A company that negotiates with a single strategic investor — even the largest private equity fund in the region — places itself at a structural disadvantage from the first indicative offer. The buyer knows there is no alternative, so every deadline pressure, every aggressive Reps & Warranties position, and every extended Escrow period can be pushed onto the seller without real risk of losing the deal.
Conversely, a company pursuing a pure IPO route carries market risk instead: a 12–18 month process exposed to public-market appetite at the precise moment of listing, with no guarantee that the valuation prevailing when the State Securities Commission (SSC) approves the prospectus will still hold by the time shares are actually offered.
The Dual-Track Process resolves this bind: the company runs two workstreams simultaneously — preparing an initial public offering (IPO) filing and negotiating a strategic sale or private placement — up to the point where one path must be chosen. This is not a stalling tactic; it is a structured mechanism for competitive tension that forces a strategic buyer to price close to, or above, the public-market benchmark in order to beat the listing alternative.
In Vietnam, executing this strategy correctly requires simultaneous command of three legal layers: the offering and listing conditions under the 2019 Securities Law, the economic concentration notification thresholds under the 2018 Competition Law, and the fiduciary duties of company managers running two live transactions in parallel under the 2020 Enterprise Law.
1. The Competitive-Tension Mechanism: Why Dual-Track Is More Than “Having a Backup Option”
The core commercial value of a Dual-Track process does not lie in simply “having two options” in the trivial sense. It lies in the signalling effect on the strategic buyer: every document prepared for the IPO track — the preliminary prospectus, audited financial statements prepared to public-company standard, and the underwriting adviser’s due diligence opinion — is concrete evidence that the company has a credible, independent exit path that does not depend on any single buyer’s goodwill.
Once a strategic investor sees that the IPO filing has reached the stage of submission to the SSC, that investor is forced to price the transaction against the expected public-market valuation (typically reflected in the P/E or EV/EBITDA multiples of comparable listed peers), rather than the liquidity-discounted valuation customarily applied to private transactions.
In corporate-finance terms, this is the mechanism for eliminating the “illiquidity discount” and the “sole-bidder discount” — the two discounts a single buyer is always incentivized to build into its offer once it knows the seller has no fallback. International market experience suggests the valuation gap between an exclusive negotiation scenario and a scenario with genuine competitive tension (including tension created purely by a credible IPO track) can range across roughly 15–30% of equity value, depending on sector and scale.
This range is an illustrative assumption offered purely as a reference framework, not a deal-specific figure; the actual gap depends entirely on asset quality, prevailing capital-market conditions at the time of the transaction, and the number of genuine bidders in play.
2. Keeping the “IPO Door” Legally Open: Offering and Listing Conditions in Vietnam
For the IPO track to generate genuine negotiating leverage — rather than functioning as a mere press statement — the company must be able to demonstrate, at the precise moment it needs to play that card, that it can meet the statutory conditions.
Under Article 15 of Securities Law No. 54/2019/QH14, the conditions for an initial public offering of shares by a joint-stock company include: (i) contributed charter capital of at least VND 30 billion as recorded in the most recent audited financial statements at the time of registration; (ii) two consecutive years of profitable operations immediately preceding the year of registration, with no accumulated losses as of the registration year;
(iii) an issuance plan and a use-of-proceeds plan approved by the General Meeting of Shareholders; and (iv) a minimum of 15% of the issuer’s voting shares sold to at least 100 investors who are not major shareholders (this threshold is reduced to 10% where the issuer’s charter capital is VND 1,000 billion or more).
The condition most often underweighted in practice is the major-shareholder lock-up commitment: under Article 15, shareholders (individuals or organizations) holding 5% or more of voting shares must collectively commit to hold at least 20% of charter capital for a minimum of one year from the completion of the offering.
This has a direct commercial bearing on Dual-Track strategy: if founding shareholders intend to realize a significant portion of their equity shortly after an IPO, the statutory lock-up will materially constrain near-term liquidity — precisely where a parallel M&A track, which is not subject to a statutory lock-up (only to whatever lock-up is negotiated contractually), can offer superior value to a shareholder seeking a clean exit.
Once the offering is complete, listing the shares on the Ho Chi Minh Stock Exchange (HOSE) requires meeting the further listing conditions under Decree 155/2020/ND-CP: contributed charter capital of at least VND 30 billion at the time of listing registration, a return on equity (ROE) of at least 5% for the year preceding listing registration, a shareholder structure that continues to satisfy the 15%/100-investor test applicable to the offering, and a commitment from internal and major shareholders to retain 100% of their shares for the first six months from listing, followed by at least 50% for the subsequent six months.
