Research

 

By Tony Foster, Freshfields Bruckhaus Deringer and Chris Freund, Mekong Capital

One of the first deals by a global private equity firm in Vietnam was in 2006, when TPG and Intel Capital invested in FPT, a local IT firm. Now FPT has grown to the point where it is purchasing companies outside Vietnam.

Another notable foreign transaction recently was the acquisition by a fund managed by Warburg Pincus of an interest in all of the retail assets of Vingroup, one of the largest private sector property developers. This was the largest initial private equity investment ever in Vietnam and has since been scaled up.

In between these two bookends there have been:

• Private equity investments by large international names such as KKR, further deals by TPG, Goldman Sachs, Mount Kellett, CVC and GIC, among others. These investments have tended to be in the US$100 million range and up, but there are typically not a lot of investments in this size range.
• Investments by smaller offshore funds managed by the likes of Navis, TAEL and Gaw Capital. These have tended to be in the US$15 to US$50 million range.
• Numerous investments by Vietnam specific private equity funds such as funds managed by Mekong Capital, Vietnam Investment Group and Private Equity New Markets (f.k.a. BankInvest). These investments are typically in the US$6-20 million range and are much larger in volume than the first two categories.

A constant challenge facing private equity firms of all sizes is that the investment opportunities in Vietnam tend to be smaller than their funds are targeting. This can sometimes force funds to be creative. It also reduces the number of deals.

Private equity investments have been made in both equitised State-owned enterprises (SOEs) and in private sector companies, with the latter predominating. Most investments into equitised companies occurred between 2005-2008 when many funds followed a pre-IPO investment strategy, following some successful investments in the auctions of Vinamilk shares in 2003 and 2005. Most pre-IPO opportunities at the time were equitised SOEs. But with the collapse of the stock market starting in mid-2007, the IPO market dried up. Since then, capital has increasingly flowed to emerging private companies such as Masan Group, VinGroup, MobileWorld, Golden Gate, etc.