Private equity blossoms in Vietnam

News and opinion on finance

In the world of Vietnamese private equity, everyone is on the prowl for the next Mobile World. When Ho Chi Minh City-based Mekong Capital shelled out $3.5 million for a 35% stake in the firm in 2007, it was just one of thousands of shops selling early-era cellular phones and assorted electrical goods.

Vietnam’s economy was starting to buzz, but private equity struggled to find good, young, well-run and undervalued companies in which to invest. Mekong clearly liked Mobile World’s management, led by co-founders Tran Le Quan and current group chief executive Nguyen Duc Tai, and the cheerful yellow-on-black colour scheme in its stores.

Led by co-founder and partner Chris Freund, Mekong had presumably also noticed the sharp rise in the use of mobile phones. In 2005, just 11 out of 100 citizens had a mobile; within two years, that number had jumped to 52, according to data from Hamburg-based research firm Statista.

Fragmented frustration

In the past, private equity investors entered Vietnam with their eyes open. They knew the state controlled a host of sectors, from cigarette imports to the sale of fireworks. Other industries wore a welcome sign. 

The problem was, they were often staggeringly fragmented. The challenge was to consolidate a sector or service and become its leader. Succeed, and you were likely to make a lot of money.

That’s just what Mobile World did. Today its main brand, The Gioi Di Dong, is Vietnam’s largest retail chain for mobile devices, with more than 1,300 mobile phone stores as well as 700 shops selling consumer electronics. It also has a grocery division, Bach Hoa Xanh, and an e-commerce platform,, launched in 2016. 

This is an important step forward for the industry 

 – An investor

The investment also made Mekong Capital very wealthy. Its Mekong Enterprise Fund II made a full exit of Mobile World in January this year, selling its final block of five million shares at D165,000 ($7.07) apiece. That amounted to a cumulative net profit of $199.4 million and a 57-times return on its original investment.

Its stake was bought by Creador, a Malaysia-based private equity firm focused on investments in southeast Asia and south Asia, which opened its first office in Ho Chi Minh City in February this year. It aims to channel at least 15% of the capital raised in its $450 million Creador IV fund into local deals.

So where is the next Mobile World? Some private equity investors in Ho Chi Minh City point to Pharmacity, the country’s largest pharmacy chain, which aims to open 500 drugstores by 2023. Others highlight ABA Cooltrans, which provides temperature-controlled transport and which aims to consolidate the logistics space. “That’s another Mekong investment,” grumbles a fund manager.


And what is the general outlook for private equity in one of Asia’s fastest-growing economies? 

Grant Thornton, the London-based professional services firm, points to several sectors that are likely to provide ample investment opportunities in Vietnam in the years ahead, in a report published in April. 

Food and beverage, healthcare, pharmaceuticals and retail all stand to benefit from a burgeoning economy and rising levels of income and urbanization. 

Boston Consulting Group reckons the number of middle-class and affluent consumers in Vietnam will rise from 12 million in 2013 to 33 million in 2020. Renewable energy should also attract a “good level of investment”, the Grant Thornton report adds, due to government incentives that aim to channel capital into the sector.

Another sector to look out for is education, with more wealthy families able to afford private tutoring, schooling and English-language training. A host of private equity-backed deals have peppered the market over the last two years. 

In July 2017, EQT, a Stockholm-based group of 27 funds with €50 billion in raised capital, bought a stake in English teaching service ILA Vietnam for an undisclosed sum.

The next month, Mekong Capital acquired a minority stake in Yola, a provider of content-based English training programmes, for $4.9 million. Last October, Mekong – again – sold its stake in Vietnam Australia International School (VAS) to US buyout giant TPG Capital, for $25 million. 

Mekong invested $6 million in VAS in April 2010, helping the firm to develop into a network of campuses with 6,300 students.

Digital commerce is another target for buyout firms. In August this year, a consortium including Japan’s Daiwa PI Partners and SoftBank Ventures Korea invested $51 million in online marketplace Sendo Technology, a division of FPT Corporation, Vietnam’s largest e-commerce retailer. Sendo said it will use the funds to boost sales to $1 billion by 2020.

Investors are also eyeing government efforts to sell stakes in state enterprises. Hanoi raised $6.4 billion in 2017 by divesting shares in companies including brewer Sabeco and dairy producer Vinamilk, according to data from the State Capital Investment Corporation, a government fund that manages most of Vietnam’s listed state firms.

“This is an important step forward for the industry,” notes one investor. “For years, the problem in Vietnam was there weren’t enough big firms – sure things – to invest in. As the state divests more, those opportunities will present themselves.”