Mergers and Acquisitions in Vietnam

Mergers and acquisitions (M&A) have emerged as critical strategies for companies aiming to expand their horizons and strengthen their market positions. Mergers and acquisitions are two of the most misunderstood business concepts. Both expressions frequently relate to the merger of two businesses, but there are significant distinctions as such:

Contributing Advisor

Tam Nguyen

Senior Manager, Business Advisory Services

• A merger occurs when two independent organizations join forces to form a new, united entity;
• An acquisition is the purchase of one entity by another.

While a merger refers to "combining," acquisition refers to "acquiring."

Regulation about mergers and acquisition in Vietnam

Mergers and Acquisitions in Vietnam are primarily governed by two laws:

• the Enterprise Law; and
• the Investment Law.

M&As are also governed in a lesser extent by the Law on Competition and the Law on Securities. The Law on Enterprise No. 68-2014-QH13 and the Law on Investment No. 67-2014-QH13 clarify the law on mergers and acquisitions:

The Law on Enterprise No. 59/2020/QH14 (amended and supplemented under Law No. 76/2025/QH15)

• Article 187 affirms the rights of individuals and organizations to establish businesses, acquire shares, and contribute capital. The 2025 amendment introduces stricter exclusions, including:
  • Government officials, civil servants, and public employees, except those involved in science, technology, and innovation sectors.
  • Minors and individuals lacking legal capacity.
  • Persons under criminal investigation or serving sentences.
• Article 195 governs merger procedures. In case of potential conflict with the Law on Competition, the legal representative must coordinate with the competition authority. After the merger:
  • The newly formed entity must update the National Enterprise Registration Database.
  • The law also introduces post-registration oversight, replacing some pre-approval steps to streamline procedures.

The Law on Investment No. 61/2020/QH14 (amended and supplemented under Law No. 90/2025/QH15)

• Article 25 confirms the rights of foreign investors to contribute capital and purchase shares or stakes in Vietnamese enterprises. Law No. 90 expands eligibility for investment incentives to strategic sectors such as:
  • Digital infrastructure (e.g., data centers, cloud, 5G),
  • Semiconductors and AI,
  • High-tech human resource training,
  • Public transport and urban infrastructure.
• Article 26 outlines the capital contribution and share acquisition procedures. Key updates include:
  • Foreign investors may now establish economic entities before completing Investment Registration Certificate (IRC) procedures for strategic projects.
  • The Department of Planning and Investment must approve registration if:
    • Ownership exceeds 50 percent of charter capital,
    • Investment involves restricted sectors or sensitive geographic areas (e.g., border zones).
  • Required documents include:
    • Registration form,
    • Legal documents of involved parties,
    • Agreement in principle,
    • Land use rights certificate (if applicable).

M&A transactions limitation

The process of mergers and acquisitions (M&A) in Vietnam presents several unique challenges and limitations, each dependent on the nature of the transaction—whether it's a merger or an acquisition.

A notable change in the regulatory landscape is the removal of the 50 percent market share threshold as a criterion for approval of M&A transactions. The current measure focuses on whether the transaction creates or has the potential to create significant competition-restraining impacts in the Vietnamese market. Any M&A transaction that is deemed to have such an impact is prohibited.

National vs. local authorities in M&A approval

Impact of the Law on Investment 2020 on M&A procedures

The Law on Investment 2020 introduced several changes that impact M&A procedures in Vietnam. One significant change is the decentralization of certain approval processes, granting more authority to local bodies. This shift aims to streamline administrative procedures, reduce bureaucratic delays, and enhance the efficiency of M&A transactions.

The law also emphasizes transparency and investor protection, requiring stricter disclosure of information and ensuring that both national and local authorities adhere to consistent standards. These reforms are designed to create a more conducive environment for investment, fostering greater confidence among domestic and foreign investors alike.

National vs. local authorities

M&A approvals involve interactions with both national and local authorities, each playing distinct roles in the process. National authorities, such as the Ministry of Finance (MOF) and the State Securities Commission (SSC), oversee the broader regulatory framework and policies related to M&A activities. National authorities have a strategic role in the M&A approval process, focusing on the macro-level governance of investment activities.

