PRIVATE EQUITY SURVEY 2018 Structuring Private Equity Investments - - PowerPoint PPT Presentation

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PRIVATE EQUITY SURVEY 2018 Structuring Private Equity Investments - - PowerPoint PPT Presentation

Oct 22, 2022 136 likes •308 views

PRIVATE EQUITY SURVEY 2018 Structuring Private Equity Investments HKBAV & BBGV 6 June 2018 PRIVATE EQUITY SURVEY 2018 HKBAV & BBGV AGENDA BACKGROUND SOME PRELIMINARY THOUGHTS FOR BUYERS AND SELLERS INVESTMENT / ACQUISITION

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PRIVATE EQUITY SURVEY 2018

Structuring Private Equity Investments

HKBAV & BBGV 6 June 2018

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PRIVATE EQUITY SURVEY 2018

HKBAV & BBGV

AGENDA

▪ BACKGROUND ▪ SOME PRELIMINARY THOUGHTS FOR BUYERS AND SELLERS ▪ INVESTMENT / ACQUISITION STRUCTURES ▪ OTHER CONSIDERATIONS

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BACKGROUND

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PRIVATE EQUITY SURVEY 2018

HKBAV & BBGV

BACKGROUND

▪ Investment climate

  • Role of the foreign lawyer is to work together with the “real” lawyers and try to make

sense of it all

▪ Twin track

  • Normal transaction procedures
  • Regulatory and licensing procedures

▪ Improvement of investment environment

  • New laws and implementing provisions
  • Streamlined procedures

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SOME PRELIMINARY THOUGHTS FOR BUYERS AND SELLERS

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PRIVATE EQUITY SURVEY 2018

HKBAV & BBGV

SOME PRELIMINARY THOUGHTS FOR BUYERS AND SELLERS

▪ Alignment – speaking the same language

  • Do both parties understand each other?
  • Valuation methodology
  • Exit considerations
  • Ongoing management / post-merger integration

▪ Can it be done – regulatory considerations?

  • Some conditions apply to foreign investors

▪ But let’s assume… that the hard work has been done and you need to structure a deal… what is the best approach?

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INVESTMENT / ACQUISITION STRUCTURES

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PRIVATE EQUITY SURVEY 2018

HKBAV & BBGV

Target Company Offshore Vietnam

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KEEPING IT SIMPLE

▪ Traditional approach

  • Investor buys capital contribution from seller
  • Subscribe

for capital contribution in target company

  • Convertible loan

▪ Exit

  • Exit by selling onshore capital contribution

▪ Issues

  • While this approach may appear simple, parties
  • ften decide to interpose an entity: sometimes
  • nshore, sometimes offshore sometimes both

Foreign Investor

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PRIVATE EQUITY SURVEY 2018

HKBAV & BBGV

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Offshore Holdco Target Company Offshore Vietnam

INTERPOSING OFFSHORE

▪ Preferred legal framework

  • More flexible legal structure

▪ Exitability

  • Simpler process, but tax considerations (see below)

▪ Ring-fence liability ▪ Issues

  • Restructuring local shareholders offshore
  • Naughty but nice

Foreign Investor

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PRIVATE EQUITY SURVEY 2018

HKBAV & BBGV

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Offshore Holdco Target Company Offshore Vietnam Onshore Holdco

INTERPOSING ONSHORE HOLDCO

▪ Multiple onshore business activities

  • Ring-fence liability

▪ Consolidated onshore financing

  • Debt financing
  • Equity financing

▪ Onshore Employee Stock Ownership Plan (ESOP)

  • Issuance of local management shares (if JSC)

Foreign Investor

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PRIVATE EQUITY SURVEY 2018

HKBAV & BBGV

WHAT’S THE PROBLEM WITH CONDITIONAL SECTORS?

▪ Certain conditional sectors place restrictions on foreign ownership ▪ Investment Law 2014 seems to allow certain work around structures as the following is deemed to be domestic investor

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PRIVATE EQUITY SURVEY 2018

HKBAV & BBGV

Foreign Investor Onshore Holdco Local Owner < 51% Target Company Onshore Holdco 2 Foreign Investor Onshore Holdco 1 Onshore Holdco 2 Target Company Target Company Onshore Holdco 3 < 51% < 51% 100%

51% Shareholding 76% Shareholding 100% Shareholding

100% 100% 100% 100% 100% Foreign Investor Onshore Holdco 1 Local Owner

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PRIVATE EQUITY SURVEY 2018

HKBAV & BBGV

CASE STUDY

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Foreign Investor Onshore Holdco Local Owner Target Company < 51% 100% Target company: ▪ Retail services ▪ Pawnshop ▪ Health and wellness services

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OTHER CONSIDERATIONS

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PRIVATE EQUITY SURVEY 2018

HKBAV & BBGV

TAX CONSIDERATIONS

▪ Capital gain tax on offshore transactions with underlying assets / businesses in Vietnam

  • Sales of major retail supermarkets
  • A hotel chain in Vietnam with offshore holding company

▪ Old structure: offshore holding company placed in a country with favourable Double Taxation Agreement with Vietnam in respect of capital assignment

  • Singapore
  • Netherlands
  • Malaysia

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MARK OAKLEY MANAGING PARTNER

 +84 16 9231 6565  mark.oakley@acsvlegal.com

ELAINE CHEW SENIOR ASSOCIATE

 +84 9 3893 5388  elaine@acsvlegal.com

HIEU PHAM ASSOCIATE

 +84 9 6838 4842  hieu.pham@acsvlegal.com

MARIEKE VAN DER PIJL BUSINESS DEVELOPMENT MANAGER

 +84 9 1492 5842  marieke@acsvlegal.com

CONTACT US

ACS LEGAL VIETNAM COMPANY LIMITED (ACSV LEGAL) LEVEL 2, SOMERSET CHANCELLOR COURT, 21-23 NGUYEN THI MINH KHAI STREET DISTRICT 1, HO CHI MINH CITY, VIETNAM T: +84 28 3822 4539 F: +84 28 3822 4239

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