The acquisition of emerging businesses in Vietnam is a well-planned strategy that regional companies and large corporations employ to enrich their ecosystems with the least amount of resources.
The M&A sector has been witnessing a rebound in recent years
According to KPMG Vietnam, the Vietnamese merger and acquisition (M&A) market is anticipated to surpass US$4.4 billion in 2023 and continue to increase in the years ahead. It is important to note that M&A are not only occurring in traditional sectors such as finance, real estate, and retail but are also gaining significant momentum in emerging sectors like technology and the digital economy.
Technology is undergoing accelerated development and evolution. Any company — big and long-standing, or tech giants like Google, Meta, Microsoft, etc. — is struggling to keep ahead of rivals in terms of technology.
In the past, large corporations invested billions of USD annually in research and development (R&D) to reduce the technology disparity. However, R&D is a long-term investment process that may have potential hazards if the research results are not commercialised. Consequently, large corporations are accelerating the adoption of new technology by pursuing startups that offer emergent technology solutions and pursuing mergers.
According to Mrs. Le Hoang Uyen Vy, Co-Founder and CEO of Do Ventures, the Vietnamese technology industry has experienced a resurgence in M&A activities in recent years, indicating a dynamic consolidation and expansion.
This is also the reason why the Vietnamese M&A market has also witnessed the emergence of new buyers, such as regional companies, big tech companies, and domestic corporations. Each organisation implements its own unique acquisition strategies.
Also Read: M&A in Asia: A strategic roadmap for venture builders
Merging with like-minded partners and venture capital funds through M&A
The most prevalent M&A strategies for reginal large-scale companies involve the acquisition of market leaders by regional mega apps to fortify their ecosystems. SEA Group’s acquisition of Foody (2018) and the acquisition of a majority stake in Giao Hang Tiet Kiem (2017) are two typical examples. Furthermore, they acquire market-leading companies in the same industry to strengthen their positions. For example, Mynavi acquired IT Viec (2020), Woowa Brothers acquired Vietnammm (2019), and Traveloka acquired Mytour (2018).
In order to conserve time and resources, large regional technology companies frequently acquire licensed businesses in regions with stringent legal regulations rather than pursuing new licenses independently. Typically, Grab acquired Moca (2018), Ant Financial acquired eMonkey (2019), Gojek acquired Wepay (2016), or Truemoney acquired 1Pay (2017).
In additon to the “big guys” in the region, significant domestic technology companies also have a strategy to acquire early-stage startups to upgrade and expand their business ecosystem. For example, FPT’s acquisition of Base.vn (2021), Momo’s acquisition of Nhanh.vn (2022) and Pique AI (2021), and Tiki acquired Ticketbox (2019).
Alternatively, they pursue digital startups with the objective of expediting the digital transformation process, as evidenced by the acquisitions of Vicare (2018) by Vinmec (a subsidiary of Vingroup), Mobicast (2021) by Masan, and Hocmai (2020) by Galaxy Media & Entertainment.
As the domestic tech market grows, local startups are also emerging as a new destination for large corporations. Local businesses, which possess substantial resources, have also undergone a transformation from passive participants to key architects in the development of the M&A market. They have actively improved their technological capabilities and market presence through strategic transactions.
“Through M&A activities, numerous domestic enterprises have initiated engagement in open innovation.” Mr. Do Tien Thinh, Deputy Director of the National Innovation Center, Ministry of Planning and Investment, is aware that certain large corporations have established a distinct M&A committee. The committee will select enterprises to begin merging monthly to acquire technology and market share.
Conclusion
According to a projection, startups will constitute 44 per cent of the innovation sources for corporations and businesses of all sizes within the next five years.
This development is advantageous for both corporations and entrepreneurs. The tech giants will provide startups with additional resources (finance, human resources, infrastructure, customer network, etc.) to facilitate their expansion. Corporations and organisations will have access to new technology and solutions that will enhance their competitiveness against rivals.
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