M&A in technology sector on the rise

November 03, 2022 - 10:34
M&A in the technology sector tripled in value and nearly doubled in activities in the past few years, from 22 deals in 2020 to 42 deals in 2021, reaching roughly US$1 billion.
People make a QR code transaction. M&A in technology sector is picking up in recent years thanks to private equity and venture capital investments. — Photo nhipsongkinhdoanh.vn

HÀ NỘI — Mergers and acquisitions (M&A) in the technology sector have been witnessing a rebound in recent years as tech giants have employed M&A to expand their ecosystems.

Data from VnEconomy showed that M&A in the technology sector tripled in value and nearly doubled in activities in the past few years, from 22 deals in 2020 to 42 deals in 2021, reaching roughly US$1 billion.

Trần Vinh Dự, Strategy and Transactions Leader of Ernst & Young Indochina, remarked that private equity and venture capital investments in the sector continued to sustain strong growth in the first half of 2022 despite some turbulence in equity and debt markets.

A sizeable deal during the period was the deal of Viet Nam-based e-commerce solution provider OnPoint, which successfully raised $50 million from an indirect wholly-owned subsidy of Temasek.

The deal targeted Việt Nam's fast-growing e-commerce industry and became the largest private fundraising round in Southeast Asia's e-commerce-enabler industry in the last five years.

"According to our research, the total value of deals transacted in the first half of 2022 in the country was almost the same as the figure of the whole of 2021 ($4.97 billion)," Dự said.

Ernst & Young also said global M&A activities would remain resilient in 2022, but further shocks could derail the outlook. In Việt Nam, the main technology fields that have attracted a large number of investments include Fintech, Edtech, Logistics and business automation.

Lê Hàn Tuệ Lâm, director of the investment fund Nextrans Vietnam, asserted that few tech giants in Việt Nam can afford to own start-ups of multiple tens of millions of dollars outright.

"The demand is tight on Việt Nam's startup M&A market," Lâm said.

Hoàng Thị Kim Dung, head of Genesia Ventures Representative Office in Việt Nam, shared this view, saying that most start-up M&A deals in the country are worth less than $10 million each.

"M&A in the technology sector has been of limited success mostly because of the expectation mismatch between acquirers and acquirees," Dung said.

Some start-ups that are expected to reach near-unicorn status in the short term have been valued at between $100 million to over $3 billion.

Dung believed such valuations are so high that not many buyers are financially adequate to make acquisitions. She revealed that Genesia Ventures Vietnam is assisting a tech start-up in its M&A negotiation but reaching an agreement on price is not an easy task.

Lâm, in contrast, believed tech firms are normally under-valued in their initial public offerings (IPO). She said it is hard to tell how the market would move in the short term as many firms have begun to make IPOs abroad.

Kiều Ngoan, deputy general director of Fibo Capital Vietnam, highlighted several criteria to choose M&A partners, including healthy cash flows, an expanding customer base, and a popular brand name.

"Choosing M&A partners is a four-tier process involving ten steps, focusing on their business system, financial, legal, human and risk factors," she said. — VNS