What information matters in M&A transaction?

Nowadays, in the field of business and investment, the term “Merger and Acquisition” (M&A) is a very common term. This is considered as one of the global investment methods, and is a business and development strategy applied by many businesses. In conducting the M&A, beside information provided by the target company, other information are also important before the buyer stepping into negotiation with the seller of the target company.

Intelligence compliance in Vietnam

Corporate Information Search

Legal Service for M&A in Vietnam

Mergers and acquisitions are usually conducted through three main stages, that is: reviewing and evaluating target businesses, valuation and price negotiation, completing legal procedures. When participating in a business merger and acquisition, investor or buyer need to ensure high accuracy of inside information of the target business. It is extremely important for investor or buyer in determining the value of the deal as well as helping investors make decisions about whether to participate in the acquisition and merger of this business or not. The tasks to consider and evaluate the target business include searching information and evaluating the information on shareholders, investors, influential individuals, and further information i.e. financial statements, accounts receivable and payables, staffs, customers, business locations, facilities status, competitors, business registrations, licenses and business area divisions, company image, and potential disputes, or criminal records of relevant people of the target company.

In fact, not every country has specific regulations governing mergers and acquisitions, as does Vietnam, although it is mentioned in various legislations. In many cases, the investors have to search information, and evaluate the situation themselves to learn various aspects of the business beside the information given by the target company for instance finding general information about a business, information about the legal representative, information about business manager or capital contributors of that business as well as other related information. In particular, the buyer might be interested to know if the owner or shareholders have other business similar to the target business or if any of those have criminal records. Further, the buyer might wish to know the history or the target company with registration and changes of registration in the last three years. Other information about business lines, subsidiary, child companies, dependent companies, charter capital, founding shareholders, seal specimen could also be of importance business intelligence. Based on the information obtained, the buyer is able to reach some information conclusion about the business and the target beside official information provided by the target itself.

In conclusion, all relevant information about the business and people matters in M&A transaction, being corporate information or influential investors or stakeholders are important that the investor or buyer should pay attention to every details, and should attempt to search and evaluate such information such as part of their effort to evaluate market entry risks in investment through intelligence market entry risks analysis in Vietnam.

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How to Protect Business Secrets through Non-Disclosure Agreement (NDA)

In business or production process, individual or organization being may have to share its business secrets with others. Legal solution for this situation is to enter into a Non-Disclosure Agreement agreement (NDA).

Non-Disclosure Agreement (NDA) are often used by inventors or companies when sharing business ideas, sample products which have just been created, patent and many other business secrets. This disclosure’s purpose is to explore the possibilities to cooperate, manufacture; to commercialize a particular product in relation to another company when seeking licensing contracts, financial source to develop a product; to deploy a business secret, to enter into a Merger and Acquisition transactions, or to create binding obligations on employees if they know or are known secrets of the company they are working for.

What does the content of the Non-Disclosure Agreement (NDA) include?

NDA should begin with a clear statement of who the owner’s non-disclosed information is (owner); party who receives non-disclosed information (recipient); identify non-disclosed information and the reason for disclosing such information to the recipient. The most important thing of NDA is to identify the scope of non-disclosed information or confidential information to avoid the parties in dispute if one party discloses certain information. Another thing to keep in mind is that the NDA can achieve the purpose of the parties when stipulating clearly how the recipient has to protect that information and what is allowed or not allowed to do with that information. In particular, it is necessary to detail that the recipient has to take responsibilities if they violate the information security obligations specified in the NDA.

Besides, the parties may agree to a reciprocal NDA. Sometimes, the source of information is two-ways, both parties will then disclose confidential information to each other, for example when the two parties form a joint venture, or have intention of acquiring the target company through M&A. Accordingly, NDA will refer to the agreement of formation a joint venture, M&A which clearly states that which confidential information two parties will share, what are the rights and obligations of the two parties.

Of course, the best way to keep a secret is to not tell anyone. However, this is not always possible in the collaboration world when shared economy is thriving in Vietnam. If the owner needs to share business secrets, they could sign with the recipient an non-disclosure agreement or contract to avoid unfortunate circumstances.

