Vietnam’s manufacturing sector is no longer just a low-cost production hub; it has become a vital part of global supply chains. From advanced electronics to high-volume textiles, the country now offers a mix of skilled labor, strategic trade access, and operational efficiency that continues to attract foreign capital.

For investors, mergers and acquisitions (M&A) are often the fastest and most practical route to securing factory capacity, accessing local teams, and entering the domestic market. But behind every opportunity lies a complex legal and regulatory framework that can either support or stall the deal. Understanding how to navigate this terrain is key to executing a successful merger or acquisition. 

This guide walks you through what foreign buyers should know when exploring M&A transactions in Vietnam’s fast-moving manufacturing landscape.

Why Manufacturing Is a Target for M&A in Vietnam

Vietnam’s growing role as a regional manufacturing hub, combined with its skilled labor pool, vast network of free trade agreements (FTAs), and expanding infrastructure, makes it a compelling manufacturing base in Asia. Foreign investors view M&A as a shortcut to gaining strategic footholds in the region.

Acquiring a local manufacturer allows foreign buyers to:

  • Quickly obtain factory space and licenses without building from scratch
  • Leverage established supply chains, distribution networks, and workforces
  • Access domestic and FTA markets with preferential tariff treatment

Popular targets include:

  • Electronics and electrical component plants
  • Garments, textiles, and footwear manufacturers
  • Wood processing and furniture exporters
  • Food and beverage processing facilities

At the same time, many Vietnamese manufacturers are seeking capital, technology, and access to overseas markets, making them receptive to foreign investment. This mutual interest creates a ripe environment for joint ventures or full acquisitions when structured properly.

Pre-Deal Considerations: Legal and Regulatory Factors

Before committing to a transaction, investors should assess whether the target company operates in a sector subject to conditional or restricted foreign ownership under Vietnam’s investment laws. Some industries require prior approval from specialized ministries or impose equity caps. 

Another important factor is whether the company holds licenses or incentives tied to its current ownership or location. In some cases, a change in shareholders may impact the continued validity of these approvals. 

Foreign buyers should also consider management compatibility and the Vietnamese entity’s internal corporate structure. Joint ventures may require extra caution, especially if minority partners or family-owned elements are involved. 

Legal Due Diligence for Manufacturing Targets

Manufacturing targets require thorough due diligence that goes beyond reviewing financials. Key areas to investigate include:

  • Land and factory ownership: Many manufacturers operate on long-term leased land in industrial parks. Review the lease terms, land-use rights certificates, and whether subleases or third-party interests exist.
  • Labor compliance: Confirm that employment contracts, overtime policies, social insurance contributions, and union obligations meet legal standards.
  • Environmental matters: Check for valid environmental impact assessments (EIA), wastewater discharge permits, and history of inspections or violations.
  • Intellectual property (IP): Review trademarks, trade secrets, and whether any proprietary production methods are registered or protected.
  • Legal disputes and risks: Identify any ongoing litigation, government audits, or unresolved penalties.

Thorough due diligence will inform valuation and deal structuring while minimizing post-acquisition surprises.

Structuring the M&A Deal

One of the first decisions in any deal is whether to acquire shares or assets. Each approach has trade-offs:

  • Share purchases preserve the legal entity and its existing licenses, contracts, and permits. But they also come with the target company’s liabilities, known or unknown.
  • Asset purchases allow buyers to pick and choose what they acquire, such as factories, machines, and IP, but typically require more licensing procedures and approvals.

In Vietnam, many foreign investors prefer share purchases in manufacturing because licenses (like environmental approvals or fire safety certifications) may not easily transfer to a new legal entity.

However, asset deals may still be helpful when the target company has compliance risks, or the buyer wants to exclude unrelated business lines.

More complex structures might involve:

  • Joint ventures with phased buyout options
  • Transitional services agreements to support knowledge transfer
  • Carve-outs of specific product lines or factory units

Getting the structure right requires close coordination between legal, tax, and operational advisors.

Government Approvals and Notifications

M&A transactions involving foreign investors typically require:

  • Updates to the Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC)
  • Approval from sector regulators in conditional sectors (e.g. pharmaceuticals, logistics)
  • Notification to land management authorities if land leases are affected
  • Updates to environmental and labor records under the new ownership

Proper sequencing of approvals is critical to avoid delays. Timelines vary depending on the target company’s structure and location. 

Common Challenges in Manufacturing M&A

While Vietnam welcomes foreign investment, manufacturing M&A deals can face roadblocks:

  • Licensing gaps: Target companies may have incomplete or outdated licenses
  • Undisclosed liabilities: Labor or environmental issues may not be documented
  • Informal accounting: Smaller companies often maintain parallel financial records
  • Integration risks: Operational systems, HR practices, and supplier relationships may resist foreign control

Anticipating these challenges and addressing them in the deal documents can protect buyers from operational and reputational harm.

Post-Transaction Risks and Compliance Obligations

After closing the deal, buyers must ensure smooth business continuity and legal compliance:

  • Labor transition: Changes in leadership or policy may trigger labor unrest if not communicated properly
  • Land-use rights: Transfers may require new lease registration or renegotiation
  • Environmental compliance: Buyers may face inspections shortly after takeover
  • Regulatory reporting: Post-deal filings must be made to tax authorities, ministries, and industrial park management boards

A transition plan supported by legal advisors can reduce risk in the critical first year after acquisition.

How Foreign Investors Handle Land and Factory Ownership in M&A Deals

Land is a sensitive and heavily regulated asset in Vietnam. Foreign investors cannot own land outright, but they can control land-use rights through Vietnamese companies. In M&A deals involving manufacturing targets, understanding land status is essential.

Buyers should assess:

  • Whether the land is leased from the government or subleased within an industrial zone
  • If the lease is tied to the company being acquired or a related party
  • Whether lease transfer procedures will trigger approvals or fees
  • Any restrictions on modifying the land use (e.g. expansion, construction)

Overlooking land-related obligations is one of the most common pitfalls in manufacturing M&A. Early legal review of land-use rights, zoning regulations, and lease terms can prevent delays and unexpected costs post-acquisition.

Cross-Border Payment and Tax Considerations in Manufacturing M&A

Making and receiving payments across borders for M&A deals in Vietnam involves both commercial planning and legal compliance.

Key considerations include:

  • Capital gains tax: Share transfers may trigger taxes for the seller, particularly if shares are held offshore.
  • Foreign exchange controls: Payments from overseas must be made through registered investment capital accounts.
  • Pricing transparency: Declared transfer prices must reflect fair market value or risk scrutiny from tax authorities.
  • Escrow or milestone payments: These are often used to mitigate risk pending regulatory approvals or performance conditions.

Buyers should also consider whether to structure payments through holding companies in jurisdictions with double tax treaties with Vietnam. Legal and tax counsel should review all structures to ensure regulatory compliance and tax efficiency.

Conclusion 

Vietnam’s manufacturing sector is full of opportunity, but executing a successful M&A deal requires careful attention to legal detail. From identifying hidden liabilities to managing land and labor transitions, the due diligence and structuring phases are critical. A strong understanding of Vietnam’s licensing, regulatory, and post-deal compliance landscape helps protect your investment and ensure long-term success.

If you are considering an acquisition or partnership in Vietnam’s manufacturing space, we’re here to help. At Corporate Counsels, we provide clear, business-focused legal guidance to navigate each stage of your M&A transaction. You can contact us at letran@corporatecounsels.vn to explore how we can support your M&A objectives in Vietnam.