M&A in the Vietnamese market currently has been quite active. However, there are several investors who underestimate the post-M&A risks to have a sound strategy. What are those risks and how to limit them?
1. Common risks after M&A transactions are disputes
In fact, the post-M&A disputes is often complex. Types of dispute may include:
- Disputes between new shareholders/ members and founding shareholders/ members or between the seller and the buyer on the issue of operating the target company after M&A;
- Labor disputes when new owner restructures the workforce, or terminates labor contracts with key employees of the old labor structure;
- Business-, commerce-, contract-, intellectual property-related disputes with partners having cooperative relationship in current time or in the past with the target company. Although the legal issues in a M&A transaction have been carefully appraised, it is not totally predictable about all aspects from it; or
- Dispute over the issue of forging legal documents when the seller deliberately gives those documents to persuade the buyer to perform an M&A transaction.
2. Measures to limit the common risks after M&A transactions
Firstly, for a dispute between the seller and the buyer, the parties should clearly specify the wishes and ways to resolve conflicts/ disputes if they cannot achieve those wishes in the share sale and purchase contract or shareholders agreement. These agreements, if the parties closely, reasonably and fully made, would be very helpful when issues arise or help the parties explain the issues.
Secondly, for a labor dispute with an employee or collective employees, the buyer or the company’s new management board should settle it in accordance with the law with considering interests of those who works for the target company for a time. The company should have a roadmap for retraining and job switching before considering a retrenchment plan to those employees.
Thirdly, for disputes with working partners, the parties or the target company should review contracts signed with those partners, to find out legal risks that may arise. At the closing date of the M&A deal, the company should send a notice to all working partners to be able to check unresolved matters and have a solution.
Finally, for the issue of forging legal documents, in addition to specifying this issue in the M&A-related contracts, the parties should carefully check those documents with the issuing authority before signing the M&A contracts.
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