Even as deals in the tech startup space have been bleak, Vietnam is anticipated to see an uptick in exit activity driven by higher M&A interest from both foreign and local investors, according to the Vietnam Innovation & Tech Investment Report 2024 released on Friday.
“As the market matures, local players have shifted from passive participants to pivotal architects of the M&A landscape, actively enhancing tech capabilities and market presence through strategic deals,” said the report, a joint publication of local venture capital firm Do Ventures and the National Innovation Centre.
In addition to inbound deals like Sea Limited’s acquisitions of Foody and Giao Hang Tiet Kiem, PropertyGuru’s acquisition of Batdongsan.vn, and Ant Financial acquiring eMonkey, Vietnamese companies have also bought startups in recent years. Not only have mature tech companies like FPT and MoMo invested in smaller startups, local conglomerates Vingroup, Masan Group, and Sovico Holdings have also strengthened their technology and digital capabilities through M&As.
One of the largest acquisitions was Masan’s control investment in credit scoring company Trusting Social.
The report indicated encouraging trends for the sector. “A robust inflow of FDI, supported by favourable trade agreements, creates an environment conducive to IPOs and M&A activities in Vietnam. It enhances market attractiveness, access to capital, and fosters an environment of innovation and strategic collaboration, driving sustainable growth in the IPO and M&A landscape,” it stated.
The recent enhancement in economic ties between Vietnam and the US, in the form of the Comprehensive Strategic Partnership, is also expected to prompt an enormous inflow of new investment from the US to Vietnam, especially in science, technology, and innovation in the digital field.
“This is a positive signal for the increase in technology M&A deals,” the report added.
However, there is still a long way to go for the Vietnamese startup ecosystem.
Tech is still one of the least active sectors in terms of M&A transactions, according to the report. Particularly in 2023, there were only five acquisitions, the lowest in more than a decade.
Meanwhile, quarterly funding in Vietnam has been in a downward spiral since the COVID-19 pandemic and reached only $47 million in Q1 2024, plummeting nearly 80% from the previous period even as deal count slightly increased, per DealStreetAsia’s DATA VANTAGE SE Asia Deal Review: Q1 2024.
Vietnam lost its ranking as the third-largest venture capital market to the Philippines, with 4.7% of Southeast Asia’s total funding value compared to 14.2% of the Philippines.
Funding crunch continue to present across the region, with no single deal of above $100 million in Q1 2024. Meanwhile, late-stage funding proceeds reached the bottom of the review period since 2020, which was even 81% weaker than the previous low in Q1 2023.
Overall funding value in the quarter fell to the lowest in more than five years, at $1.2 billion.