The market of merger and acquisition in Vietnam recorded stable growth over the years. Many foreign investors use mergers and acquisitions, or M&A, to gain quick entry into this dynamic market with more than 97 million people.
The Vietnamese government is continuously pursuing to create a more business-friendly environment for foreign direct investments through policy reforms.
The M&A market in Vietnam will keep flourishing during 2020 and the years to come due to the positive outlooks supported by statistics. According to AVM Vietnam, the total value of mergers and acquisitions deals in Vietnam in the first half of 2019 recorded at US$1.9 billion. In 2018, 41.4% growth of M&A transactions was recorded with a total value of US$7.64 billion, compared to the previous year.
Some of the biggest Vietnam’s M&A transactions in 2019 are SK Group, Vingroup, and Masan; Saigon Co.op and Auchan; Truong Hai and HAGL; Vingroup, Fivimart, and Hanwa; Mitsui and Minh Phu; Taisho and Hau Giang Pharmaceutical; GTNfoods and Vinamilk; Sojitz and The Pan Group; Gelex and Viglacera; SonKim Land and its strategic partners.
In a merger and acquisition process, business owners shall look into due diligence and contract procedure carefully to minimise the potential risks.
In this article, our specialists have prepared some important aspects regarding M&A due diligence and contract for your consideration.
Important Elements in Due Diligence for Merger and Acquisition in Vietnam
A huge part of the success of your M&A in Vietnam depends on effective due diligence.
You must prudently think out the following aspects of M&A due diligence before making a decision.
1. Review all parties’ financial reports and check their cash flow to find out their financial health.
2. Verify their employment conditions. For example, the working hours, employee turnover, work culture, employee’s salaries, and benefits.
3. Evaluate company-client relationships, customer services, and customer disputes.
4. Identify the company’s competitors and define its capacity in its targeted market
5. Validate the company’s business registration, permits, and zoning compliance.
6. Investigate the company image and its reputation
7. Check the business location to make sure the location will still benefit the business in the future. For example, the availability of parking lots, the change of surrounding areas, and its accessibility.
M&A Contract is as Vital as the Due Diligence
An M&A contract holds important information about the value of a business and its potential liabilities.
Therefore, a negotiated and properly tailored contract in merger and acquisition in Vietnam is just as pivotal as an M&A due diligence.
You should include the below items in an M&A contract:
- All parties’ information such as business address, corporate name, tax number and others
- M&A terms and conditions
- Assets and financial obligations
- Commitment of all parties on the status of enterprises
- Payment time and method
- Transfer of rights and obligations
- M&A procedure and time limit
- Legal rights and obligations
- Dispute resolution terms
- Contract performance’s time limit
- Fines and violations terms
- Force majeure clause
Conduct Due Diligence for Merger and Acquisition in Vietnam with Cekindo
The due diligence process is more than just going through a standard checklist and ticking off the items.
Due diligence has to be properly performed to provide valuable insights to identify potential issues and risks at the early stage.
At Cekindo, our due diligence for merger and acquisition in Vietnam gives you the information you need to support your merger and acquisition decisions. We assure you that the costs of performing due diligence with Cekindo will far outweigh the cost of a bad merger and acquisition.
We can also assist you in drafting an M&A contract. Fill in the form below to discuss.