Mergers and Acquisitions (M&A) are becoming increasingly popular in the Vietnamese market in recent years, with the number and value of M&A transactions growing and reaching significant milestones compared to previous years. Below is a presentation of some of our practical perspectives on conducting M&A Transactions in the Vietnamese market over the past period.
Mergers and Acquisitions (M&A) are becoming increasingly popular in the Vietnamese market in recent years, with the number and value of M&A transactions growing and reaching significant milestones compared to previous years. Below is a presentation of some of our practical perspectives on conducting M&A Transactions in the Vietnamese market over the past period.
How do investors understand Mergers and Acquisitions (M&A)?
M&A is essentially the purchase, sale, and merger in a narrow sense, but a broader understanding of mergers and acquisitions will exist in the following forms:
- Acquiring shares/capital contributions from existing shareholders/company members, owners;
- Investing to purchase shares/capital contributions newly issued by the Target Enterprise to become a shareholder/capital contributing member;
- Combining both (1) and (2);
- Acquiring assets or business divisions of the Target Enterprise;
- Through forms such as mergers, consolidations, divisions, separations of enterprises; and/or
- Combining all of the above forms.
Các nhà đầu tư có thể xem xét việc sở hữu Doanh Nghiệp Mục Tiêu theo các hình thức nói trên để cuối cùng có thể giành được quyền kiểm soát, quyền sở hữu nhất định trong Doanh Nghiệp Mục Tiêu.
Benefits of Mergers and Acquisitions (M&A)
Mergers and Acquisitions (M&A) bring many benefits to both the buyer and the seller:
- Buyer: Market expansion, acquisition of new technology, strengthening of competitiveness, cost savings, rapid access to resources.
- Seller: Escape from financial difficulties, increase in enterprise value, enhancement of reputation, opportunities for cooperative development.
How are Mergers and Acquisitions (M&A) consulting services conducted?
Typically, a standardized M&A transaction begins with the stage of exploring the intentions of each party, and non-binding items are exchanged between the parties (specifically, Letters of Intent, Term Sheets, Memorandums of Understanding (MOU), Non-Binding Offers).
Subsequently, the parties will proceed with the M&A Transaction process by conducting due diligence, valuing the transaction, and developing a suitable transaction structure. Experienced and specialized teams of experts will carry out these tasks and act as a bridge to help the parties reach the signing of transaction documents
Due diligence is an opportunity for the seller and investor to identify issues within their enterprise and decide whether to proceed with the M&A transaction, and to request the Target Enterprise to address and rectify any serious issues before signing the relevant transaction contracts.
Finally, the parties will proceed to sign the relevant transaction agreements in accordance with the agreed-upon transaction structure and carry out the relevant legal procedures to register the buyer as a shareholder/capital contributing member or owner of the Target Enterprise.
Mergers and Acquisitions (M&A) Transactions Through the Lens of Vietnamese Law
Based on the experience of IVLF Advisors LLC, conducting M&A transactions in Vietnam, including domestic and foreign-invested transactions, typically involves various legal regulations, including the Enterprise Law 2020, Investment Law 2020, Securities Law 2019 (applicable to public companies, listed companies), Labor Code 2019, Competition Law 2018, WTO Commitments, and relevant specialized legal guidelines.
M&A Approvals consulting services for Foreign Investors
For foreign investors, conducting M&A Transactions in Vietnam requires approval from the local Department of Planning and Investment, allowing them to acquire shares or capital contributions in Vietnamese enterprises ("M&A Approvalbefore proceeding with M&A Transactions with the seller or participating in investments in Vietnamese enterprises ("Target Enterprises”).
If the foreign ownership ratio increases to over 50% in a Vietnamese enterprise through the acquisition of shares/capital contributions or through investment transactions leading to an increase in foreign ownership in the Target Enterprise to over 50%, obtaining M&A Approval is mandatory before conducting the M&A transaction in the Target Enterprise.
In some other cases, when foreign investors acquire shares/capital contributions in the Target Enterprise but do not increase the foreign ownership ratio in the Target Enterprise to over 50%, some local investment registration authorities also require the Target Enterprise to obtain M&A Approval before implementing the M&A transaction.
Differences for Mergers and Acquisitions (M&A) Transactions Without Foreign Investors
For M&A transactions without foreign elements, the procedure for obtaining M&A Approval is not required. However, for certain specialized industries, before conducting M&A transactions, these enterprises must obtain approval from the competent authorities before conducting the M&A transaction, such as the State Bank of Vietnam, the Ministry of Finance, and the State Securities Commission.
Concerns After Obtaining Mergers and Acquisitions (M&A) Related Approvals
After obtaining approval to conduct the M&A transaction, the parties will sign appropriate contracts and submit documents to the local Business Registration Office to carry out procedures related to the change of capital contributing members, owners (if it is a limited liability company), notify shareholders who are foreign investors and their capital representatives at the Target Enterprise (if it is a joint-stock company), and change the charter capital if investing capital into the Target Enterprise.
Competition Law Significantly Impacts M&A Transactions
In some transactions with a value of 1,000 billion VND or more, or reaching thresholds that require notification of economic concentration, the parties must carry out the procedure of Notifying Economic Concentration with the National Competition Commission before proceeding with the signing of contracts and completing the M&A transaction. This leads to the completion of the M&A Transaction being delayed or interrupted due to waiting for approval from the National Competition Commission on whether the M&A Transaction is allowed to proceed.
Which Parts of M&A Transactions Can Affect Employee Employment?
In some M&A transactions, the parties involved also need to consider the personnel resolution plan within the Target Enterprise before the investor takes over the management of the Target Enterprise, and simultaneously resolve the benefits for employees upon mass termination of labor contracts with personnel within the Target Enterprise.
Conclusion on M&A Transactions
In general, conducting M&A transactions involves many strict legal regulations and requires the parties to consider carefully before proceeding with the M&A Transaction into the Target Enterprise.
IVLF's M&A consulting services :
IVLF is a professional M&A consulting firm with a team of experienced experts who have a deep understanding of law and the market.
IVLF Services Include:
- M&A strategic consulting
- Enterprise due diligence and valuation
- Contract drafting and negotiation
- Legal procedure support
IVLF is committed to providing clients with:
- Optimal M&A Solutions: Tailored to the goals and needs of clients
- Professional Process: Ensuring transparency, efficiency, and confidentiality
- Added Value: Supporting clients in achieving their business objectives
Contact IVLF for consultation and support in M&A transactions!
