Startup M&A deals booming to raise big firms' position

Vietnam Investment Review

In line with the increasing amounts of capital pouring into startups, mergers and acquisitions (M&A) involving the newbies may keep on a steady course up as a growing number of giants see them as the pathway to enhancing their position in the market.

A rising trend among giants

Over the past time, the local market has seen giants like Vingroup, Singapore-based Grab, and Sea Group joining hands and acquiring local startups.

Grab purchased 3.523 per cent of e-wallet application Moca’s shares from Access Venture Capital for hundreds of thousands of US dollars. Besides, Shopee’s parent company – Sea Group – also spent $64 million to acquire 82 per cent of the shares of Foody Corporation – the owner of food delivery firm Now. The firm also purchased the local delivery firm Giaohangtietkiem at an undisclosed price.

In addition, Malaysia-based real estate company Property Guru acquired its online real estate searching website after years of investment.

Evidently, local conglomerate Vingroup could not miss the trend. Several months ago, its subsidiary VinID JSC completed procedures to buy up the e-wallet platform MonPay. Moreover, the Vietnamese giant also launched the $100 million Vingroup Ventures Fund, VinTech Fund, and VinGroup Innovation Foundation to support local startups.

Discussing with VIR, Nguyen Xuan Truong, former CEO of once iconic delivery startup Ahamove, said that enhancing investment or M&A in startups is an inevitable trend amid the fierce battle among giants. Accordingly, big brands like Grab have been running business across multiple sectors like ride-hailing, food delivery, and cashless payment – all areas of high startup activity which makes it ideal for M&A dealings.

“Thus, there are great opportunities for startups offering related solutions. For instance, startups could offer online sales tools for food delivery firms,” said Truong. “Stricter competition will clarify market demand, so startups will be able to identify the right services to market.”

Great prospects for local startup M&A deals

Despite the rising trend, the number of M&A deals involving startups in Vietnam has been minuscule compared to regional countries, according to a representative of the Department of Market and Sci-Tech Enterprise Development at the Ministry of Science and Technology.

Justin Hall, partner of Singapore-based Golden Gate Venture, told VIR that,“M&A is essentially the final capstone of a large pool of invested capital, high-quality startups, and acquisitive corporates and funds,” said Hall. “When those other components have evolved, scaled, and matured, M&A will naturally emerge as a result.”

According to him, to promote startup M&A deals, potential acquirers from around the region only need greater exposure to and familiarity with companies and entrepreneurs in Vietnam. “The opportunity is there, it's just that many potential acquirers haven't been sufficiently educated about it.”

“I do believe that Vietnam will become a new hub for investors and startups in Southeast Asia. There is a tremendous amount of outside interest, from both global and regional funds, to participate in and source deals from Vietnam, and I expect foreign direct investment to significantly increase over the next three to five years.”

The nation has seen an outbreak of startups in the past three years, with the number of firms going from 1,800 in late 2015 to about 3,000 in the middle of last year, according to the latest report of Echelon, a Singaporean online newspaper for the startup community. According to the latest statistics of Topica Founder Institute, the country’s startup ecosystem has also seen impressive growth in capital mobilised by startups as investment in startups was $889 million in 2018, tripling the total of 2017 and rising six times over 2016.

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