coteccons Construction JSC Coteccons Construction
JSC
22.7 79 2016
Metro Pacific Tollways Corp. CII Bridges and Roads Investment
JSC
CII Bridges and Roads
Investment JSC
41.1 31 2015
Co
nsu
mer
Dis
cre
tio
nary
Warburg Pincus LLC VinaCapital Sofitel Legend Metropole
Hanoi Hotel
100 100 2016
Power Buy Company Limited Not disclosed Nguyen Kim Trading JSC 49 200 2015
Nord Anglia Education, Inc Not disclosed British International School
Vietnam
90 150 2015
Co
nsu
mer
Sta
ple
s
Earth Chemical Co., Ltd. Not disclosed A My Gia Company Limited 100 80 2017
F&N Beverages Manufacturing Sdn.
Bhd.; F&N Dairy Investments Pte Lt
State Capital Investment
Corporation
Vietnam Dairy Products
JSC
5.4 499 2016
The Central Group; Nguyen Kim
Trading JSC
Casino, Guichard-Perrachon
Société Anonym
Big C Vietnam 100 1,145 2016
Fin
an
cia
ls
FWD Life Insurance Company
(Bermuda) Limited
The Great Eastern Life Assurance
Co., Ltd.
Great Eastern Life
(Vietnam) Co Ltd.
100 36 2016
Viettel Corporation; SCIC Military Commercial Joint Stock
Bank
Military Commercial Joint
Stock Bank
24.4 191 2015
BIDV Securities Joint Stock Company Not disclosed Mekong Housing Bank 100 164 2015
Healt
hcare
Taisho Pharmaceutical Co., Ltd. Various sellers DHG Pharmaceutical JSC 24.5 96 2016
VinaCapital Vietnam Opportunity
Fund Limited; VinaCapital Investment
Management Ltd
Not disclosed Thai Hoa International
Hospital JSC
75 10 2016
Aikya Corporation State Capital Investment
Corporation
Tv.Pharm Pharmaceutical
JSC
43.5 10 2016
Source: KPMG analysis
Capital IQ, accessed on 02 June 2017
17
Document Classification: KPMG Confidential
Soon there will be no boundaries…
We see… SOEs start executing their equitization plans (i.e. Vietnam Airlines, Sabeco, Habeco)
Increasing foreign ownership in major companies
Increasing foreign ownership in public companies
We will… Become the alternative manufacturing and business hub of the region
Have greater opportunities
We need to… Be prepared for a more integrated world
Develop capabilities to match the region
18
Getting Deals Done in Vietnam
19
Key deal considerations (1/3) Extended, inefficient process – expect delays
Poor business planning by the Target
Unrealistic pricing expectations/ lack of basis for pricing
Changing/inconsistent regulatory landscape
Changing deal structure and parameters
1. Transaction
process
matters
2. Financial
due
diligence
matters
Our understanding
of and ability to help
clients navigate
through the myriad
of potential local
investment issues
and challenges are
unsurpassed Unreliable information provided by the Target/Vendor
Poor visibility of historical earnings/trading experience of the
Target company
Immediate and future tax consequences of the proposed
acquisition
“Black holes” or prima facie errors
20
Key deal considerations (2/3)
Non-compliant tax practices and tax payments
Unreliable indication of the future rate based upon historical effective tax
rate
Lack of legitimate supporting documents to determine actual deductibles
Lack of market and competitors’ information in order to benchmark
Target’s current performance:
Current market size
Breakdown by key products and services
Market share/ Current sales/distribution network
Future outlook and development plan
3.Taxation and
structural
matters
4. Commercial
due diligence
matters
21
Key deal considerations (3/3)
Non-compliant corporate legal documentation is done properly during the
implementation of the ideal transaction structure
Lack of understanding possible legal risks related to the Target
Inefficient understanding of legal impact of the proposed deal and anticipate
possible burdens to any post-deal conditions
Lack of focus on the relationship between risk and return, which ultimately translates
into biased valuation
Lack of adequate information and consistent criteria to determine pricing of business
Changing competitive forces and industry trends, which may challenge the
applicability of historical results in projecting future performance
Ineffective valuation model building hurdles the process of analyzing transaction
5. Legal due
diligence
matters
6. Valuation
matters
22
Document Classification: KPMG Confidential
Thank You
23
Document Classification: KPMG Confidential
23
Document Classification: KPMG Public
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entity. All rights reserved.
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