Vietnam M&A Forum 2015

Ending the first phase 2008 – 2013, Vietnam has witnessed a wave of M&A, recognized as the first wave. The first wave took place in the context of fluctuations in the stock market, the efforts of enterprises to restructure and survive the global crisis. During this period, M&A in Vietnam grew five-fold from US $ 1 billion to $ 5 billion.

Starting in 2014, the market began to pick up the new wave, known as the second wave occurred in 5 years from 2014 to 2018: the commitment of equitization of large state-owned enterprises; the rise of the private sector companies, the interest of foreign capital flows for investment opportunities and M&A activities in Vietnam.

In 2015, after a year starting in the new wave, the business began to have specific strategies. For domestic enterprises namely “Countdown to the next market boom”. Analysts pointed out that if we do not attract foreign investment, the equitization plans of state enterprises in Vietnam will face many difficulties. Therefore, finding funds are particularly important problem. Within each business, attracting capital and gathering resources for M&A are also very important, only a handful of businesses have performed well such as Masan, Pan Pacific. Besides finding the capital, choose the opportunity to now the focus will be discussed in the forum of this M&A in 2015. In this stage, potential M&A opportunities in Vietnam are huge: Opportunities from the company are in demand selling to restructure; program opportunities from equitization of State Enterprises. However, among the number of potential opportunities, only a few of them that can bring great value to the business.

Forum M&A Vietnam 2015 will take the time to assess the trend of M&A in the vibrant sector today such as banks – financial, food and FMCG, technology and commerce, ecommerce. Besides, the issues of strategy and M&A techniques will also be discussed and shared like boom growth strategy Breakthrough, valuation in M&A.

In the framework of the Vietnam M&A Forum 2015 will be held with key activities include: Exhibition and Promotion of Investment, voting typical M&A deals and Banquet-Gala Dinner in GEM Center, HCMC 06/08/2015.

For Ticket, please click HERE

Speakers

Speakers and Panel at this year Vietnam M&A forum are Policy Makers, M&A Experts from all areas related to M&A. Especially, Mr. Hong Bui, Co-head of M&A practice from LNT & Partners will join the Panel in session 1: Policy Dialogue. With his intensive experience in handling legal side of M&A deals, he’ll definitely bring interesting points of view to the discussion.

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Agenda | VIETNAM M&A FORUM 2015

 MORNING SESSION DEALMAKERS PRIVATE MEETING

Time: 9h00 – 12h00

AFTERNOON SESSION

13:00- 14:00             Register

14:00- 14:30             Opening session –      Welcome Speech: Dr. Nguyen Anh Tuan – Vietnam Investment’s Editor-in-Chief, Head of the Organizing Committee of the Vietnam M&A Forum 2015. –      Speech by Vice Minister, Ministry of Planning & Investment.  

14:30- 15:30             TOPIC 1: POLICY DIALOGUE

–      Policy changes in recent time: New Amendment to the Investment Law and Law on Enterprise which will come into effect soon on 1 July 2015; and the Government’s policy to open room for foreign investors in many sectors. These issues will hold great interest from investment companies in Vietnam and at abroad and will be raised on the Forum this year.

Panelist:

  • Mr. Vu Bang – President, The State Securities Commission Of Vietnam (or Mr. Nguyen Thanh Long – Vice President)
  • Mr Nguyen Huu Nghia, Chief Supervisor of the SBV
  • Mr Dang Quyet Tien,Deputy Head of Corporate Finance – Ministry of Finance
  • Mr Phan Duc Hieu, Head of Business Environment and Competitiveness Department, CIEM
  • Mr. Seck Yee Chung, Partner, Baker & Mckenzie
  • Representative from Deloitte Vietnam
  • Mr. Bui Ngoc Hong, Partner, LNT & Partners
  • Dr. Nguyen Anh Tuan (Vietnam Investment Review’s Editor-in-chief, Moderator)

 15:30 – 16:00           Networking Break  

16:00 – 17:15:         TOPIC 2: PROSPECT OF NEW CAPITAL FLOW AND OPPORTUNITIES FOR THE M&A MARKET BOOM

–      Looking back on the movement of M&A capital flows into Vietnam for the last time and assess future prospect.  –      Regarding the recent policy changes (opening room, relaxing business conditions in the New Investment Law and the Lawon Enterprise…), is there a possibility for M&A market boom  in Vietnam in the following time? Evaluation of the M&A capital inflows from Japan, South Korea, Thailand, other ASEAN countries, the US and Europe?

–      Assessment of opportunities of the equitization progress when the Vietnamese government decided to open room andstrongly promote the divestment in new sectors such as seaports, airports, large-scale state-owned enterprises. What are the quality deals for international investors?  