Key responsibilities include:

• Provincial Department of Finance, Provincial Industrial Zone/Economic Zone Management Authority (IZMA)(DOF) are the bodies that responsible for assessing and issuing the Investment Registration Certificate (IRC), which is essential for foreign investors. The Ministry of Finance OF  provides guidance on national investment policies and ensures compliance with the Law on Investment and other relevant laws.
• State Securities Commission (SSC) regulates the securities market, ensuring transparency and fairness in public company M&A transactions. It oversees the disclosure of information, monitors trading activities, and enforces regulations to prevent market manipulation and protect investors.
• Tax Authority plays a significant role in financial oversight and regulation, particularly concerning tax policies and financial reporting standards that impact M&A transactions.

Local authorities, including provincial Departments of Planning and Investment (DPI), handle region-specific aspects of M&A transactions, ensuring that local regulations and conditions are met. Local authorities focus on the practical implementation and enforcement of M&A regulations within their respective regions. Their responsibilities include:

• Provincial Departments of Fiance (DOF ) are responsible for issuing the Enterprise Registration Certificate (ERC) for new business entities and facilitating local investment projects. They ensure that M&A activities align with regional development plans and comply with local regulations.
• Provincial People’s Committees (PPC) have the authority to approve certain investment projects and provide support for infrastructure and land use planning relevant to M&A transactions. They play a crucial role in resolving regional issues that may arise during the M&A process.
• Local Tax Authorities oversee the local tax compliance of businesses involved in M&A transactions, ensuring adherence to regional tax laws and regulations.

M&A transaction types in Vietnam

Acquisition of shares or capital contribution

This is the most prevalent type of M&A transaction in which the buyer acquires control of the target company. This can be accomplished by purchasing either primary (newly issued) or secondary (existing) shares.

All assets and obligations are transferred directly and instantly to the new shareholders, making the process relatively simple. The seller and buyer are not required to review every item on the asset and liability lists. As a result, managing such M&A transactions saves both parties time and money.

However, it also has drawbacks. The buyer automatically "inherits" all financial liabilities and may face unforeseen conflicts or compliance concerns. As a result, it is critical to have expert agencies in charge of due diligence to ensure transparency and foresee potential hazards of the target company.

Assets purchases

The buyer uses this strategy to acquire assets from the target company and incorporate them into an already licensed entity. This is prevalent in asset-heavy industries (such as energy, manufacturing, or logistics) or when the buyer is primarily interested in acquiring the target company's business division (unit).

This method allows the buyer to be flexible in selecting the necessary assets to acquire while avoiding the acquisition of extraneous assets such as financial liabilities. The process of purchasing each asset, on the other hand, will be time-consuming, with various documentation required for each asset type.

Another area for improvement with this form of M&A is valuation, especially when it comes to intangible assets. It is also advised that investors plan for a very high tax rate (as much as 20 percent) on the purchase of the property.

Merger or consolidation

The target firm transfers all its properties, labor rights, liabilities, and legitimate interests to another company during a merger or consolidation. Once completed, the target company ceases all operations.

The most significant element to consider in this form of M&A is the clash of cultures between the two (or more) merging organizations. How to balance the interests of all stakeholders (shareholders, employees, or management team) is also an important decision to maintain the smooth running of the merged company.

Requirements and practices of different local authorities

Below, are a summary of requirements and procedures for M&A approvals across five key Vietnamese provinces: Ho Chi Minh City, Hanoi, Da Nang, Dong Nai, and Binh Duong.

Requirements:

• Investment Registration Certificate (IRC);
• Enterprise Registration Certificate (ERC);
• Approval from the Competition Authority; and,
• Sector-Specific Licenses.

Common practices and procedures:

• Dedicated M&A support units: Specialized units assist with M&A procedures, providing guidance and paperwork facilitation.
• Online application systems: Digital systems for IRC and ERC applications enhance efficiency and accessibility.
• Local consultations: Engaging with local experts provides valuable insights into the regulatory environment.
• Public disclosure requirements: Strict requirements to publish transaction details in local newspapers and notify stakeholders.
• Inter-agency coordination: Collaboration with tax and competition authorities ensures comprehensive transaction reviews.