| Legal requirement | Legal basis | Relevance to Dual-Track | Risk if overlooked |
|---|---|---|---|
| Contributed charter capital ≥ VND 30 billion | Article 15, 2019 Securities Law; Decree 155/2020/ND-CP | Capital increase and audit must be completed before opening the IPO track alongside M&A negotiations | High — the IPO filing is rejected if unmet |
| Two consecutive profitable years, no accumulated losses | Article 15, 2019 Securities Law | A recently restructured or recently loss-making company must delay activating Dual-Track | High |
| Minimum 15%/100 non-major investors | Article 15, 2019 Securities Law; Article 109, Decree 155/2020/ND-CP | Directly affects the ownership percentage founders must relinquish if the IPO branch is chosen | Medium |
| Minimum 20% charter capital held for 1 year (major shareholders) | Article 15, 2019 Securities Law | Constrains near-term liquidity — must be weighed against the M&A branch’s exit terms | Medium to High depending on exit objective |
| ROE ≥ 5% in the preceding year; 100%/50% lock-up over 6+6 months at listing | Decree 155/2020/ND-CP | Affects when shareholders can realize gains after choosing the IPO branch | Medium |
3. Obstacles on the M&A Side: Economic Concentration Control and Foreign Investment Approval
The M&A track of a Dual-Track process is not exempt from administrative procedures that can extend closing timelines — a factor that must be built into the parallel schedule from the outset.
Under Competition Law No. 23/2018/QH14 and Decree 35/2020/ND-CP (with thresholds adjusted by Resolution 66.18/2026/NQ-CP, effective 1 July 2026), a merger or acquisition constituting economic concentration must be notified to the National Competition Commission before completion where the parties (assessed on a group basis) exceed any one of the following current thresholds: total assets in the Vietnamese market of any party at VND 6,000 billion or more (VND 3,000 billion before 1 July 2026); total sales or purchase turnover in the Vietnamese market at VND 6,000 billion or more (also VND 3,000 billion before that date); the transaction value at VND 2,000 billion or more (VND 1,000 billion before that date); or the parties’ combined market share in the relevant market at 20% or more (this threshold is unchanged).
Separate, materially higher thresholds apply to insurers and credit institutions (for example, VND 15,000 billion in total assets for insurers).
Completing a transaction before a valid notification is filed, or before the review period has expired (so-called “gun-jumping”), is a violation subject to penalties calculated as a percentage of turnover, and in serious cases can require the parties to unwind the transaction. For a company running a Dual-Track process, the practical risk is rarely a simple failure to notify; it is misjudging when the competition-clearance process must start relative to the IPO timeline.
Where the strategic buyer is a large player in the same industry, the competition review can take longer than the SSC’s processing of the offering filing, turning the M&A branch — assumed at the outset to be the faster path — into the slower one.
Where the M&A buyer is a foreign investor, market-access conditions under Investment Law No. 143/2025/QH15 and the market-access conditions list issued with Decree 96/2026/ND-CP must be reviewed in parallel.
Where the foreign investor’s share purchase would result in ownership of 51% or more of charter capital in a conditional-access sector, or where the target holds a land-use rights certificate in a border or island area, the transaction may require registration of the capital contribution or share purchase under Article 21 of the 2025 Investment Law before the shareholder change can be recorded with the business registration authority — an additional approval step that must be built into the Conditions Precedent of the M&A agreement and factored into the timeline comparison against the IPO branch.
4. Running Both Tracks Without Breaching Fiduciary Duties: Confidentiality and Conflicts of Interest
Running two processes simultaneously creates real governance risk that the Board cannot disregard. Under Article 165 of Enterprise Law No. 59/2020/QH14, Board members and company managers have a duty to exercise their rights and perform their duties honestly and prudently, in the best lawful interests of the company. This duty is particularly acute where management must allocate internal resources, senior-management time, and access to sensitive financial information between two external counterparties — the IPO underwriting bank and the strategic buyer — without either side learning the details of the other’s negotiation.
In deal practice, three controls are typically established alongside a Dual-Track structure: (i) separating the data rooms and advisory teams serving each track, limiting personnel with simultaneous access to both document sets to reduce the risk of leakage affecting valuation;
(ii) establishing a Special Transaction Committee reporting to the Board, with authority to decide the timing and criteria for moving from “running in parallel” to “selecting a single track,” to avoid conflicts of interest among senior managers who may benefit differently depending on which exit path is chosen; and (iii) reviewing confidentiality and Exclusivity/No-Shop provisions that strategic buyers typically request as early as the preliminary negotiation round — a No-Shop clause signed too early, or drafted too broadly, can neutralize the entire strategic value of Dual-Track before the company has a chance to use the IPO track’s competitive pressure.
