M&A in the logistics industry: A strategic step to capture market share

According to the World Bank (WB), Vietnam ranks 43rd in the Logistics Performance Index (LPI) in 2023, among the top 5 countries in ASEAN. This reflects clear progress in the domestic logistics ecosystem. “Vietnam is leading the shift in production and trade flows in Southeast Asia, accounting for more than 20% of ASEAN’s total export turnover to other regions,” Mr. Yap Kwong Weng, CEO of Vietnam SuperPortTM, emphasized at the Vietnam Logistics Conference 2024.

With industry growth averaging 14-16% annually, logistics companies have great opportunities for breakthrough. The Emerging Markets Index ranking by Agility, a world-leading logistics service provider, shows Vietnam ranking 10th out of 50 emerging markets in 2023, up one place from the previous year.

Mr. Do Hoang Phuong, General Director of Bao Tin Trading and Logistics Co., Ltd., said: “This shift is a golden opportunity, but businesses need to take advantage quickly to implement digital and green transformation, or they will miss the opportunity.”

It can be said that the M&A trend in Vietnam’s logistics industry is emerging as an attractive strategic choice for international investors who want to quickly enter and establish a solid foothold in this potential market. Instead of building from scratch, acquiring or cooperating with domestic enterprises with existing infrastructure is an effective way to avoid complicated procedures, reduce time, and save significant costs.

According to the latest data from the Foreign Investment Agency (Ministry of Planning and Investment), as of September 30, 2024, the total registered capital of foreign investment projects in Vietnam, including various sectors, has reached over $24.78 billion, up 11.6% compared to the same period last year. Of this, actual capital invested in projects reached about $17.3 billion, up 8.9%. Although this figure is not entirely for the logistics industry, it shows the level of interest and attraction of the Vietnamese market to international investors, including in logistics.

Explaining further about international investors’ strategy, Mr. Dinh Hoai Nam, Business Development Director of SLP Vietnam, said: “We prioritize acquiring companies with existing land funds because it helps avoid complicated processes like project licensing or site clearance. This is the optimal way to establish a solid position while effectively utilizing existing resources.”

This shows that Vietnam’s logistics industry is becoming more dynamic than ever. International investors are ready to invest heavily to participate in the market, creating fierce competitive pressure for domestic enterprises, which are still facing many challenges in scaling up and maintaining advantages.

Domestic Enterprises Need to Change

M&A has many advantages for foreign investors, helping them quickly access the market and utilize existing infrastructure while reducing legal barriers in the context of complex administrative procedures in Vietnam. “Logistics is the backbone industry and supply chain optimization is key to reducing costs and increasing efficiency. Accordingly, M&A helps us save startup time and costs,” Mr. Yap Kwong Weng further explained.

With this potential, Vietnam’s logistics industry attracts many foreign investors. This also poses challenges for domestic enterprises when competing with foreign rivals. Deputy Minister of Planning and Investment Do Thanh Trung admitted: “Policies and institutions for the industry are not yet synchronized. Logistics enterprises face difficulties in capital, lack experience and high-quality human resources, making it difficult to scale up and compete with foreign enterprises.”

Mr. Dinh Thanh Son, Deputy General Director of Viettel Post Corporation, also shared: “Many domestic companies were acquired before they could grow. They lack experience in negotiation, financial analysis, and this increases the risk of M&A.”

To maintain competitiveness and sustainable development, many opinions suggest that logistics enterprises need to focus on digital transformation and sustainable development. Mr. Cao Hong Phong, Deputy General Director of Gemalink Port, said: “Gemalink has conducted annual greenhouse gas emission inventories and switched to renewable energy use. These are necessary steps to develop smart and sustainable ports.” Gemalink Port currently plays an important role in connecting trade between Vietnam and major markets like the US and Europe, with Phase 2A expected to begin construction from 2026.

According to Mr. Do Hoang Phuong, applying technology in operations management helps save long-term costs. “We have invested heavily in automation, from fleet management to route tracking to reduce transportation time and limit waste, not only creating competitive advantages in the international market,” Mr. Phuong said.

However, to support logistics enterprises’ sustainable development, the Government needs to simplify administrative procedures and create conditions for investors. Deputy Minister Do Thanh Trung called: “We need input from businesses to improve policies, create more favorable conditions for the logistics industry; at the same time, there needs to be cooperation between management agencies and businesses to overcome challenges and develop more strongly.”

Discussing this issue further, Mr. Le Tuan Anh, Director of the Department of Industrial and Service Economics (Ministry of Planning and Investment) shared: “Vietnam is amending a series of policies to strengthen decentralization and improve infrastructure, including the North-South high-speed railway and road system. These changes will help strengthen connectivity and reduce logistics costs, creating a foundation for sustainable development in the future.”