Lawyers at ANT Lawyers could help clients to create NDA in various business transactions in M&A, joint venture, IP commercialization, labour to address the needs of business requirements in Vietnam.

How ANT Lawyers Could Help Your Business?

The changes of laws will be monitored by ANT Lawyers. For advice or service request, please contact us via email ant@antlawyers.vn or call +84 28 730 86 529

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M&A Due Diligence and Execution in Vietnam

Merger and Acquisition (M&A) activities in Vietnam have been rapidly increasing over the the years in value and number of transactions when Vietnam’s opening policies to attract foreign investments loosen up. The M&A due diligence and execution are therefore important steps to ensure a successful transaction.

For foreign investors wishing to take advantage with a certain level of risks in Vietnam where the cost of labour are cheap, mid-income populations are growing, and the need of capital are high, it is imporatant to find the right target companies to invest. Challenges might arise when approaching the right local companies, locating the right decision makers within the local companies, encountering differences in languages and cultures.

It is imporant that the local consultants with the understanding of the business and legal environment in Vietnam where the local companies are incorporated could be involved at an initial stage to monitor and minimize the risks, improve the effectiveness of the M&A process in Vietnam.

The Vietnam consulting company could also provide corporate intelligence and insights of the Vietnam targeted companies to have an overall evaluation of the compliance of the Vietnam companies, possible risks involved and growth potential. Financial forensic services might also be needed before other further steps. Then, the following will need to be considered when undertaking the M&A in Vietnam.

+Due diligence

M&A due diligence in Vietnam is a vital step because it determines whether the M&A will succeed or not. There are some aspects that must be carefully considered:

-Financial reports

Review all the financial reports of the Vietnam targeted companies within 3 to 5 years to assess the current and future financial situation. These data needs to be audited by a reputable independent auditing company. Evaluating financial situation targets on many aspects such as the reasonable connection between the financial statements, operating and sales margin of the business in relation to the average in that industry. These data allow valuation real value of the target business.

-The cash flow

Checking the dates on invoices showing that whether targeted businesses have paid promptly or not. Term of payment may vary from industry to industry, but generally 30 to 60 days. If the money order is paid after the billing date period of 90 days or more, it means that the business owner may be struggling with cash flow. Finding out that if the clients’ inability to pay bills or not is very important.

-The staff

Determining the importance of staff for the success of the business considering work habits of employees, working time of key employees; ability to remain working after a change of the owner occurs; the incentives necessary to keep key employees; ability to easily replace key employees; the relationship of key employees with the company’s customers.

-The customers

This is the most important assets of the Vietnam targeted company. Make sure that clients are as the other tangible assets of the business. Evaluating customers on some primary aspects: the relationship with the current owner of the business, customer history with business relations and the contribution of each customer to the profits of the company; assessing that customer will leave or stay when the business having new owners; customer services and dispute of the company, the relationship of the former owner of the business with the community or the industry.

-Business location

This is especially important if the targeted company is a retail company. Does the importance of business location play a crucial role for the success of the company? How is the location of the company you plan to acquire? Is there sufficient parking lot for customers? How does the company depend on sales in the region? How is the prospects of the business in this area? Does this place have been in the process of rapid change from new residential district office building or not? Has business location become more or less desirable because of contemplated changes in surrounding area or not?

-Competitors

Considering this aspect in order to define the capacity of the targeted business in the industry, the following questions would help: who are its competitor and what are their strategies? Does the price war happen frequently? How has the competitive environment changed?

-Business registration, permits and zoning

It’s necessary to make sure that business registration certificate and other legal documents can be easily given to the buyer. It would be better to acknowledge the procedures to transfer these documents and its fee with the help of local management set up company in Vietnam. If the targeted company is a joint-stocks company, what is the procedure for the business registration? Can foreigners own the company 100% according to Vietnam laws? Conditional investments in Vietnam need to be considered carefully by lawyers in Vietnam to avoid mishaps.

