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Vietnam Market Entry Take a bold new path 2018 and beyond kpmg.com.vn
KPMG was established in Vietnam in 1994, at a time when Vietnam was reopening its doors to investment. KPMG is the largest professional services firm in Vietnam KPMG is recognised by the Ministry of Finance (MOF) with offices in Hanoi, Ho Chi Minh City, Da Nang, and and Vietnam Association of Certified Public Accountants Thanh Hoa. KPMG also has an office in Cambodia’s (VACPA) as Vietnam’s largest Audit and Advisory firm in capital city Phnom Penh. With more than 1,200 terms of revenue, partner numbers, and overall human professionals in Vietnam, KPMG is proud of its ability resources. KPMG has also received awards and accolades to deliver international standard professional services from the Vietnamese government for its contribution to the encompassing: nation’s audit, tax, legal and advisory professions. • Audit As a leader in the professional services industry, KPMG • Tax & Legal regularly advises the Government of Vietnam and • Consulting international organisations in support of Vietnam’s reform • Deal Advisory and integration programmes. 02 Vietnam Market Entry
Table of contents
Why Market Entry Market Entry
Vietnam? Group Process
04 05 06
Market Entry Tax and Legal Deal
Strategy Analysis Execution
07 09 10
Post Deal Vietnam M&A Vietnam in
Support landscape numbers
11 12 14
Vietnam Market Entry 03
Why Vietnam?
The fast growing Vietnam market offers a number of attributes
that makes investing in Vietnam attractive to foreign investors:
Fast Growing Economy: Strategic location:
As one of Asia’s and the world’s fastest With large and relatively low labor
growing economies, Vietnam’s GDP is cost, Vietnam remains one of the most
at a 10-year high of 6.8% in 2017. attractive locations for foreign investors.
The Mekong Region (including
Thailand, Cambodia, Laos, Myanmar
and the southern provinces of China)
provides access to an affluent market
Integration to Global Economy: of over 250 million people.
Vietnam’s participation in numerous
FTAs has attracted foreign investments
in the recent years. This helps to
provide a Market Entry alternative for
both new and existing participants.
04 Vietnam Market Entry
Market Entry Group
We have responded to the
need for comprehensive,
reliable and quality Market
Entry support through
compiling a team of
professionals drawn
from KPMG’s Tax, Legal
& Advisory divisions in
Ho Chi Minh City and Hanoi.
The 2018 Economic Scenarios Conference Breakthrough Opportunity
For Business Growth in March, 2018 in HCM City
Warrick Cleine
KPMG’s Chairman and CEO Warrick Cleine (first from the right),
Dr. Vu Tien Loc, Chairman and President of VCCI (second from the left).
Chairman & CEO
KPMG in Vietnam and Cambodia Our experts come from various Where necessary and appropriate,
backgrounds including accounting, KPMG will work with external
finance and law. They work together in partners, including Vietnamese
order to share ideas and add value to consulting firms, to ensure the
your business. success of Market Entry projects.
The mission of this group is to provide Whether providing a comprehensive
international standard services to “turnkey” market entry solution,
potential market participants. The or addressing a specific issue or
group acts as a bridge between problem in support of a larger
participants and Vietnam’s authorities project, KPMG has the resources
and trading partners, providing and expertise to provide dedicated
intelligence, advice and support professional support to entities
regarding Vietnamese regulatory, exploring, entering or altering their
financial and commercial issues. presence in the Vietnamese market.