Panelist:

  • Mr. John Ditty, Chairman, KPMG Vietnam
  • Mr.Masataka SamYoshida, Senior Managing Director, RECOF Corporation
  • Mr. Paul DiGiacomo, Managing Director, BDA Partner HongKong
  • Mr. Nguyen Vinh Tran, General Director of Jen Capital
  • Mr. Nhu Đinh Hoa, General Director, BVSC
  • Ms.Dang Pham Minh Loan, Deputy Managing Director, VinaCapital (Coordinator).

17:15– 18:30             TOPIC3: M&A EXPERIENCES AND STRATEGIES IN VIETNAM

–      Sharing experience from successful deals in Vietnam.

–      What is strategy to develop the company and expand market in Vietnam. 

–      Experience on how to optimize the selling and buying business

–      Experience on negotiating with foreign partners

–      Build and Develop business for sale, a new trend and business opportunity for Vietnamese enterprises.

Panelist:

  • Mr. Stephane Gripon, Director of Mondelez Kinh Do
  • Mr. Chu Chee Kwang, General Manager of Nam Long Ltd, Co
  • Mr. Katsumi Mizuno, Director, General Manager, Overseas Business Division, Business Planning Dept., Credit Saison
  • Mr Johan Nyvene, CEO HSC
  • Mr Le Kim Hoa, Vice CEO, BIDV
  • Representative from the company which has been involved in the M&A deal in Vietnam
  • Dr. Nguyen Cong Ai, Deputy General Manager of KPMG Vietnam (Moderator)

18:30- 19:00             Cocktail & Networking

19:00 – 21.00           Gala Dinner & Deal Awards  

 

For Ticket, please click HERE

Source: http://mavietnamforum.com/sukien/chuong-trinh-hoi-thao.html

Vietnam M&A Seminar in Japan

On November 26th, 2014, in Vietnam, the Investment Law 2014 and the Enterprise Law 2014 were approved in the National Assembly, for the purpose of the further promotion of M&A and other investment activity by foreign companies. The Investment Law 2014 and the Enterprise Law 2014 are to be in effect from July 1st, 2015.

In this seminar, attorneys from the Vietnamese law firm of LNT & Partners (LNT) will speak about the Investment Law 2014 and the Enterprise Law 2014, as well as other laws and regulations in Vietnam regarding M&A, tax and labor systems, and contract enforcement (by, among other things, making comparisons with Indonesia, Myanmar, and Thailand), and under the assumption that there may be Japanese companies that are carry out M&A and other investment activity in Vietnam. Furthermore, attorneys from the law firm of Blakemore & Mitsuki (B&M) that have deep expertise in such subject areas will make comments about points to consider from the viewpoint of Japanese companies. In addition, a certified public accountant from Ernst & Young ShinNihon LLC (EY) will speak about accounting-related issues.

This seminar is perfect for any companies that are considering making inroads into Vietnam, or any companies that have already entered the Vietnam market but are seeking to use M&A to further expand business operations. In only 5 hours and 25 minutes, it is a great way to get the most up-to-date legal information on the most important subject areas.

For a more detail calendar, please click here

Please click here to make your request to reserve your seat for “Vietnam M&A seminar”

Solutions to mitigate M&A pitfalls

Recently Vietnam has become a favourite merger and acquisition (M&A) destination among foreign investors, particularly from Japan, Korea  and Singapore. Popular sectors include real estate, food and beverages, retail, and to a lesser degree, manufacturing.

Vietnam has become a favourite merger and acquisition destination among foreign investors. However, one problem at present is that negotiations are often lengthy and closing deals can be difficult. This article reviews the major obstacles and pitfalls facing M&A transactions, based on a recent case study, and proposes solutions that could make the process easier and more efficient.

Law on Enterprises and Law on Investment – Effects on closing conditions

Under the Law on Enterprises (LOE), an equity acquisition is considered complete at the time the investor receives their share certificates and is entered into the shareholder registry.

Under the Law on Investment (LOI), the time at which a foreign investor is eligible to manage an acquired local company (officially under the definition of foreign direct investment (FDI) is when they are issued an investment certificate (IC). Obtaining an IC is often a cumbersome process and requires the signature of a provincial leader. The process can take months and needs to be well-advised and strategically carried out to avoid delay. That is one reason why Vietnam is currently behind other countries in terms of competitiveness. It is also a reason why major M&A transactions still occur offshore – investors take over a holding company that holds the acquired company’s shares. This loses  tax revenue and is not effective when the target company is already an FDI enterprise.

