When doing business in Vietnam, regardless of the size of a company, the company may need company restructuring when the company grows or certain business circumstances occur.
Company restructuring may also indicate that business owners realise the necessity for a change of their business in order to expand or even survive in this ever-evolving and specialized marketplace.
When doing business in Vietnam, a company’s operation or performance which will no longer fit into its initial strategy or plan often resorts to company restructuring.
Companies utilise company restructuring in Vietnam to make crucial financial or operational adjustments. Possible reasons for company restructuring when doing business in Vietnam are listed below:
- To integrate new technology into the company
- To cut down costs and expenses
- To efficiently utilise talent and skills
- To focus on main accounts, services or products
- To enhance the business competitive edge
- To merge or join forces with another company
- To spin off a subsidiary or a group of companies
- To consolidate or reduce debt
Common Types of Company Restructuring in Vietnam
Company restructuring has two major aspects. It can mean financial restructuring due to debts or losses, or operational restructuring to enhance business performance and get rid of potential financial calamity.
A company performs financial restructuring to make changes to its financial structure in terms of debts and equity. Liquidation and dissolution, leveraged buyout, reorganisation, and stock buyback are all examples of financial restructuring.
This type of restructuring means that a company sells its product lines partially or downscale its business by closing some of its non-profitable facilities. It can also mean that the company sells its shares or capital contribution of its subsidiaries.
Operational restructuring in Vietnam has other forms comprising mergers and acquisitions (including friendly takeover and hostile takeover), workforce rearrangement or reduction, joint venture, divestiture, strategic alliance, equity carve-out, and spin-off.
Below are the descriptions of different operational and financial restructuring:
- Divestiture: A company sells almost all of the company or its business and product lines to another party to exchange for securities or cash.
- Equity Carve-Out: It is a type of initial public offering from the parent company. The parent company sells its capital contribution or shares of its subsidiary up to 20%. This could lead to dilution.
- Spin-off: The parent company establishes a new subsidiary and distributes shares of the subsidiary as stock dividends to existing shareholders. The parent company still keeps its people, assets, and intellectual property. This will not lead to dilution.
- Friendly Takeover: The company’s board of directors will listen to ideas and recommend the approval of the shareholders. The acquiring party of the target company shall offer a premium to the existing stock price to acquire and gain control of the company.
- Leveraged Buyout: A party acquires the target company through a significant amount of loan to be able to fulfill the acquisition cost.
- Hostile Takeover: The acquiring party buys shares from shareholders or purchases stocks on the public stock exchange.
Doing Business in Vietnam with Cekindo
While doing business in Vietnam, your business may not be where it was supposed to be in terms of growth and financial performance.
Whether your company is under-performing or sustains consecutive financial losses, Cekindo is here to help you in protecting your business.
Our professional consultants at Cekindo apply effective business structuring service in Vietnam to avoid imminent insolvency. We will help you solve complex business issues and provide you with suggestions for new systems, processes, and procedures to general the best possible outcome for your company.
Fill in the form below to discuss further.