Vietnam Market Entry 05
Market Entry Process
KPMG’s Market Entry Understanding the market landscape is a key requirement
process recognises for potential investors in strategic decision making.
that the key to a Market due diligence
successful project is We will provide advice on your proposed business activities, including the options
available under Vietnamese investment regulations and international commitments.
rigorous enterprise,
and industry-specific Regional and location analysis
research and analysis, Our expertise permits us to provide you specific advice concerning the geographical
areas attracting investments incentives.
before decisions and
commitments are made. Corporate intelligence / Background check
This applies whether Our research team can provide market, government and competitor intelligence,
relevant to your business decision.
the Market Entry is
conducted by way of an
acquisition, greenfield Pre-Licensing
PHASE
investment, or third party MARKET ENTRY STRATEGY
contractual arrangement. TAX & LEGAL ANALYSIS
PHASE
Deal Execution
GREEN FIELD OR DEAL
PHASE
Post-Deal
POST DEAL SUPPORT
06 Vietnam Market Entry
Market Entry Strategy
The Strategy team’s multi-disciplinary business partner inVietnam by evaluating
and industry- focused professionals their business licence, operations,
work on both local and cross-border and financial situation, as well as the
transactions, drawing upon KPMG’s reputation of the management team.
Our Strategy team global network of industry specialists
to advise on specific deal issues. We Commercial due diligence (CDD):
advises clients on the bring you the right mix of strategy skills,
commercial knowledge and practical
When you wish to enter the market
through acquiring an existing market
issues that influence their deal experience, whether you are
considering an acquisition, expansion,
player (‘the target’), we will assist you
in the decision-making process by
investment decisions. divestment, merger, joint venture,
100% foreign invested enterprise or
conducting a CDD. In short, a CDD is
the process of evaluating a target in
other strategic alliances. reference to its market and, above all,
We offer a range of services across whether the company is positioned
the deal spectrum from pre-deal to succeed. We tackle the key issues
investigations to post-transaction such as market conditions and outlook,
advisory. We highlight some of our key macroeconomic influences, industry
structure, regulatory environment,
Dr. Nguyen Cong Ai services below:
competitive position and relationships
Senior Partner Market due diligence with key customers and suppliers.
Head of Market Entry With your planned investment in mind, Most importantly, we will challenge
KPMG in Vietnam we study the market size and growth the target company’s forecast growth
potential, regulatory and competitive assumptions in light of market changes.
environment, key drivers and possible
future developments in detail. We help Regional and location analysis
you assess the attractiveness of the The process of choosing the right
industry and evaluate whether the location for your operation can be tricky.
opportunity is realistic as you build a Not only will you have to consider the
strategy to enter or expand in the market. costs involved, but also the plethora
of regulatory complications of each
Corporate intelligence /
province or locality. We can help
background check
you analyse and develop a series of
Keeping in mind that having the right financial and non-financial elements
partner in a new market is the key for the specific factors that drive your
to success, we help you assess your investment decision.
Vietnam Market Entry 07
Japanese Desk: Korean Desk:
Kanaoka Hidehiro (HCM) Won Il (HCM)
hidehirokanaoka@kpmg.com.vn ilwon@kpmg.com.vn
Taninaka Yasuhisa (HN) Park Song Hak (HN)
yasuhisataninaka@kpmg.com.vn hakpark@kpmg.com.vn
Chinese Desk: Thai Desk:
Jiahuey Ji Phakkhanit Daengsupha
jiahueyji@kpmg.com.vn dphakkhanit@kpmg.com.vn
Profit and capital repatriation strategies
FDI By Sector in 2017
Profits can generally be repatriated, so
long as all applicable taxes are paid and
regulatory requirements are met. Energy and Resources
Our research is conducted confidentially, $9,751 million of total capital,
and reports can be provided in English, 27 new projects and $79
Japanese, Chinese or Vietnamese. million of increased capital
Target identification and analysis
Real estate and Construction
When you wish to enter the market
through acquiring an existing market $2,875 million of total capital,
player, we will help you in identifying a 199 new projects and $417 million
list of potential targets that may meet of increased capital
your investment criteria. We will then
make initial contact with the potential Industrial Manufacturing
targets to gain more information on $2,860 million of total
their view on the potential investment capital, 396 new projects
opportunity, as well as to obtain more and $1,117 million of
detailed information on the targets’ increased capital
business. We will then report the results 13%
of the discussion to you for your further Textile and Garment
consideration.
