Market InsightsVietnam

Mergers and Acquisitions in Vietnam: A Complete Guide

By 18 July, 2022June 30th, 2023No Comments

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Increasingly more companies seek to establish a presence in Vietnam through local M&A activities, a result of its growing manufacturing industry and domestic consumption. While the market experienced a slowdown from 2018 to 2020, it started to take off again in 2021.

Due to the increased interest in local M&A activities, we have written this article where we review Vietnam’s M&A market, the regulations, types of transactions, and the outlook.

Vietnam’s M&A Market

The M&A market in Vietnam has been growing fast since 2007, the same year as it joined the WTO.

In the first years, most investors came from foreign companies, including South Korea, Japan, Hong Kong, and Singapore. With that said, domestic Vietnamese investors have joined forces and are actively increasing their presence, both in terms of the number of deals and transaction values.

Acquiring a well-established local entity is a preferable market-entry strategy among many foreign companies, particularly in the consumer-related industries. Many Vietnamese brands are no longer owned by Vietnamese companies, but foreign ones.

For example, Sabeco, a state-owned beverage company with more than 100 years of experience was sold to ThaiBev in 2017, the largest transaction in Vietnam at that time. Kinh Do – who used to be the market leader with a 28% market share of confectionery in Vietnam, was also sold to Mondelez International in 2014.

Capturing the growing middle-income population in Vietnam, several finance-related sectors were also targets of foreign investors. Almost all consumer lending companies are also owned by foreign investors, at least partly. Examples include Home Credit (European), Shinhan Finance (South Korea), HD Saison with the involvement of Credit Saison (Japan), and MCredit with the involvement of Shinsei Bank (Japan).

Recently, SMBC’s purchase of shares in FE Credit from VPBank was known as one of the largest deals in 2021 in Vietnam, with a deal size of roughly 1.4 billion USD.

Graph showing M&A deals in Vietnam

Other finance-related industries, like insurance and banking, also receive more attention from foreign investors. Many non-life insurance companies in Vietnam now receive support from foreign strategic investors. One example includes BIDV Insurance Corporation with support from Fairfax Asia Limited (Canada), AXA (France), and Chevalier (Hong Kong). Bao Viet Holdings is another insurance company that got investments from Sumitomo Life (Japan).

Renewable energy is another industry that gets increasingly more interest from foreign companies. Solar energy projects that had Commercial Operation Dates (COD) before 31 December 2020 can enjoy fixed feed-in tariffs (FIT) set by the government.

This deadline for wind power projects was 31 October 2021. Hence, projects that were eligible for such FIT seem to be more attractive for investors, as their output is secured. With no fixed prices investors have more uncertainty which can be risky in Vietnam.

M&A Regulations in Vietnam

Like in other countries, M&A activities in Vietnam are subject to many regulations. The four most notable ones are the Investment Law, the Enterprise Law, the Securities Law, and the Competition Law.

These laws were revised between 2018 and 2020, in preparation for the booming trend of inbound and domestic M&A activities locally.

The Competition Law

The Competition Law on M&A transactions regulates Economic Concentration (EC). This can restrict M&A activities if they negatively affect competition in the market.

The National Competition Commission oversees this case-by-case and by various factors such as:

  • The combined market share of the related parties to the EC
  • The level of concentration pre- and post-EC
  • The relation of the businesses participating in the EC
  • The competitive advantage that the EC might bring to the market
  • Specific characteristics of each industry

Transactions that make any company own more than 50% of the market shares are not allowed to proceed with M&As, except in special cases. If the market share is 30% to 50%, the company is required to report the transaction to local authorities. However, it has become more difficult to enforce such regulations as the market share can be subjective to estimate, unless obvious.

Tender Offer

A tender offer is often required when buying secondary shares of a listed company, as explained in the Securities Law. This is an effort to ensure fairness among the existing shareholders.

In detail, if an M&A transaction increases a shareholder’s ownership from less than 25% to more than 25%, a tender offer is required. If a shareholder already owns more than 25% of a company and wants to increase the ownership, a tender is also required if the transaction results in ownership of 35%, 45%, 55%, and so on.

This is waived in some cases, especially when fairness has been ensured before the purchase of shares. For example, when it is the purchase of new shares issued by the company, or when the purchase of the secondary shares has been approved by the Board.

Foreign Ownership Limit

Foreign ownership is restricted in some industries. Hence, foreign investors are suggested to consult with local experts and do research carefully before deciding to kick off an M&A strategy in Vietnam. Otherwise, transactions could result in a large waste of money and human resources, as the deal was not allowed from the start.

Let’s take the example of the banking industry. Foreign ownership is capped at 30% for any commercial banks in Vietnam. A foreign individual is not allowed to own more than 5% of a Vietnamese financial institution. Also, a foreign organization is not allowed to own more than 15% of a Vietnamese financial institution, except when the organization is a strategic investor, then the cap is set to 20%.