When the company to be acquired is a Vietnamese firm, an offshore transaction does not avoid the IC required to complete the transaction. One solution would be to use a local holding company. Recently however the government issued regulations prohibiting the establishment of a local ‘holding company’. However, because there is no official definition of ‘holding’, foreigners are not restricted from setting up such an entity and it could in fact be used to streamline the acquisition process.

The pitfalls of due diligence

Legal due diligence (LDD) in Vietnam differs from other countries in that foreign investment is restricted in certain sectors. The starting point of an LDD process would be to check whether the buyer is excluded from some areas of the target company’s business. If so, the recommendation would be to clarify or remove those areas of business or use the holding structure as advised above.

Another issue could be the nature of the target company. Family businesses, for example, may use double book transactions and may not have their books audited before the transaction. It is therefore important that a buyer only trust audited financial statements and that any other ‘profit’ shown in a separate transaction book be considered with scepticism.

There are two risks that cannot be avoided through LDD in Vietnam. The first is the ‘non-litigation’ risk. There is no central database in Vietnam where one can look up who is suing whom. Therefore, most LDD reports simply state that the ‘target is not aware of any legal action pending’, which is a weak position. The second is tax risk. Under the Law on Tax Management, there is no time limitation on tax recovery. That means in theory a target company could be subject to tax arrears indefinitely. In fact, there have been cases where an LDD takes place and a company is acquired, only to have tax authorities return for arrears years later, and the due amount including penalties is actually higher than the purchase price. If the sellers have left the country then the company is the only entity availably responsible for payment. One solution to this would be to request that tax authorities clarify any outstanding issues, or to withhold part of the payment until taxes have been finalised. Having said that, it does not fully mitigate risk. This is also the reason many buyers opt for asset deals rather than equity deals. This can be more practical with a pure M&A transaction, rather than private equity where asset deals are not an option.

Risks during negotiation

Contract negotiations may be short or long, depending on how skilled both sides’ lawyers are and how detailed the memorandum of understanding (MoU) or term sheet is. More often, negotiations are drawn out because the MoU or term sheet was not drafted or lacks detail. Asides from fixing a purchase price, these preliminary documents are very important to limiting the expectations of both parties and familiarising them with concepts such as right of refusal, a drag-along or tag-along clause, a non-compete clause, or reserved matters, which are often a source of tension.

Co-operation between lawyers from both sides in good faith and towards a win-win solution is vital. There is nothing more frustrating than an embattled negotiation, where one party has a presumed feeling that he/she has been treated unfairly by the other party, or that the lawyers have done nothing to protect their clients. If lawyers are apathetic with their clients, then both parties lose and the only winner is the law firm.

During negotiations, it is standard for both sides to have lawyers. In a case where only one side has lawyers, the other side may not understand basic concepts such as rep and warranties and put options, and may start feeling paranoid about the contract as a whole. That said, many sellers hesitate to engage lawyers because of the high cost, but this only prolongs negotiations and leads to frustration. If the seller doesn’t employ a lawyer, it is important for the buyer’s lawyers to use plain English or tone down their language so that their client can achieve their objectives. Regardless, it is much better that the seller has a lawyer for negotiations, and if not, suspends negotiations until one can be employed. Another option is for the buyer’s lawyers to clearly explain any and all points of contention.

What often happens is that foreign lawyers blame local lawyers for being uncooperative or not understanding the basics of M&A. But more often I encounter foreign lawyers that underestimate local lawyers or have colonial attitudes. Such attitudes lead to bullying and might be useful in some frontier markets, but not in Vietnam, especially when the other side are prominent local lawyers who have been involved in many international transactions. Both sides have to be realistic and have a win-win attitude. This is easier said than done, but small steps such as not arguing over ‘face-saving’ issues and avoiding the use of unsubstantiated threats can help to build trust between both lawyers and the involved parties.

Post-closing issues

Closing a deal does not mean it is time to pop open the champagne. Apart from tax risks (mentioned above) there are also situations where a put option or convertible bond applies, and these issues need to be worked out. Recently there was a pending case at the Vietnam International Arbitration Centre between a buyer who wanted to enforce the put option and the seller who denied the validity of the option. A battle commenced where one side argued a strict interpretation of the words ‘shareholder agreement’ and the other side who defined it as the intention of the parties before the M&A transaction occurred. The solution, in either case, is to have a well-drafted contract and that both sides have a red-line and hedge against or insure that red-line.

There are numerous obstacles to M&A transactions in Vietnam, as in all emerging countries. But with an experienced advisory team, it is easier to build trust with the counter-party.

By Vietnam Law Insight, LNT & Partners.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://LNTpartners.com

What is the Solution for M&A Procedures of Foreign Investors in Domestic Companies?