$1,525 million of 13%
Labour issues total capital, 191 new
projects and $1,911
Our consultants can advise you on salary
million of increased FDI by
requirements, social security, pensions,
capital 7% sector 2017
and unemployment and health insurance.
In 2018, obtaining a work permit for
Electronics (in $) 46%
foreigners has become more and more 5%
difficult and time consuming, due to the $1,048 million of
more stringent regulations as well as total capital, 182
stricter licensing practice applied by the new projects and 16%
local labour authorities in the past few $3,133 million of
years. Our consultants can assist you to increased capital
obtain a work permit.
Other
FDI By Country in 2017 (by value)
Japan 37% South Korea 19% Singapore 16%
China 7% Hong Kong 4% Others 17%
08 Vietnam Market Entry
Tax and Legal Analysis
The purpose of our Pre-Entry Issues Advice is to ensure that
decisions and market entry plans are made based on all
available information to avoid any surprises, and covers:
KPMG can provide
Deal structuring and corporate Employee issues
comprehensive analysis structuring options This includes employing a foreign and
and advice on the We analyse, and provide you with, a
set of alternative structures for your
local labour force, and associated tax and
immigration issues.
regulatory, commercial deal and business presence in Vietnam.
In our analysis, we will highlight the Profit and capital repatriation
advantages and disadvantages of each strategies:
and practical issues particular structure. Foreign exchange issues, as well as
associated with entering Vietnamese tax issues
accounting and financial reporting issues
This includes going over corporate
the Vietnamese market. taxes, transaction taxes and import
and export duties. Specifically, we will
analyse and advise on ways to obtain
maximum tax incentives.
Richard Arthur Mark Business licensing issues
1 Tax Advisory firm
Stapley-Oh We will discuss the licensing body Tier
Partner, Head of Legal and licensing process, with a focus on
restrictions, conditions and procedures,
KPMG in Vietnam
and will highlight the practical issues
associated with the process. International Tax Review, 2017
This service can include “anonymous” discussions with, or formal approaches to,
the relevant authorities to assess their attitude or approach in respect of uncertain
or contentious issues.
Vietnam
Leadership
Marketinsight
Entry 09
Deal Execution
Which approach is taken in the licensing or deal execution
phase will depend on the nature of the Market Entry
strategy adopted. Acquisitions will include comprehensive
financial, tax and commercial due diligence.
&A Professionals in
Glo
bal M 201
7 Commercial due diligence (CDD) Licensing support
As we already mentioned, a CDD is KPMG will help you to get a clear Deal
the process of evaluating a target in Execution view of Vietnamese legal
reference to its market and, above all, requirements, licensing procedures,
Global M&A Professionals, 2017 whether the company is positioned to as well as the latest policies from the
succeed. We tackle the key issues Government by providing you with
our research and analysis of current
such as market conditions and outlook,
Year Ranking regulations tailored to your business
macroeconomic influences, industry
needs and strategy. In addition, any
structure, regulatory environment,
2017 KPMG 1st competitive position and relationships
deal made in Vietnam is subject to the
approval of the licensing authorities,
with key customers and suppliers. Our
2016 KPMG 1st whether it is an acquisition or a joint
integrated approach, which combines
venture contract. By using our well
commercial, financial and tax due
established network that includes
2015 KPMG 1st diligence services, gives you a deeper
Government agencies at various
understanding of the business.
levels, we will support our clients in the
2014 KPMG 2nd preparation of JV contracts, a feasibility
Tax and legal due diligence
study and company charter, and other
2013 KPMG 2nd A Tax and Legal due diligence helps you documents required to be included
to evaluate the potential tax liabilities of
the target by reviewing and assessing in an application file; hence, we will
2012 KPMG 1st the past, present and future tax situation follow up with the authorities until a full
of the company. Our professionals will investment licence is issued.
