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MATTER:

M&A Deal - Selling shares of a local company to a foreign investor (2020).

CLIENT:

A group of Vietnamese businessmen who were the shareholders of the local company.

BACKGROUND:

Two wholly Vietnamese-owned companies established by the CLIENT from the midst of 2000s (“Target Companies”) of which the one is engaged in refrigeration engineering sector and the other is considered as a distributor for international giants manufacturing HVAC, Mechanical and Electrical Plumbing such as Emerson, Daikin, Panasonic, Mitsubishi, Trane, Reliable, Modine, Promek ...

In 2020, CLIENT wished to sell their shareholding to a foreign investor who was one of the “Top 5” construction companies in Japan with more than 400 years of construction experience, headquartered in Tokyo and Osaka (“Japanese Investor”).  

CLIENT engaged ATIM LAW FIRM to help them with all legal aspects of the transaction from the outset of the transaction to the successful closing phase.

LEGAL ISSUES:

Acquisition into a local company established under laws of Vietnam by a foreign investor might face roadblocks where market access requirements have to be fulfilled. Accordingly, market access conditions are various depending on business activities that the local company is operating. Looking at business activities that the Target Companies was doing, we found that some certain activities were falling into conditional sectors for the foreign investors.

Furthermore, the Japanese Investor was being interested in and targeting core business activities of the Target Companies all, while it was running under two separately legal entities. That could lead to a costly and time-consuming M&A process because of doubling M&A procedures and work load.

SOLUTIONS:

ATIM LAW FIRM advised CLIENT to overwhelm these issues by a well-planned structure where a holding company was set up in the form of a joint stock company whose shares were paid by capital contribution shares that the CLIENT was holding in the Target Companies (the “Structure”). The Structure resulted in that instead of directly holding the Target Companies, CLIENT shifted to hold the holding company who was the one wholly owning the Target Companies. The Japanese Investor acquired 19.99% total shares that CLIENT was owning in the holding company through only one M&A procedural process.

Regardless of the utility of the Structure, there were no specific regulations on acquiring the local company whose equity was contributed by shares of the other ones in Vietnam. Therefore, the Structure was quite new to the authority. As a result, they asked for a burden of explanation and evidence illustrating the fulfillment of capital injection by CLIENT in the Target Companies.

SERVICES:

ATIM LAW FIRM assisted the Client in the following work streams for this deal:

• Managed and oversaw the entire sell-side transaction at a high level of involvement.
• Advised and reviewed pre-transaction documents for CLIENT.
• Advised and reviewed full package for transaction documents allowing investments to have maximum flexibility for ongoing operations with lesser risks for CLIENT.
• Performed and reviewed conditions precedent to secure the transaction is closing as agreed.
• Monitored and advised the closing procedures for both parties.
• Advised post-closing procedures to execute the transaction documents.

RESULTS:

CLIENT and the Japanese Investor completed the successful transaction within 03 months from the date of the shares purchase agreement which came a 3-month period earlier than the long-stop date as agreed by the party.