-The company image

Company image can be a significant asset and that cannot be assessed in the financial report. There are many intangible factors to consider when evaluating a company: how to serve customers, how employees answer the phone and the level of support the community or the industry.

+Negotiate the price

It is important to understand the purpose and motivation of both parties. The sellers’ motivation are formed and affected by value drivers. There are two main value drivers which are approach value and avoidance value. Approach value is our purpose such as prosperity and avoidance value is the negative effect that we need to eliminate. Normally, the buyers try to find out what are the reasons why the owner wish to sell the companies. This will help the buyers plan a reasonable strategy beforehand.

A research analyzes the general aspects that the buyers seeking for via conducting surveys companies’ owner who have sold or transformed their enterprises. The research results are focus on profit maximization (79%), minimization of tax payable (73%), protection of viability of the company (71%)…(Source: Acquisition Marketplace Review, 2007).

The motivation of the buyer in most cases is similar to the motivation of the seller, which is to maximize profits, expand markets, increase revenue, operating areas, areas of activity, minimize taxes…

How ANT Lawyers Could Help Your Business?

Please click here to learn more about Corporate and M&A Legal Service or contact our lawyers in Vietnam for advice. Send us request via email at ant@antlawyers.vn or call us at +84 28 730 86 529

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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. 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, though legal due diligence undertaken by law firm in Vietnam.

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 ANT Lawyers Could Help Your Business?

Please click here to learn more about ANT Lawyers Foreign Investment Practice or contact our Law firms in Vietnam for advice via email ant@antlawyers.vn or call our office at +84 28 730 86 529

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What a Law Firm Could Assist in an M&A Deal?

M&A Law Firm in Vietnam

M&A, abbreviated by Mergers and Acquisitions is expanding in both quantity and volume in Vietnam in many sectors. Successful M&A deals depend on various factors and legal due diligence, and drafting agreements are important processes in Vietnam.

For investors whom are interested in M&A deal in Vietnam as buyer or seller,it is important to hire a law firm that will assist in the process. The law firm in Vietnam could provide assessment of the target company through a legal due diligence, a legal background directly related to M&A deal, all of which are necessary to the completion of a successful deal. The attorney could then draft the letter of intent, and legal contracts, including the final purchase agreement, which will include a lot of stipulations that will need to be done correctly in order for the business transaction to be beneficial to both parties and in compliance with Vietnam regulations.

A law firm with expertise of Vietnam regulations, with the lawyers having experience and legal knowledge will be able to provide the clients with the right check-list of the documents to review. In addition, the presence of lawyers contributes to strengthening the trust of the parties. In recent years, foreign businesses have often made acquisitions of all or part of a Vietnamese enterprise, and they often require the seller to engage law firms specializing in M&A. And now, not only the foreign businesses but also the Vietnamese parties are in need of conducting M&A deals with the participation of lawyers to ensure the success.

Lawyers shall conduct legal due diligence of enterprises, check reports and explanations with prudence, honesty and efficiency. They help the buyer and/or seller to understand their legal status, legal rights and obligations, legal regulations for assets, labor contracts, land records, construction and investment registration, certificates, and licenses and other matters. This is the basis for determining the status of enterprise and possible legal risks may cause. Lawyers will conduct and produce the most comprehensive, accurate, legal and objective information and legal documents by their professional, knowledgeable and ethical.

Lawyers shall advise the structure of an M&A to ensure the commercial intent that the parties are aiming and shorten the execution time and costs. In addition, it ensures the legality of procedures, safety and minimizes the legal and financial risks for the parties.

There is no common contract template for all M&A deals. Lawyers shall actualize the trade agreements, the will of the parties to the legally binding terms of the contract as well as clearly defines the rights and obligations of the parties to ensure the enforceability, minimize unlawful agreements or unclear terms that may cause the subsequent disputes.

How ANT Lawyers Could Help Your Business?

The changes of laws will be monitored by ANT Lawyers. For advice or service request, please contact us via email ant@antlawyers.vn or call +84 28 730 86 529

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