Source: Thomson Reuters SDC work in close co-operation with your
and Mergermarket
team and may approach the local tax Negotiation assistance
KPMG global M&A platform continue to authorities if required. We will assist you in negotiations with
be the leading choice for Deal Advisory. your target, the JV partner or licensing
Financial due diligence (FDD) authorities, making use of our thorough
KPMG’s Deal Advisory Services understanding of Vietnamese law,
professionals will assist you in culture and local expertise.This is to
evaluating the target’s financial situation ensure that you will not experience
and assessing the assumptions made in any surprises in your negotiations with
their projections. various parties in Vietnam.
KPMG also provides support in liaising with authorised translation firms in Vietnam,
obtaining domestic legalisation of foreign documentation and providing Vietnamese
contacts and liaison personnel.
10 Vietnam Market EntryPost Deal Support
To help you realise value in your deal,
our post-deal services start well before
the transaction is concluded. Building
KPMG is committed to on the pre-deal synergy evaluation,
we validate and quantify the available
synergies. Feeding these into our
ensuring the ongoing integration framework enables us to Adv
isory Firm of the Year
flag integration issues early and helps
success of projects that prepare the business for a smooth
post-deal operation from day one.The
it is associated with. The framework defines the organisational,
operational, employee, customer and
Global Sourcing Association, 2017
issue of an investment regulatory concerns that must be
addressed. We will also advise you on
licence or the conclusion of risky areas of the transition period which
could erode the value of the combined
a deal signals the start - not business going forward.
Immediate post-licensing services
the end - of a successful such as statutory establishment M&
A Ad
visory Firm of the Y
ear
public notices, tax code and official
market entry strategy. seal applications, labour issues, key
personnel registration and accounting
system registration. Our post-licensing Vietnam Ministry of Planning and
support effectively manages your Investment, 2017
John Ditty compliance effort in a timely manner
while saving your valuable time for
Managing Partner
business related work..
Head of Advisory LAZARD
KPMG in Vietnam Tax compliance as well as tax and
regulatory advisory services. Our tax
professional help our client meet the
more demanding and more complicated
requirements of the Vietnamese tax
authorities in tax compliance obligations,
including meeting the deadline for filing
tax returns, paying the right amount of tax
and enjoying the maximum tax incentives
which are available in Vietnam.
In addition to the above services, KPMG
offers Audit, Advisory,Transfer Pricing and
Customs Advisory to our clients.
Vietnam Market Entry 11Post Deal Support Adv
isory Firm of the Year
Consulting Services
It is critical that integrations or divestitures
are planned and implemented effectively
Our team works closely so that they can realize their stated goals
that led them to the transaction in the
together to help you focus first place. Companies are seldom able to
sustain an internal group to facilitate this
tnam
Largest Big 4 f
irm
Vie d Best Place To Wor ,
an k
on key questions at each whilst also maintaining business as usual.
Our Consulting Services team can provide
the necessary experience and effectively
stage of the process, support you in realizing value as quickly Ministry of Finance (2016),
as possible, while meeting statutory Alphabe (2018)
working with you to requirements.
Our professionals combine strong
overcome even the most technical capabilities with relevant industry
experience and the ability to offer practical
challenging aspects of the advice with draws on our extensive
domestic and international resources.
integration. By smoothly consolidating operations Gold
en Dragon Award
and streamlining processes during the
transaction closing process and in the
months after a merger, we can help you
Macallister, Ross realize the expected benefits of the deal. Vietnam Economic Times,
Managing Partner These benefits include both cost and 2006 - 2018
Head of Consulting Services revenue synergies related to rationalized
organization structures, consolidating
KPMG in Vietnam
back-office, information technology, supply
chain and operational functions, and
optimized sales channels.
Some of the services we provide are:
—— Integration/Divestiture Management Office services and change and
communications management
—— Preparation for “Day one”
—— Target operating model and organizational design
—— Functional integration including: Finance; IT; HR; Supply Chain; Procurement;
Sales & Marketing; Customer Services
—— Risk & Compliance
12 Vietnam Market EntryLAZARD Vietnam Market Entry 13
Vietnam M&A landscape
M&A activities in recent years focus on the investors’ penetration and expansion in
Vietnamese market. In addition, the investors are also seeking for Target companies
(“Targets”) that already have strong manufacturing capability and/or distribution network to
market their products to the 95-million-people economy.
