The healthcare market in Vietnam is emerging as an attractive destination for foreign investors due to its strong growth potential and increasing demand for high-quality medical services. Although the wave of M&As in this sector showed signs of slowing down in 2024 compared to 2023, forecasts for 2025 indicate that the market is expected to continue to grow and develop robustly. Recently, positive signs have emerged as companies such as the Ho Chi Minh City Infrastructure Investment Joint Stock Company (CII) and the Investment and Development Construction Corporation Joint Stock Company (DIC) have focused on this sector, indicating recovery and significant potential for the future.
In this article, BLawyers Vietnam outlines 02 important notes that investors should keep in mind when participating in the M&A “wave” in the healthcare sector, particularly hospitals, which are among the most attractive targets for investors in M&A deals.
1. Market access conditions in the healthcare sector for foreign investors
According to Vietnam’s Commitments to the WTO, foreign investors are permitted to establish hospitals with 100% foreign-owned capital, enter into joint ventures with Vietnamese partners, or operate through business cooperation contracts. Additionally, foreign investors must meet minimum capital requirements depending on the type of healthcare facility. Specifically, for hospitals, the minimum capital requirement is USD20 million.
Most trade agreements of Vietnam contain similar commitments as above, but there are some diffrences as follows: (a) the Vietnam-Eurasian Economic Union Free Trade Agreement (VN-EAEUFTA) additionally allows investment through the purchase of shares in a Vietnamese enterprise; (b) the Vietnam-United Kingdom Free Trade Agreement (UKVFTA) and the Vietnam-EU Free Trade Agreement (EVFTA) commit to not imposing any restrictions on foreign investors investing in the hospital services sector in Vietnam.
Therefore, when conducting an M&A with hospitals as the target, foreign investors should pay attention to the aforementioned market access conditions for the hospital services sector. This will help them make appropriate choices in registering business lines and operational scope to complete successfully the M&A deal.
2. Specific issues that investors need to consider when conducting an M&A in the healthcare sector
2.1. The operational scope of the target hospital
One of the key issues that investors should prioritize when selecting a target hospital for an M&A transaction is evaluating their scope of operations. Specifically, investors need to pay attention to the following aspects related to the operational scope of the target hospital:
- First, the operational scope of the target hospital, as registered under the Vietnam Standard Industrial Classification (e.g., VSIC 86101 – Hospital activities), may differ from the detailed activities outlined in applicable international treaties (e.g., CPC 9311 – Hospital services). Therefore, M&A investors, especially foreign investors, should carefully review and study the compatibility of this operational scope to make appropriate adjustments in compliance with legal regulations during the M&A transaction.
- Second, if the target hospital is registered to provide retail services for direct drug sales to patients, under Vietnam’s Investment Law and Commercial Law, the trading of goods and activities directly related to the trading of goods by foreign investors in Vietnam are conditional business lines. As a result, when foreign investors invest in target hospitals, they need to consider making suitable adjustments, such as modifying hospital operations or applying for necessary licenses to meet the conditions for providing retail services in Vietnam.
- Third, conducting an M&A transaction for a target hospital may lead to changes that require the hospital to apply for a new or adjusted operating license. Therefore, investors should thoroughly review any changes to the target hospital and carry out the necessary procedures in accordance with legal regulations.
2.2. Personnel of the target hospital
Typically, the personnel of the target company are one of the main groups most affected by the outcome of an M&A transaction. In the healthcare sector, for the current staff of the target hospital, the team of key doctors is a critical factor determining the investor’s success in managing and operating the hospital.
In addition to establishing “retention mechanisms” and appropriate incentive policies for them post-M&A, reviewing the licensing conditions of these personnel is also one of the issues that investors need to consider to avoid legal risks and negative impacts on the hospital’s reputation in the future.
For newly recruited personnel, it is important to note that if the personnel are foreigners hired to fill professional positions such as doctors, nurses, midwives, medical technicians, clinical nutritionists, out-of-hospital emergency responders, clinical psychologists, traditional medicine practitioners, or individuals with family remedies or traditional healing methods (“Professional Positions”), these individuals must meet the following basic conditions:
- Possessing a valid practice license;
- Having registered their practice, except in cases where registration is not required under the Law on Medical Examination and Treatment 2023 (“LMET 2023”);
- Meeting language requirements for medical examination and treatment. Specifically, the language used in medical examination and treatment is Vietnamese, unless otherwise stipulated in LMET 2023;
- Having sufficient health conditions to practice as regulated by the Minister of Health; and
- Not being fell under the cases prohibited from practicing medical examination and treatment as stipulated in LMET 2023.
In addition, according to the Labor Code 2019, Decree No. 152/2020/ND-CP, and Decree No. 70/2023/ND-CP, foreign workers in Vietnam holding Professional Positions are not exempt from work permits.
Thus, in addition to meeting the above conditions under LMET 2023, foreign personnel with Professional Positions must also obtain a work permit to practice in Vietnam as regulated by the Labor Code 2019.
2.3. Compliance with the environmental license of the target hospital
To minimize the risk of medical errors arising during the operation of the target hospital, foreign investors should focus on conducting legal due diligence regarding compliance with environmental protection requirements. According to the Law on Environmental Protection 2020 (“LEP 2020”), entities required to obtain an environmental permit include:
- Investment projects in Group I, Group II, and Group III that generate wastewater, dust, or emissions discharged into the environment requiring treatment, or generate hazardous waste that must be managed in accordance with waste management regulations when officially operational; and
- Investment projects, facilities, concentrated production, business, or service areas, or industrial clusters operating before the effective date of the LEP 2020 that meet environmental criteria as specified in item (i).
Due to the nature of their operations, hospitals often generate hazardous waste, particularly medical waste. Therefore, investors must carefully review current legal regulations to determine the appropriate project type and fully comply with environmental procedures, including applying for the environmental permit as mentioned above.
The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at info@blawyersvn.com. BLawyers Vietnam would love to hear from you.
Date: 25 March 2025
Writers: Chi Huynh & Chau Dang