5. The Financial Framework: Measuring the Value Added by Competitive Tension
In corporate-finance terms, the decision to run a Dual-Track process should be evaluated as an investment in a real option: the cost of maintaining two tracks in parallel (audit and advisory fees, standby underwriting fees, senior-management time) is traded against the potential to capture the valuation gap created by competition. The minimum framework the Board should require its finance team to present before approving a Dual-Track budget includes:
| Component | What must be quantified | Note |
|---|---|---|
| Base Enterprise Value | Independent valuation using DCF and comparable trading/transaction multiples for listed sector peers | The reference floor for both tracks, not the final offer price |
| Cost of running both tracks in parallel | IPO audit/advisory fees, M&A investment-banking fees, opportunity cost of management time | The component most often omitted from deal budgets |
| Estimated Competitive Tension Premium | Comparison of the expected offer price under exclusive negotiation versus the expected price once the buyer knows a credible IPO alternative exists | Illustrative assumption — must be modeled against sector-specific data, not a fixed rate applied to every transaction |
| Decision/Fork Point | The latest point at which the IPO track can be withdrawn without incurring material sunk cost, typically before the formal prospectus is filed | Should be fixed in writing in a Board/Shareholders’ resolution to avoid later internal disputes |
| Return bridge for the strategic buyer | Where the buyer is a PE fund, estimate the fund’s expected MOIC/IRR at different offer prices to understand the price ceiling the fund can realistically accept | Helps the seller identify a “workable negotiation band” rather than demanding a price beyond the fund’s minimum return threshold |
Presenting this framework is not intended to commit to a specific price — that depends entirely on the outcome of actual financial, tax, and legal due diligence for the specific transaction — but to force the Board to decide on a quantified basis, rather than the intuition that “having one more option is automatically better.”
6. Execution Risk Matrix and Mitigations
| Issue | Risk | Severity | Mitigation |
|---|---|---|---|
| Signing an Exclusivity/No-Shop clause too early with the strategic buyer | Neutralizes the IPO track’s competitive leverage before it is needed | High | Limit the No-Shop period (e.g., 30–45 days) and tie it to completion of specific due diligence milestones rather than the entire negotiation |
| Information leakage between the two internal advisory teams | The buyer learns the company is “running two tracks,” undermining the deterrent value of competitive tension, or non-public information reaches the market ahead of the company’s disclosure obligations as a would-be public company | High | Separate data rooms, track-specific confidentiality agreements, and access limited to senior management level |
| Competition-clearance timeline exceeding the IPO filing timeline | The M&A branch, assumed to be faster, becomes the slower one, disrupting the decision schedule | Medium | Begin a preliminary economic-concentration threshold assessment as soon as the list of potential buyers is identified, rather than waiting until a term sheet is signed |
| Major shareholders disagree on the fork-point criteria | Internal disputes and risk of minority shareholder claims if the decision lacks transparency | Medium | Record the criteria and decision authority in a Shareholders’ Resolution or Shareholders’ Agreement (SHA) before launching the Dual-Track process |
| Failure to plan for the major-shareholder lock-up if the IPO branch is chosen | Founders are locked into equity longer than planned, disrupting personal financial plans | Medium to High | Model the lock-up impact (Article 15, 2019 Securities Law; Decree 155/2020/ND-CP) before selecting a branch, and compare against the M&A branch’s Earn-out/Escrow terms |
Frequently Asked Questions
Does running a Dual-Track process slow down both paths compared to pursuing a single option?
It can, if not tightly managed. The time cost to senior management and the risk of diluted focus are real. However, much of the incremental cost — public-company-standard audits, comprehensive legal due diligence — is work that any serious M&A transaction requires in any event, so the true marginal cost is often lower than it first appears when the two workstreams are properly coordinated.
Can a company that does not yet meet the listing conditions still use a Dual-Track strategy?
Yes, though with more limited leverage. A company can use the fact that it has “begun the process of becoming a public company” — capital increases, standardized financial reporting, engaging advisers — as a credible signal of an alternative exit path, even before reaching formal filing. The negotiating leverage this creates scales with the genuine maturity of the preparation, not with a mere statement of intent.
Who has the authority to decide the fork point between the two tracks?
In principle, this sits within the Board’s authority under the company’s charter and the 2020 Enterprise Law, but it should be specified in a dedicated resolution or in the Shareholders’ Agreement before the Dual-Track process is launched, particularly where a major shareholder such as an investment fund holds a veto right over exit transactions.
Is the cost of a Dual-Track process justified for companies of every size?
No. It is best suited to companies large enough that the fixed costs of an IPO process (audit, advisory, underwriting) do not represent an outsized proportion of the expected transaction value — typically companies that already meet, or are close to meeting, the listing charter-capital thresholds under Decree 155/2020/ND-CP. For smaller companies, similar competitive tension can often be achieved through a well-run controlled auction with multiple strategic bidders, without incurring the cost of preparing a parallel IPO track.
Next Steps
The decision whether to open a Dual-Track process, and when to move from “running in parallel” to “selecting a single path,” depends on the company’s specific financial profile, existing shareholder structure, governance readiness, and prevailing capital-market conditions — there is no one-size-fits-all formula. IVLF advises boards and founding shareholders on building an Exit Decision Matrix that reviews, in parallel, the offering and listing conditions under the Securities Law, the economic concentration notification thresholds under the Competition Law, and the internal governance controls needed to run two transactions simultaneously without breaching managers’ fiduciary duties.
To discuss your company’s specific position confidentially with an IVLF Partner or Senior Counsel, please contact us at (+84) 936 726 065 or info@ivlf-advisors.com.
This article is general information as of the date of publication and does not constitute legal advice on any specific transaction.
This article is provided for general information only and does not constitute legal advice for any specific case. Regulations may change – please consult a qualified professional before acting. Should further analysis be required, please contact one of our lawyers below.