The government is accelerating the privatization process of the State-owned Enterprises
(“SOEs”), hence, the M&A market is expected to witness more robust activities.
7 300
Value (USD billion) 6.4
6 Volume
240
222
5
176 4.4
152 173 4.0 159 180
4 3.6 155
144
3.0 2.9
3 104 120
97 2.1
2 80 71 1.8
1.5
60
1 0.8 0.6
- -
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Total deals by volume and value from 2007 – 2017
Note:
Deal value does not disclosed for a large number of transactions Source: KPMG analysis, Capital IQ, accessed on 05 January 2018
Deal means M&A and private placement transactions
A big push in the Vietnamese M&A market
The privatization of SOEs such as Sabeco and Vinamilk has been a big push for the Vietnamese M&A market and is expected to
continue in coming time with the upcoming privatization of PVOil, Genco3, Habeco, etc.
The positive macro picture of Vietnam in recent years has attracted significant cash inflow from global investors, which seek to
capitalize on the growth of middle class and consumer market.
Industrials, Consumers and Real Estate ara among the most attractive target sectors.
Consumer Staples: Packaged Foods and Meats
Industrials: Construction & Engineering
3%
Industrials
12% 10% Consumer Discretionary
Consumer Discretionary: Home Furnishing
3% Materials
Energy
13% Utilities
Others
16% Financials
2015 -1H 2016 Consumer Staples
11% Information Technology
Healthcare
7% Telecommunicatio n
2% 1% Real Estate
12% 10%
Source: KPMG analysis, Capital IQ,
Real Estate: Office & Apartment accessed on 05 January 2018
Deal volume breakdown by sector from 2007 – 2017
14 Vietnam Market EntryKey deal considerations
Japan leads with 1. Transaction process matters 4. Legal and regulatory matters
volume, Thailand Agreements/contracts (with other business Changing/inconsistent regulatory landscape
partners, suppliers and customers) that prohibit
leads with value… the Target(s) from entering the potential
Foreign ownership restrictions/limitation
The recent highlighted M&A transaction or working with other partners Nominee structures / legal and beneficial
transactions in Vietnam are the ownership
Extended, inefficient process - expect delays
government’s divestment in
Lock-up period / Right of first refusal
Sabeco; the acquisition of Big Short term business planning by the Target(s)
C Vietnam and Metro Cash & Lacking licenses and permits
Unrealistic pricing expectations / lack of basis
Carry Vietnam.
for pricing Unenforceable commercial contracts
By Volume 2007- 2017 Changing deal structure and parameters No culture of compliance
Japan 169 Contingent liabilities from commercial
2. Financial due diligence matters
Singapore 82 disputes
Two accounting books (for tax purpose and
United States 80 management purpose) Ownership to immovable property not
South Korea 52
reflected in Land-use-right
Accounting errors
Malaysia 46
Mortgaged assets / immovable property
Non-compliance with international accounting
Thailand 43 policies (e.g. IFRS) Present and future environmental
obligations
United Kingdom 34 Inadequate records, controls, governance
Denmark 26 Real underlying earnings of the business/ 5. Valuation matters
Taiwan 22 impact of one-off/non-recurring items Income approach is the primary valuation
approach for companies which generate
France 21 Related party transactions
a steady income stream that provides an
Funding - cost and availability of debt, adequate return on the capital employed
By Value (USDm) 2007- 2017 business impacts
The quality of the financial projections
