Real Estate Market: Vibrant M&A Sector

 

The sharp increase in property M&A deals during market recovery reflects the strong pull of the real estate market. Opportunities are in the hands of companies with strong financial capacities.

 

The National Housing Organization (NHO), a joint venture between TAG Joint Stock Company and NIBC Investment Company Limited, invested nearly US$1 billion, an equivalent to VND21 trillion, to get hold of many property projects owned by various companies in major cities and provinces like Hanoi, Ho Chi Minh City, Da Nang and Binh Duong. Acquired projects are going forward to win the trust of customers in the company’s prestige and responsibility.

 

Licogi 16 Joint Stock Company also transferred its Sky Park Residence Project (on Ton That Thuyet Street, Cau Giay District, Hanoi) to Thanh Hoa Construction Corporation for VND143 billion. And, the success of many big M&A deals has caught the attention of public. For instance, FLC Group purchased ION Complex Project at 36 Pham Hung Street, a prime location in Hanoi, from Hai Phat Investment Joint Stock Company.

 

Mr Phan Xuan Can, President of Soho Vietnam Real Estate Consulting Company, said, in spite of still being in difficulty, property transfers have never been ever eventful as now, especially when the real estate market has shown signs of recovery. Many companies with strong financial bases have rushed to take over projects at the most reasonable values.

 

According to experts, together with the revival of the property market, deals have started to increase and market liquidity has gradually improved. Many people have become more interested in real estate projects while owners have ended their stop-loss sales. Hence, many companies envisaged the solid recovery of the property market and they rushed to acquire investment projects.

 

Mr Nguyen Dinh Trung, President of Hung Thinh Co., Ltd, said: "In essence, the purchase of investment projects owned by troubled companies which fail to continue their projects is an act of humanity, because the deals not only revitalise their projects and warm up the market but also save the sellers from the brink of bankruptcy on lack of capital and ensure employment for many people."

 

Acquisitions also bring a lot of profit for investors because investment costs may be much lower than starting on new projects. They do not have to conduct time-consuming paperwork and deal with complicated troubles arising from land clearance and compensation. Instead, they can start doing business immediately.

However, transfers are not always easy because new owners have to spend much time and effort to contact and connect old partners and build up the trust with them to continue their projects smoothly. They also have to review all customers to have satisfactory explanations to continue fundraising activities and property handovers in the future.

 

Mr Marc Townsend, Managing Director of CBRE Vietnam, said M&A is not actually the solution to settling inventories but it is a good opportunity for businesses to perform restructuring, continue their projects and even develop new ones.

 

However, he stressed, "Not all M&As are successful. Buyers have many options and they only pick up good ones. Besides, price is sometimes not the deciding factor but the similarity of development orientations between buyers and sellers. Indeed, M&As depend on many factors like price, location, legality and insider sentiment.”

 

According to economists, M&As have helped the market to eradicate ailing businesses and make experienced, strong businesses more powerful. This benefits the real estate market and homebuyers in the long term, and strengthens market stability.