Mergers and acquisitions

Mergers and acquisitions (M&A) is an activity that takes control of a business through owning part or all of that business. This is the term for a merger, consolidation or acquisition between two or more businesses together. In Vietnam, the system of legal documents does not have the concept of mergers and acquisitions, this is the commercial term. In legal terms, this term is understood to include activities of consolidation, merger and acquisition of enterprises, specifically:

Merger of an enterprise is the transfer of all of its lawful assets, rights, obligations and interests to another enterprise and at the same time terminating its business or its existence. The acquirer company still exists and inherits all assets, rights and obligations of the acquired companies.

Consolidation of enterprises means that two or more enterprises transfer their entire properties, rights, obligations and lawful interests to a new enterprise and at the same time, consolidating companies shall cease to exist.

Acquisition of an enterprise is a activity that an enterprise directly or indirectly acquires all or part of the capital and assets of another enterprise sufficient to control and dominate the enterprise or a business line of the acquired enterprise. Acquired enterprise still exist, only changing the enterprise structure.

M&A always requires strict legal compliance with both acquired and acquirer enterprise. Under Vietnamese law, merger, consolidation and acquisition are one of the forms of economic concentration. Recently, economic concentration is the legal acts which have been implemented quite popular in Vietnam. Along with the positive effects, this activity also has the potential to affect competition in the market. Therefore, the merger activity is not only governed by the Enterprise Law but also regulated by the Competition Law. The current Competition Law has amended and prohibited businesses to implement economic concentration that has an impact or is likely to cause significant anti-competitive effects on the Vietnamese market.

On the economic side, the economic concentration will reduce competition (because competitors cooperate with each other and the market access becomes difficult) and distort the market leading to damage to consumers. Stemming from the need to control economic concentration activities to avoid the formation of large enterprises with the power to control the market and unfair competition, create conditions for new businesses to join in market, Competition Law creates a legal corridor that allows state management agencies to control economic concentration activities, and accordingly adjust M&A activities.

Each M & A form has governed by its own legal provisions. Therefore, before conducting any M&A activity, investors need to carefully understand the provisions of the law to best protect their rights and interests in accordance with the provisions of law.

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