Thailand 9,484 Instituting change post deal prepared by management of the Target(s)
United States 2,235 and/or Acquirer (“Management”) will
Commitments and contingencies
largely determine the robustness of the
Japan 2,120 valuation result
3. Taxation and structural matters
Singapore 1,788
Non-compliant tax practices and tax payments In order to estimate the fair value of the
France 1,176 Target(s), minority interests should be
Unreliable indication of the future rate based identified and deducted (if any)
Netherlands 895 upon historical effective tax rate
Taiwan 656 Lack of legitimate supporting documents to
Malaysia 597 determine actual deductibles
United Kingdom 570
Hong Kong 472
Source: KPMG analysis Capital IQ
Vietnam Market Entry 15Vietnam in numbers
Land area
Approximately
Population Avg annual
69.9% Inflation
330,000km²
Income
Is working age 4.1% (2017)
Capital City 93.7 million (2017)
$2,200-2,500 Average age Total FDI
Ha Noi 98.2 million (2020(f))
32 registered capital
35.9 billion
Provinces
& Cities 63
GDP Growth % GDP GDP/capita GDP by Sector New FDI projects
6.8% (2017) $220.8 $2,385 41% Service 2,591
million (2017)
33% &Industrial
(2017) Park
6.2% (2020(f)) $270.2 $2,752 Construction
million (2020(f)) (2020(f)) 15% Agriculture
Source: GSO, EIU, Worldbank
Import ($billion) 2017 Total $211.1 bilion USD
37.7 33.7 16.3 11.3 9.0
Computers, Machinery, Telephones and Textile fabrics Iron, Steel
Electronics Instruments parts thereof
35% 18% 54% 8% 11%
(year to year growth)
Export ($billion) 2017 Total $214.02 bilion USD
45.3 26.0 26.0 14.7 12.8
Telephones and Textiles, Computers, Footwears Machinery,
parts thereof Sewing products Electronics Instruments
31% 9% 36% 12% 26%
(year to year growth)
Source: Vietnam Customs
16 Vietnam Market EntryMeet our experts
Consumer & Retail Consumer & Retail
Chong Kwang Puay Ditty, John
Managing Partner Managing Partner
Infrastructure & State- Real Estate
owned enterprises Ninh, Van Hien
Partner
Do, Thi Thu Ha
Senior Partner
Private Business Financial Services
Lam, Thi Ngoc Hao
Tran, Dinh Vinh
Partner
Partner
Manufacturing Energy & Natural resources
Casihan, Nelson Ta, Hong Thai
Partner Partner
Automotive Healthcare
Hoang, Thuy Duong Treloar, Luke
Partner Director
Vietnam Market Entry 17Contact us
Hanoi
46th Floor, Keangnam Landmark 72
E6 Pham Hung Road, Me Tri Ward
Warrick Cleine South Tu Liem District, Hanoi, Vietnam
Chairman & CEO T: +84 (24) 3946 1600
KPMG in Vietnam and Cambodia F: +84 (24) 3946 1601
E: kpmghanoi@kpmg.com.vn
Ho Chi Minh City
10th Floor, Sun Wah Tower
115 Nguyen Hue Street, Ben Nghe Ward
District 1, Ho Chi Minh City, Vietnam
T: +84 (28) 3821 9266
Dr. Nguyen Cong Ai F: +84 (28) 3821 9267
Senior Partner E: kpmghcmc@kpmg.com.vn
Head of Market Entry Group
Da Nang
Unit D3, 5th Floor, Indochina RiversideTower
74 Bach Dang Street, Hai Chau 1 Ward
Hai Chau District, Da Nang, Vietnam
T: +84 (236) 351 9051
E: kpmgdanang@kpmg.com.vn
Richard Stapley-Oh
Partner
Head of Legal
The information contained herein is of a general nature and is not intended to address the circumstances of any
particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no
guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the
future. No one should act on such information without appropriate professional advice after a thorough examination of
the particular situation.
© 2018 KPMG Limited, KPMG Legal Limited, KPMG Tax and Advisory Limited, all Vietnamese one member limited
liability companies and member firms of the KPMG network of independent member firms affiliated with KPMG
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