Vietnam PE: Proving ground

Annual private equity investment in Vietnam surpassed $3 billion for the first time in 2018, more than the total for the preceding four years combined. It is testament to increasing appetite for exposure to the country – although one could be forgiven for interpreting the spike as a specific bet on the potential of a handful of corporate giants to go public.

In March of last year, Warburg Pincus committed $370 million to Vietnam Technological & Commercial Joint Stock Bank (Techcombank) in what was at the time Vietnam's largest-ever PE investment. Six weeks later, it completed a $1.28 billion IPO, then the country's biggest to date.

GIC Private was one of several anchor investors that covered most of the Techcombank offering. It followed up by deploying $850 million in Vinhomes, Vietnam's leading residential property developer, which duly raised $1.35 billion through a public offering. The bragging rights for largest private equity investment and IPO had changed hands once again.

GIC subsequently deployed $209 million in Masan Group Corporation and then accounted for the bulk of a $265 million investment in Vietcombank. The Singaporean sovereign wealth fund is by some margin the largest private investor in Vietnam of recent years, a status it has also enjoyed in other less developed Southeast Asia markets, including the Philippines.

Arguably more meaningful is greater participation from global PE firms. When KKR invested $359 million in Masan Consumer Corp. across two tranches in 2011 and 2013, the deal was viewed as an outlier. When the GP returned in 2017 with a $150 million commitment to Masan Nutri-Science – plus the purchase of $100 million shares in Masan Group – it seemed part of a sustainable trend.

Since 2013, the likes of Warburg Pincus, CVC Capital Partners, TPG Capital, and EQT have made substantial investments in Vietnam. Their willingness to engage can be linked to hopes that the country's track record of economic volatility has been laid to rest.

Longstanding investors have seen two dramatic peaks, in 1997 and 2007, followed by equally dramatic troughs as the public market crashed, price-to-earnings ratios plummeted, and exit plans were torn to shreds. There was no repetition in 2017 and the overall macro picture is encouraging. Vietnam's recent reputation is for solid economic growth, not inflation crises and property busts.

Assuming this stability can be maintained, the market now needs to see more investment activity that reaches beyond a top tier of elite domestic companies. The deals struck by TPG and EQT both facilitated exits for smaller GPs from private companies that had delivered on their growth potential. Mobile World is one of few to go through this process and then successfully tap the public markets.

Once Vietnam has repeatedly proven itself as an investment destination where GPs can take private companies to scale and then complete exits, more institutional capital will follow. 

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• Topics
• Southeast Asia
• GPs
• Vietnam
• Economy