The process and stages of M&A

Preliminary analysis and due diligence

Companies should clearly define their objectives for the merger, such as expanding market reach, acquiring new technologies, or enhancing operational efficiencies. This involves a thorough review of the companies' financial, legal, and operational aspects. It's crucial to identify any potential risks or liabilities.

Negotiation and drafting of the M&A agreement

The parties negotiate the merger terms, including valuation, structure, and post-merger operations. Legal representatives draft a M&A  agreement that outlines the terms and conditions agreed upon during negotiations.

Approval from shareholders

Each company must hold a shareholders' meeting to vote on the proposed merger/acquisition. A merger requires shareholders' approval, typically needing a supermajority vote.

Regulatory approvals and compliance

Regulatory approval from competition authorities or sector-specific regulators may be required depending on the size of the merger and the sectors involved. For public and listed companies, compliance with the laws on securities is mandatory.

Public announcement

The merger must be publicly announced to shareholders, stakeholders, and, in some cases, the public.

Integration planning

This plan should detail how the merging companies will combine operations, staff, technologies, and cultures.

Implementation

This involves legally consolidating the companies into a single entity transferring assets, rights, and obligations.

Post-merger integration

The newly formed company begins the process of integrating its operations, which can involve organizational restructuring, combining technology systems, and aligning corporate cultures.

Monitoring and adjustments

Continuous monitoring ensures that the merger achieves its intended goals. Adjustments may be required to address unforeseen challenges or to better align with strategic objectives.

Each merger is unique, and the process can vary based on the specific circumstances and sectors involved. It's important to consult with legal and financial experts familiar with Vietnamese laws and regulations to navigate this complex process effectively.

Takeover bid

Under the Securities Law, executing a tender offer is often mandatory when acquiring secondary shares in a publicly listed company, a measure designed to uphold fairness among current shareholders.

A tender offer becomes necessary in an M&A deal when an investor's shareholding in a company increases from below 25 percent to over 25 percent. A tender offer is also required if an investor already holds more than 25 percent and aims to increase their stake to thresholds like 35 percent, 45 percent, 55 percent, and more.

However, there are exceptions to this rule, particularly in scenarios where fairness is already established in the share acquisition process. This exemption applies, for instance, when buying newly issued shares from the company or secondary shares that have received the Board's approval.

Foreign equity limit

Foreign investment in several Vietnamese industries faces ownership restrictions.

Therefore, foreign investors must engage with local experts and conduct comprehensive research before initiating M&A activities in Vietnam. Neglecting this due diligence could lead to substantial financial and resource losses due to potential regulatory non-compliance.

For instance, foreign ownership in Vietnamese commercial banks is capped at 30 percent in the banking sector. An individual foreign investor can only hold a maximum of 5 percent in a Vietnamese financial institution, while foreign organizations are limited to 15 percent, except for strategic investors, who are allowed up to 20 percent.

Similarly, ownership limitations are also in place in the logistics sector, which attracts considerable foreign interest. Foreign investors can hold a maximum of 49 percent in companies that offer sea freight or inland waterway transportation services. This cap varies for other transportation services, ranging from 49 percent to 51 percent, based on the specific type of business.

Veto right

Evaluating the power of veto in joint-stock companies (JSCs) is essential. Under the Enterprise Law, significant decisions by the Board demand the backing of at least 65 percent of shareholders. This implies that any shareholder holding over 35 percent of a JSC can reject key resolutions, including alterations in business operations, management structure changes, and sanctioning the sale of projects or assets that constitute over 35 percent of the company’s total assets.

When considering the acquisition of a JSC in Vietnam, understanding this veto power is crucial. A pivotal threshold is holding either 35 percent or 65 percent of a company’s shares. It enables investors to limit their capital investment while maintaining influence over major strategic decisions. Moreover, this arrangement can help a strategic investor circumvent interference from minority shareholders while minimizing their investment, needing only a 65 percent stake.