How To Conduct Legal Due Diligence for M&A in Vietnam?

Mergers and Acquisitions (M&A) has become popular in Vietnam as the country develops and more investors are eager to invest and gain control of the business enough to engage in, decide important business matters through partial or full ownership of an enterprise.  As experience of M&A law firms in Vietnam, a successful M&A mean the parties achieve their financial and commercial goals (increasing capital, raising management capacity, branding, etc) and ensuring safety and restraint the risk at the lowest level.  The legal due diligence undertaken by law firms in Vietnam to help address the concerns.

The Importance of Legal Due Diligence of Enterprise in M&A activities

Legal due diligence of enterprises focuses on full and detailed assessment of legal issues relating to the legal entity, capital contribution status, shareholder status, legal rights and obligations. From the investigation information, the parties can anticipate legal risks, assess opportunities to come up with alternatives. In addition, legal assessments help parties evaluate the reliability of their counterparts as well as understand their advantages and constraints for the negotiation process.

What Legal Due Diligence in M&A Activities Entail?

• Evaluate the factors related to the legal status and capacity of the target enterprise: Review the legitimacy of the establishment, operation, possession of enterprise; ensure that the enterprise is not subject to procedures for dissolution or bankruptcy and compliance with the law of the enterprise in the course of operation. The information to be checked includes: dossiers, certificate of enterprise establishment, operation licenses, practice certificates, professional liability insurance, company charter, agreement between the company owner on rights of shareholders, capital contributors, minutes of meetings, member/shareholder register, certificate of capital contribution.
• Evaluate the factors related to the business and financial activities of the target enterprise: Review the system of customers and partners of the enterprise; the documents on economic contracts (with customers, suppliers, etc); dossier of investment, construction, land, project; information on guarantee, mortgage (if any), debt and credit agreement, M&A, financial leasing contract, exclusive contract, franchise, etc, in terms of value, legality, validity, progress to evaluate legal risks in the future. Review the financial statements on the accuracy of the financial status of the business.
• Verify the factors related to labor: Review labor contracts, labor agreements, internal labor regulations to determine the enterprise’s financial obligations to employees, compliance Labor law and reception of labor after the purchase or sale.
• Verify the factors related to intellectual property: Review intellectual property rights of enterprises including: trademarks, trade names, industrial designs, layout designs, business secrets, etc; the property has granted the patent/license. Review matters of infringement of intellectual property rights of other organizations, individuals or legal persons in order to anticipate the risks of being sued or claiming damages.

In addition, in an M&A deal, the acquirer should ensure that participation in capital contribution or acquisition of the target enterprise is permitted, the form of M&A implementation is in accordance with the law and the M&A deal was approved by the competent authority of each party. After that, the factors related to M&A transaction procedures and constraints and restrictions of law (if any) must be evaluated.

How M&A Law Firms in Vietnam Could Help?

M&A law firms in Vietnam play a crucial role in helping investors undertake due diligence in the country. Due diligence is a comprehensive process that potential investors go through to assess the risks and opportunities associated with an investment or acquisition. M&A law firms in Vietnam, with their understanding of law, business environment, and cultures, can provide valuable assistance in the following ways:

Legal Expertise: M&A law firm in Vietnam have a deep understanding of Vietnam laws and regulations governing mergers, acquisitions, and foreign investments. They can ensure that the investor complies with all relevant legal requirements, identify potential legal risks, and suggest strategies to mitigate them.

Identifying Risks: Vietnam’s business environment can be complex and dynamic, and there may be various hidden risks associated with an investment or acquisition. M&A law firms in Vietnam can thoroughly investigate the target company’s legal and financial records to identify potential legal liabilities, contractual obligations, and pending litigations that might impact the investor’s decision.

Cultural Understanding: Understanding the local culture is crucial for successful business transactions in Vietnam. M&A law firms in Vietnam are familiar with the Vietnamese culture can help bridge the gap between the investor and the target company, facilitating effective communication and negotiations.

Transaction Structure: M&A law firms in Vietnam can assist in determining the most suitable transaction structure based on the investor’s objectives and the target company’s characteristics. They can recommend options such as asset acquisitions, stock purchases, joint ventures, or other investment structures that align with the investor’s goals.

Deal Negotiation and Drafting: Lawyers with M&A experience can help negotiate the terms of the deal and draft the necessary legal documents, including the letter of intent, memorandum of understanding, and the final purchase agreement. They ensure that the investor’s interests are protected and that all relevant details are properly documented.

Regulatory Approvals: Vietnam has specific rules and regulations concerning foreign investments, and certain acquisitions may require approval from government authorities. M&A law firms in Vietnam can guide investors through the regulatory approval process, ensuring that all necessary permits and licenses are obtained.

Tax Implications: M&A transactions can have significant tax implications. M&A law firms in Vietnam can advise investors on the tax implications of the deal and help structure the transaction in a tax-efficient manner.

Post-Deal Integration: After the acquisition, M&A law firms in Vietnam can assist with post-merger integration, helping the investor navigate any legal issues that may arise during the integration process.

In summary, M&A law firms in Vietnam are essential for investors undertaking due diligence as they provide a comprehensive understanding of the legal landscape, navigate cultural differences, identify risks, and ensure compliance with local regulations, contributing to the overall success of the investment or acquisition.

We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest rate protection, risk mitigation and regulatory compliance while doing business in Vietnam. ANT lawyers, a law firm in Vietnam has attorneys in Hanoi, Ho Chi Minh and  Danang.