How S&C Addresses the Challenges of M&A with Vietnamese Companies — Case Examples
Table of Contents
- Re-application and Invalidation of Business Licenses
- Non-disclosure of Financial Data and In-person Demands from the Outset
- Collapse at the Due Diligence Stage
- Conclusion: As a Companion in Overcoming Cultural and Institutional Barriers
Backed by a young, fast-growing demographic structure, robust economic development, and policies welcoming foreign investment, the Vietnamese market has become one of the most attractive investment destinations for Japanese companies. Among the available approaches, market entry via M&A (mergers and acquisitions) is drawing particular attention as a means of entering the market and expanding market share at speed.
In practice, however, as they consider M&A with Vietnamese companies, many Japanese firms encounter complex problems rooted in differences in legal systems, disclosure attitudes, and business customs. It is not uncommon for deals to stall in the early stages of negotiation, or ultimately to fall through.
In this article, Solara & Co—which has supported more than 50 cross-border M&A transactions to date—presents, as case examples, the challenges we have actually addressed in M&A with Vietnamese companies and how we overcame them. We hope that these practical countermeasures, characteristic of an advisory firm deeply versed in local culture and institutions, will help Japanese companies enter the Vietnamese market with greater peace of mind.
Re-application and Invalidation of Business Licenses
🔹 The M&A challenge:
In Vietnam, in M&A involving foreign capital, there are cases where, alongside changes to commercial registration information, re-application for business licenses (IRC/ERC) becomes necessary. In particular, depending on the nature of the business, prior approval from the competent ministry may be required, entailing a certain review period.
Within this process, although rare, a decision to "invalidate (revoke)" may be made, creating the risk that a company can no longer continue its very business operations. Such regulatory risks can suddenly surface at an advanced stage of negotiations, posing a major obstacle for the buyer.
👉 S&C's countermeasure:
Solara & Co conducts thorough advance license verification and risk analysis, and on that basis designs the optimal acquisition scheme for each deal (share transfer, asset transfer, establishment of a holding company, etc.). We also leverage our local network to contact the Department of Industry and Trade—the license-issuing authority—and the relevant ministries directly, grasping the authorities' stance from the planning stage and preemptively avoiding unforeseen risks.
In this way, controlling legal risks that tend to be overlooked by purely formal due diligence, through proactive measures, is one of S&C's strengths.
Non-disclosure of Financial Data and In-person Demands from the Outset
🔹 The M&A challenge:
Many small and medium-sized enterprises in Vietnam do not yet fully understand M&A, and a deep-seated unease about information disclosure persists. Even when the buyer requests materials such as financial statements or accounting books, disclosure is often refused on grounds such as "confidential" or "we don't know whether you can be trusted."
Furthermore, even when an online format is proposed for the first meeting, requests such as "we'd first like to meet in person to talk" may arise, making scheduling difficult. There is also a tendency to be uncooperative with Q&A and to avoid written responses, so information asymmetry becomes a challenge.
👉 S&C's countermeasure:
Solara & Co places the highest priority on building relationships with the seller. In the early stages, we carefully explain to the selling company the basic mechanics of M&A and provide reassurance regarding the handling of data, taking an approach that lowers psychological barriers.
As needed, we conduct in-person visits and workshops locally, striving to be recognized as a "trustworthy partner." Such steady relationship-building leads to smooth subsequent disclosure of materials and Q&A handling, becoming a major factor in moving the deal forward.
Collapse at the Due Diligence Stage
🔹 The M&A challenge:
Within the M&A process, due diligence (DD) is an extremely important step for the buyer. In Vietnam, however, problems such as the existence of double bookkeeping and informal expenditures (bribes, slush funds) remain deeply rooted, and there are very many cases where these come to light during DD, leading to negotiations being suspended.
According to one industry insider, it is said that more than roughly 50% of Japan–Vietnam M&A deals halt at the DD stage. When the books fail to reconcile or the tax risks are too great, it leads to withdrawal of the LOI (Letter of Intent) or to the deal falling through.
👉 S&C's countermeasure:
Solara & Co places importance on pre-DD (a preliminary, simplified investigation) before entering the formal DD phase. Beyond finance and tax, we check multifaceted information early—such as compliance and the owner's background—and if red flags appear, we issue a warning before the LOI.
In addition, during the initial meeting we conduct interviews on the structure of the books and recording rules, translating these into appropriate DD design so that unexpected facts do not emerge later. This stance of early detection and early countermeasures ultimately serves as an effective means of "preventing interruptions before they occur."
Conclusion: As a Companion in Overcoming Cultural and Institutional Barriers
M&A with Vietnamese companies certainly involves numerous challenges. However, if undertaken together with an advisor possessing the right knowledge and experience, they are by no means insurmountable.
S&C maintains corporate entities in both Vietnam and Japan, and provides cross-border M&A support through a team well-versed in the legal systems, tax regimes, and cultural backgrounds of both countries. We offer integrated services spanning initial information gathering and negotiation, contract drafting, closing, and even PMI (post-merger integration support).
If your company is considering strategic growth through collaboration or M&A with a Vietnamese company, S&C, as a trusted partner, will support your challenge with all our might.
For those who would like detailed information or materials about the Vietnamese market, please feel free to contact us. We look forward to hearing from you!
