Modern businesses are looking for every opportunity to be successful. Thanks to globalization, firms can find promising projects in any country. Vietnam is an attractive place for investment, as the economy has shown stable growth for almost 10 years. According to statistics, total foreign investment in 2023 exceeded $18 billion, 8.2% higher than in 2022. Analysts say this trend will continue, and in 2026, the amount could exceed 20 billion.
It is obvious that successful Vietnamese businesses do not make rash decisions. Each investment is the result of painstaking work and careful analysis. It’s good that the modern world offers excellent tools for complex analysis. You can use these programs to make smart decisions.
Due Diligence là gì or Navigating the Process in Details
The due diligence process is necessary if you want to understand all the transaction features and identify all the risks. This is true both for projects in Vietnam and for others. It is important to understand that the transaction process has its logic, so it is necessary to follow some general requirements.
- Confirm or clarify information about the object of the transaction.
- Conduct an operational audit of the partner company’s business cycle.
- Analyze financial statements and predict the borrower’s solvency.
- Assess all risks associated with investments and the conclusion of a transaction.
- Determine the status of assets and all unbalanced funds.
A complete due diligence report allows you to make informed decisions with an understanding of all risks. Today, this is a mandatory step for quality investments.
Comprehensive Due Diligence Questionnaires
Conducting thorough due diligence is a critical step towards ensuring successful business ventures. Through comprehensive due diligence questionnaires tailored to Vietnam’s legal framework, investors can mitigate risks and uncover vital information that could impact their decisions. By incorporating legal nuances and market-specific insights into the due diligence process, parties can assess potential legal impediments and adapt their strategies accordingly. The significance of due diligence in Vietnam cannot be overstated, as it provides a safeguard against unforeseen challenges, assuring that every move within Vietnam’s business landscape is made with a clear understanding of the underlying legal and financial factors. Therefore, mastery of due diligence is an indispensable skill in Vietnam’s evolving market landscape.
Modern due diligence data rooms have expanded functionality. One of the important functions that allows you to obtain useful information is working with questionnaires. This stage may have several main stages.
- Analysis of company employee profiles.
- Documentary data verification.
- Classification of questionnaires and forecasting.
As a result of working with the questionnaires, the user receives an audit report containing the main conclusions based on the information studied, identified risks, and recommendations for eliminating them.
Technical and Tax Due Diligence Insights
Mastering due diligence requires a keen understanding of technical and tax landscapes. Technical due diligence in Vietnam scrutinizes the operational aspects of the target asset, ensuring that all systems and infrastructures align with local regulations and international standards. Tax due diligence is equally crucial as it unveils potential fiscal liabilities, offering insights into Vietnam’s complex tax regime. When coupled, technical and tax insights empower investors to navigate Vietnam’s evolving market landscape confidently. This dual approach to due diligence in Vietnam often necessitates rigorous evaluation, extending beyond comprehensive due diligence questionnaires to engage with the intricate details of Vietnam’s business environment.
Comprehensive verification allows you to obtain important information about the object of the transaction. Today, these tools are actively used in various fields. For example, tax due diligence is an analysis of the tax practice of an object and the state of its settlements with the budget. During this audit, the level of potential risks (and associated sanctions) is determined, and recommendations are made to bring the existing facility model to best practices and legal requirements.
Also, there is technical due diligence, which involves checking the operational activities of the Facility: the state of assets, business processes, and practices. As a rule, such verification is carried out by the Buyer’s team or under its leadership with the involvement of external consultants. The transaction price may also be adjusted since the unsatisfactory condition of the assets may require additional investment.
Vietnamese Financial and Legal Due Diligence Unpacked
Financial due diligence in Vietnam involves meticulously reviewing financial statements to ensure the viability and integrity of potential investments. Meanwhile, legal due diligence is equally crucial; it entails examining legal documents to navigate Vietnam’s evolving statutes and regulations. Both financial and legal due diligence in Vietnam are not just procedural necessities; they are vital instruments for mitigating risk and uncovering value. This detailed process, now unpacked for clarity, requires investors to scrutinize a myriad of factors, from Vietnamese tax obligations to compliance histories, ensuring due diligence in Vietnam is thoroughly mastered.
Statistics show that the tourism and financial sectors are the most promising areas for investment in Vietnam. Unsurprisingly, due diligence is also extremely important in such sectors. We want to draw your attention to the benefits of this approach.
- Financial due diligence is the process of collecting and analyzing the financial data of an Entity. This type of due diligence is carried out directly by the buyer’s team or a specially engaged team of auditors. Typically, such a review aims to confirm or adjust financial results and examine the reasonableness of the Entity’s forecasts.
- Legal due diligence is collecting and analyzing various legal information about the property: registration status and ownership of major assets, terms of key contracts, lawsuits and encumbrances, compliance with the requirements of current legislation, etc. Legal due diligence is usually carried out by a specially engaged team of lawyers with different specializations depending on the task.
Thus, due diligence is one of the most important stages of a transaction, which can make significant adjustments to the plans of the parties, the structure, and the price of the transaction or even stop the further implementation of such a transaction.
Evaluating Third Parties and Market Opportunities in Vietnam
Evaluating third parties is crucial for conducting thorough due diligence in Vietnam’s evolving market. By meticulously assessing affiliations, companies can foresee and mitigate risks associated with partnerships. As Vietnam’s economy grows, recognizing market opportunities is equally paramount. Firms must adeptly navigate Vietnam’s commercial landscape to capitalize on these opportunities. Analyzing market trends, understanding regulatory changes, and identifying growth sectors are all integral parts of evaluating Vietnam’s market possibilities. In-depth due diligence protocols ensure that third parties align with corporate standards and business ethics, setting the stage for successful ventures in Vietnam. Adhering to these principles of evaluation will serve businesses well in harnessing Vietnam’s market opportunities with confidence and strategic insight.
We believe that it is important to entrust due diligence to a third party that uses only modern and high-quality software. Reputable independent companies can guarantee impartiality and also provide honest due diligence. The third party must be objective and not interested in the benefit of one of the parties.
Another good practice is drawing up a disclosure letter, which should become an integral part of the purchase and sale agreement. In this letter, the seller sets out all the defects of the Vietnamese property known to him, and after acceptance of such a letter by the buyer, claims can only be made for defects not listed in the information disclosure letter.
Identifying Problem Statements
During a company’s due diligence, various complications and additional problems may arise. We want to highlight the most common options.
- Complete withdrawal of one of the parties from the transaction.
- Suspension of a transaction at the initiative of one of the parties until certain problems are resolved.
- Changing the deal structure.
- Adjustment of the basic terms of the transaction.
- Maintaining the basic terms of the transaction and providing the seller only with basic warranties and representations.
To reduce risks, we recommend avoiding personal guarantees on all matters other than those regarding title to the property so as not to jeopardize its other assets.
Conclusion
Thus, due diligence is one of the most important stages of a transaction, which can make significant adjustments to the plans of the parties, the structure, and the price of the transaction or even stop the further implementation of such a transaction. Of course, the primary factors are still the parties’ intentions, the transaction’s business logic, and the willingness and ability to negotiate.
Proper preparation for due diligence will significantly reduce the time and necessary resources to complete it and significantly increase the chances of successful transaction completion. We recommend using modern date rooms that offer high-quality functionality and ensure maximum transaction security. In this case, you can quickly conduct a comprehensive analysis, gain access to all documents, and make the right decision.