#Japan #Tokyo #M&A #ONE-VALUE #HRDD

Strengthening HRDD Support for Successful M&A in Vietnam

ONE-VALUE Corporation, headquartered in Koto Ward, Tokyo, has announced its plans to enhance its Human Resource Due Diligence (HRDD) support within its M&A advisory services focused on Japanese companies acquiring Vietnamese firms. This comes in light of a predicted recovery in the Vietnamese M&A market post-2025, where the emphasis is shifting toward both the quality of deals and the feasibility of post-acquisition integration.

Overview of the Vietnamese M&A Market

The M&A landscape in Vietnam has experienced a significant transformation. According to data referenced by ONE-VALUE, the number of M&A transactions is expected to reach 367 by 2025, with disclosable deal values totaling approximately 8.72 billion USD, reflecting a 26% increase from 2024's estimate of 6.93 billion USD. Notably, foreign investors account for over 53.6% of these total transactions, with Japanese and Thai investments remaining particularly strong.

However, the characteristics of M&A in Vietnam from 2025 to 2026 will not just revolve around the increase in transaction numbers; instead, investors are beginning to prioritize the quality of opportunities. Japanese companies are shifting their strategies, seeking more than just growth potential. They are increasingly rigorous in evaluating governance structures, workforce quality, labor management, and the likeliness of successful integration post-acquisition.

In this evolving market, HRDD has emerged as an essential component of the due diligence process. It has transitioned from being a supplementary checklist to a fundamental aspect that directly influences acquisition decisions, corporate valuation, transaction terms, and integration planning.

Importance of HRDD in M&A Transactions

HRDD involves a comprehensive assessment of an acquiring company’s human resource systems, organizational structures, labor-related obligations, and risks. It's more than merely confirming the number of employees or salary levels; it critically examines whether the organization can continue generating value post-acquisition. Key areas of emphasis include:

• - Organizational charts, workforce compositions, and employee retention
• - Salary structures, bonuses, benefits, and social security obligations
• - Identification of key personnel along with assessing retention risks
• - Compliance with labor laws, employment contracts, and workplace regulations
• - Evaluation of performance management systems and human resource information systems (HRIS)
• - Organizational culture and decision-making processes
• - Planning for post-acquisition integration related to human resources

Particularly in sectors such as IT, AI, semiconductor, manufacturing, and renewable energy, where the quality of talent can drastically impact corporate value, the results of HRDD are highly consequential to acquisition decisions.

The Risks of Inadequate HRDD Implementation

Failing to conduct thorough HRDD can lead to severe post-acquisition challenges. Key risks include:

1. High Turnover Risk: Post-announcement anxieties among employees regarding job security, evaluation processes, and management strategies can lead to significant talent attrition if key personnel are not identified and retention strategies are not implemented effectively.

2. Hidden Labor Costs: Undisclosed financial obligations related to severance pay, bonuses, or compliance issues can arise after acquisition, leading to unexpected costs.

3. Compliance Risks: Inadequate employment contracts or missing documentation may result in lawsuits or regulatory actions.

4. Cultural Conflicts: Differences in decision-making speed, agreement processes, and management styles between Japanese and Vietnamese firms can hinder successful integration if not addressed beforehand.

The ONE-VALUE Advantage

ONE-VALUE draws on extensive experience in supporting Japanese companies with their M&A endeavors in Vietnam. Its integrated approach to HRDD and M&A advisory ensures rigorous evaluation beyond mere document checks, facilitating practical solutions rooted in Vietnam’s labor laws, practices, organizational cultures, and worker sentiments. By collaborating with experts well-versed in Vietnam’s HR practices, ONE-VALUE meticulously scrutinizes labor documents, human resource systems, and potential risks.

Furthermore, ONE-VALUE provides PMI support, tackling cultural and procedural gaps between Japanese and Vietnamese firms, aiding in the integration of HR systems, organizational restructuring, and employee communication strategies.

Linking HRDD to PMI Planning

ONE-VALUE believes that HRDD should not merely be about pre-acquisition risk assessment but must also be interconnected with post-acquisition PMI planning. The insights gained from HRDD should influence various aspects, including share purchase agreements, transaction conditions, and communication strategies directed at employees following the acquisition.

A robust communication plan detailing employment conditions and organizational changes is crucial in alleviating employee concerns and minimizing turnover risks.

Conclusion

As the Vietnamese M&A landscape culminates a notable transformation headed toward recovery, assessing human resource aspects is vital for improving acquisition success rates. ONE-VALUE stands ready to assist corporations considering M&A in Vietnam, offering comprehensive due diligence services that account for HR-related risks.

For more details on how ONE-VALUE can assist you, please reach out to our customer service team at [email protected].

About ONE-VALUE

Since its establishment, ONE-VALUE has specialized in management consulting focused on Vietnam. The company's expertise and extensive practical experience in facilitating business operations between Japan and Vietnam have allowed it to provide tailored solutions across various sectors, maintaining a commitment to delivering optimal results for its clients.