Inside Vietnam’s ‘Approval Layer’ — The Hidden Delay in Every Deal
July 23, 2025
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July 24, 2025Vietnam’s M&A environment is evolving fast, and with it, so are the tools dealmakers use to navigate regulatory constraints. As foreign ownership caps and execution risks mount across sectors like healthcare, education, and consumer services, investors are turning to alternative structures that prioritize economic alignment over legal control. Revenue-share, licensing, and operator models are no longer considered second-tier workarounds. In many deals, they lead the strategy.
Why Ownership Isn’t the Only Path Anymore
For much of the past decade, foreign investors in Vietnam followed a clear playbook: acquire majority equity, secure control, and upgrade operations via governance or management appointments. But this path is increasingly constrained.
Equity limits apply to sectors designated as “conditional” under Vietnamese law, including healthcare, logistics, education, and advertising. In other cases, unclear licensing rules, provincial-level obstacles, or lengthy approvals render direct acquisition impractical. And in many family-owned Vietnamese businesses, majority equity may not even be available.
Sophisticated investors are now decoupling ownership from control. Instead of acquiring shares, they negotiate economic participation—gross revenue, net profit, or cash flows—via contracts granting operating rights, brand usage, or service delivery. These agreements follow Vietnamese law but are designed for international enforceability and aligned with transfer pricing standards.
This reframes the concept of “control.” Often, the investor guides outcomes—pricing, brand, service delivery—without holding legal title. This approach suits platform operators, regional consolidators, and foreign groups seeking sector exposure without entering Vietnam’s equity compliance maze.
Deal Structures in Practice: How Revenue-Share Works
Revenue-share structures in Vietnam follow no single formula. They adapt to each sector’s commercial objectives and regulations. Three models are most common.
First, management contracts allow foreign operators to run daily operations while earning a fixed percentage of top-line revenue. These agreements, typically five to ten years long, contain terms for bonuses, exclusivity, and renewals. In healthcare and consumer services, where daily revenue is steady, this model delivers reliable cash flow with low overhead.
Second, brand licensing enables foreign companies to monetize intellectual property, systems, and brand equity while transferring execution risk to local partners. Royalties link to gross or net revenue and are often paired with training, systems, and site support. These deals include exclusivity terms, brand standards, and provisions for operational control in case of breach.
Third, hybrid joint ventures combine minority equity with service or licensing contracts. This gives investors financial visibility and some shareholder protection while preserving their main economic participation through externalized cash flow. In regulated sectors like education or finance, this balance of alignment and compliance is critical.
An Example in Healthcare
One case involved a foreign healthcare operator partnering with a Vietnamese hospital group. Through a five-year agreement, the Vietnamese partner kept its land rights and health licenses. In exchange for international branding and system support, the foreign operator earned 18% of gross revenue and future expansion exclusivity. With no equity transfer, both sides achieved key outcomes—higher pricing and credibility for the hospital, operating leverage for the foreign group.
These contracts specify service levels, branding rights, non-compete clauses, and audit mechanisms. Lotus Venture structures fallback tools such as renegotiation clauses, revenue guarantees, and audit-linked incentives to ensure durability and performance.
Where It Works Best: Sector Applications
These models do not apply universally. They perform best where brand strength matters, revenue recurs, and ownership is fragmented.
Healthcare: Many second-tier hospitals and clinics remain privately run but underused. Foreign operators provide protocols, IT systems, and training that boost both care quality and margins. Revenue-share arrangements often span 5 to 10 years with KPIs linked to patient volume or care quality. Local doctors retain clinical decision-making, so operating roles require careful framing.
Retail and F&B: Licensing and operating models suit international franchises looking to scale without deep equity risk. A regional café brand recently entered Vietnam via a 10-year licensing deal. The contract included 7% royalties, capex support, and exclusive territory rights. With menu and design control retained, the brand expanded quickly in major cities without equity commitments.
Golf and tourism: Assets here are difficult to own due to land rights and provincial barriers. Instead, foreign investors sign development or operator deals, adding design expertise and management systems. In return, they earn shares of revenue from tee-times, retail, or F&B. One southern Vietnam golf project awarded a foreign brand 15% of revenue for design input and management over a 36-hole course.
Legal and Commercial Risks: Navigating the Grey Zones
The benefits are clear—faster deals, lower risk, and real economic exposure. But the risks require careful structuring. With no equity stake, investor protection relies fully on contract strength.
Disputes can arise over revenue reporting, performance metrics, and service quality. Contracts must define audit rights, escalation paths, and clear financial terms like “net revenue” or “adjusted EBITDA.”
If the local partner defaults, sells, or faces bankruptcy, the deal can unravel. Protective clauses—such as change-of-control provisions, asset security rights, or milestone-based step-ins—become essential.
Vietnam’s foreign investment rules, notably Decree 31/2021, create gray zones. For instance, foreign firms cannot direct clinical decisions in healthcare. Contracts must ensure compliance by delineating brand support from regulated activity. Similar constraints exist in education around staffing and curriculum.
To manage these risks, Lotus Venture includes bilingual drafting, legal opinions, and arbitration forums pre-cleared for enforcement. Where suitable, we add convertible instruments or equity triggers to create future alignment paths.
Why Investors Are Choosing This Route
Three reasons underpin the rise of these models.
Speed: Compared to traditional M&A—with its due diligence, approvals, and regulatory drag—revenue-share or licensing deals close in 60 to 90 days. For time-sensitive mandates, speed is critical.
Returns: These deals provide steady cash flow and limit downside. Investors avoid capex and regulatory exposure while earning from systems they already operate regionally. Vietnam becomes an extension, not a new build.
Flexibility: Agreements often include conversion clauses if laws evolve or KPIs are met. This phased approach reduces risk and builds trust with cautious Vietnamese partners.
Conclusion: Structuring Around the Limits
Vietnam’s ownership restrictions don’t stop economic alignment—they reshape it. Revenue-share, licensing, and operator agreements now form a core part of modern deal strategy.
At Lotus Venture, we advise investors to think beyond shareholding. The smartest deals today aren’t always the largest—they’re the ones with the sharpest structure.
When executed well, these models deliver regulatory compliance, commercial upside, and strategic entry into sectors where equity is off-limits. The future of investment in Vietnam lies in structure, not just control.