Another industry that receives much attention among foreign investors is the logistics industry. Companies providing ocean freight or inland waterway transportation can only have 49% foreign ownership. This limit also applies to companies providing other types of transportation, with the cap of foreign ownership between 49% to 51%, depending on the nature of the business.

Veto Right

It is also important to consider the veto right in joint-stock companies (JSC). The Enterprise Law explains that important decisions by Boards require at least 65% approval of the shareholders.

In other words, any shareholder that owns more than 35% of a JSC has the right to disapprove significant decisions, including but not limited to changes in business scopes, changes in the managerial structure, approval of the sales of projects or assets that have the value of more than 35% of the total asset of the company.

The veto right is crucial to take into consideration before acquiring a JSC in Vietnam. Hence, 35% (or 65%) of the ownership of a company is an important threshold. It could help the investor to minimize their paid capital, while remain the right to approve important strategic decisions of the company.

It could also help the strategic investor to eliminate the interference of small shareholders while keeping their investment at the lowest level (only buy 65%).

Types of M&A Transactions in Vietnam

M&A transactions can be structured in different ways, with the most common one being the acquisition of shares or capital contribution of target companies. Each transaction type has pros and cons that can benefit investors, depending on the case. Let us review both below.

Shares or Capital Contribution Acquisition

This is the most common type of M&A transaction where the buyer becomes the shareholder of the target company. This can be done by acquiring the primary (newly issued) shares or the secondary (existing) shares.

The process is comparatively simple with all the assets and liabilities being transferred directly and automatically to the new shareholders. The seller and buyer do not have to go through all items on the asset and liability lists. Hence, it saves time and cost for both sides to manage such M&A transactions.

However, it also brings disadvantages. The buyer automatically “inherits” all financial liabilities and might be facing potential unforeseen disputes or compliance issues later. Hence, it is important to have professional agencies in charge of the due diligence, to ensure transparency and that can foresee the potential risks of the target company.

Asset Purchases

In this method, the buyer purchases assets from the target company and incorporates such assets into an already licensed entity. This is common for asset-heavy industries (energy, manufacturing, or logistics), or when the buyer only wants to acquire a business division (unit) of the target company.

This option allows the buyer to be flexible in choosing the necessary assets to acquire, without taking over the irrelevant ones such as financial liabilities. However, the process of buying each individual asset will take time with complex documents required for each asset type.

The valuation is another challenge for this M&A type, especially when it comes to intangible assets. The investors are also suggested to prepare for a very high tax rate (as much as 20%) for the purchase of the property.

Merger or Consolidation

During a merger or consolidation, the target company transfers all its properties, labor rights, obligations, and legitimate interests to another company. Once done, the target company terminates all its activities.

Under this type of M&A, the most important factor to consider is the conflict of the culture between the two (or more) merging companies. How to balance the interest of all stakeholders (shareholders, employees, or management team) is also a crucial decision to ensure the smooth operation of the merged company afterward.

Outlook for M&A Activities in Vietnam

As mentioned, M&A activities have increased much in Vietnam since 2007. The market has become more active lately with the involvement of both foreign and domestic companies, acting as investors. Experts forecast that the market will keep growing fast, especially when the country is in the recovery phase after three years of being hit by the pandemic.

As mentioned, the growing middle-income population is one of the key drivers that attract foreign investors’ attention to the consumer-facing industries. In 2021, while many countries saw negative GDP growth rates, Vietnam grew by 2.58%, and the most M&A deals and total deal values were recorded.

With no travel restrictions, it’s easier for foreign entrepreneurs to visit and explore business opportunities here. One of the main challenges for M&A activities during the pandemic was the travel restrictions, which prevented investors from visiting the potential targets directly. This is even more difficult when it comes to manufacturing companies, having facilities that must be audited. Most of these assessments were either outsourced to local agencies or carried out remotely (by sending photos or through video calls).

Moreover, the many free-trade agreements signed have made Vietnam an increasingly interesting destination for trade and manufacturing. With wider access to global trade, as well as tariff exemptions, many domestic companies are expected to become more attractive, both as financial investments and as key parts of the global supply chains of foreign companies.


Vietnam’s M&A market has been highly active, despite the pandemic. The consumer-related industries have and will certainly be one of the key drivers that attract more foreign investment.

Japan, South Korea, and Singapore have long been the top investors in Vietnam, but the country has gained more interest from Western companies, as well as Vietnamese domestic investors. Major challenges that prevent Western investors from inbound investments are the cultural differences and the untransparent legal system.

To minimize such concerns, the Vietnamese government has been working to revise, update and provide a clearer legal system, including key regulations that directly affect M&A activities, such as the Enterprise Law, the Investment Law, or the Competition Law.

It’s fair to say that M&A is a preferred option among many foreign companies who want to get quick access to Vietnam’s domestic market and through inorganic growth. Just be sure to work with credible local partners that can minimize the risk of pitfalls and for proper due diligence.

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