The Government has recently finalised its long-anticipated considerations to amending Decree No.108/2006/ND-CP which was promulgated almost six years ago in September 2006 in a bid to further clarify provisions under the Law on Investment. Most of these amendments have already been submitted to the Government by the Ministry of Planning and Investment (“MPI”), with only three unconfirmed matters remaining, awaiting the scrutiny of the Government.

However, this is no call for celebration yet. Stormy waters still lie ahead for foreign investors and domestic companies as one of these three matters may pave the way to tighter controls and stricter management over foreign capital and share transfers in domestic companies.

The relevant governing laws

The procedures for these transfers (or “acquisitions”) had been touched upon by numerous legal instruments including the Law on Enterprises, Law on Investment, Decree No. 108/2006/ND-CP and Decision No. 88/2009/QD-TTg.

However, in the past, no detailed, uniform procedures for such acquisitions have been comprehensively covered by any legal instrument. At some point in time, there existed numerous guidelines from various licensing authorities within Vietnam, thereby creating difficulties for any investors wishing to engage in these acquisitions.

The most recent Government regulation overseeing the acquisitions, Decree No. 102/2010/ND-CP (“Decree 102”), was issued with a view to regulate and offer a uniform approach to the procedures. On the face of the law, it seems to be a victory for foreign investors and domestic companies alike as an interpretation of this decree reveals an absence of any requirement on part of the domestic company to obtain an investment certificate following the acquisitions. In fact, we were recently presented with an opportunity to view official dispatches of the MPI (the “Report”), which confirmed this absence.

The reality in the application of Decree 102

However, numerous commentators have observed a potential conflict in the wording of Decree 102 and the Law on Investment. As a result of this lack of textual clarity in Decree 102, licensing authorities are, again, divided on the correct procedural requirements of carrying out the transfer. Foreign investors and domestic companies are, again, left in the dark as to what is precisely required in executing the procedures for these acquisitions.

This conflict has yet to be resolved, with different licensing authorities still continuing to act upon different interpretations of the law. For example:

  • The licensing authorities in Ho Chi Minh City require domestic companies to obtain an investment certificate after the acquisition such that the company will operate under two licenses – the enterprise registration certificate and the investment certificate.
  • The licensing authorities in Hanoi require all members or shareholders of the domestic company (including foreign investors) to engage in procedures to obtain an investment certificate. In doing so, the members or shareholders of the company will be granted an investment certificate while having their enterprise registration certificate revoked.
  • The licensing authorities in Ba Ria–Vung Tau Province and Binh Duong Province abolish the need for an investment certificate for domestic companies altogether if the transferred capital or shares do not exceed 49% of the domestic company’s charter capital.

The basis for this requirement

In its Report, the MPI highlighted the need for an investment certificate, citing that such requirements lay consistent with international customs on selected industries such as banking, insurance and real estate. Furthermore, it will ensure that there exist a codified set of procedures which would ultimately save the day on the face issues arising through a lack of specified guidelines.

However, it is debatable that perhaps the MPI should have given further foresight in providing its reasons. Particularly, the face of the Report seemed to overlook numerous key considerations:

  • First, the laws in countries of developed economies such as Singapore, Australia, USA and UK do not generally provide for any requirement to obtain an investment certificate of the kind potentially required in Vietnam. Particularly, Singapore provides no specific provisions for foreign investors in establishing a new company or purchasing shares of a private Singaporean company.
  • Second, the conformity to international customs that the MPI highlights apply to selected industries which are traditionally regulated to a high degree. Therefore, it is not necessarily appropriate to apply them universally to all industries.
  • Third, it seems that the requirement does not draw advantages for the transferring parties, not the State of Vietnam. In fact, both the parties and the licensing authorities fall victim to an increased burden and administrative workload as a result of its requirement.
  • Fourth, Decree 102 does not provide for this requirement so its removal will abolish any potential legal conflicts now and in the future.

What is the solution?

Without a doubt, investors aim to seek the simplest, shortest and cheapest way possible in order to carry out and maximise their investment. As such, one can only expect disappointment from foreign investors and domestic companies alike if the amendments of Decree 108/2006/ND-CP continue to implement this investment certificate requirement.

Therefore, now is a crucial time for the Government to reconsider its position, particularly given Vietnam’s national policy in promoting foreign investment into the country. Otherwise, consistency in the laws will need to be maintained in order to create a clear and systematic process for the transferring parties and licensing authorities.

At the moment, however, potential foreign investors can only wait in anticipation that the Government opts to takes one step forward in the right direction without the two steps back.

(Please note that the scope of this article covers only transfers between foreign investors and domestic companies established and operating in ordinary domains and sectors)

By Vietnam Law Insight, LNT & Partners.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://LNTpartners.com