Promises Stumble as Capital Flows: Caution Flags in Vietnam’s Private Equity and Venture Capital Scene
KKR’s planned divestment from EQuest Education, one of Vietnam’s top private education groups, has hit a roadblock following the collapse of a school acquisition in Hanoi. This setback underscores the broader challenges of operating in Vietnam’s rapidly growing but often unpredictable investment landscape.
KKR, holding a 54.8% stake in EQuest through its Singapore-based entity Equinox II Pte Ltd, has invested over US$200 million in two funding rounds in 2021 and 2023. A stake sale was anticipated this year, potentially marking KKR’s exit after four to five years. However, a dispute has disrupted negotiations and delayed due diligence, complicating valuation efforts.
KKR has not responded to media inquiries.
In 2021, a subsidiary of EQuest agreed to acquire 80% of two Hanoi-based Ngoi Sao School campuses for roughly S$49 million. However, a dispute arose over the second school, founded in 2023, leading to a breakdown in the deal.
EQuest accused co-founder Pham Bich Nga and her team of withdrawing funds and failing to transfer ownership and management of the second school, prompting a police report alleging fraud and embezzlement. EQuest CEO Nguyen Quoc Toan publicly criticized the former partners for misrepresenting their contractual understanding while retaining investor capital.
Nga countered on social media, asserting she had voluntarily ended the partnership due to incompatible visions and organizational cultures.
Recurring Risk Patterns
This case illustrates the frequent complications in Vietnam’s PE and VC deals. Legal experts warn that post-deal disputes are common due to mismatched expectations and lack of legal clarity, especially when Vietnamese target firms are less familiar with deal structures.
David Harrison of Hogan Lovells noted that many family-run Vietnamese businesses enter deals without proper legal guidance, often agreeing to terms they don’t fully comprehend. Dentons LuatViet’s Tran Duy Canh added that these disputes are frequently the result of overconfidence or the assumption that any issues can be renegotiated later.
One notable precedent involved Rang Dong and Japan’s Sojitz Pla-Net. A 2017 share purchase led to prolonged conflict and arbitration, with Sojitz ultimately winning. However, Rang Dong’s ability to fulfill the judgment remains uncertain due to ongoing bankruptcy proceedings.
Investor Takeaways from Troubled Deals
Investors often endure the financial and legal fallout from these conflicts. Legal advisors recommend mediation as a preferred resolution method when there’s sincere intent from both parties.
Another case saw VinaCapital’s Vietnam Opportunity Fund (VOF) invest US$32.5 million in Ba Huan, a leading poultry producer. The founder, however, moved to cancel the deal shortly after, alleging misleading terms and discrepancies between contract versions. Despite standing by its practices, VinaCapital eventually exited the investment amicably.
VOF’s managing director Vu Nguyen Khanh emphasized the importance of ensuring all parties fully understand deal terms, especially when cultural or legal norms differ. With over 200 Vietnamese investments since 2003, VOF stresses the need for clear agreements and realistic expectations.
Harrison also advised foreign investors to avoid copy-pasting Western deal templates. Instead, he recommends detailed due diligence and incorporating protective clauses such as redemption or put rights to guard against underperformance.
Navigating Cultural and Legal Gaps
Hoang Minh Duc of Duane Morris Vietnam said most disputes arise not from bad intent, but from cultural and communication gaps. He observed that Vietnamese founders often lack full comprehension of deal terms or legal support, and some attempt to bypass investors when issues arise.
He explained that while Vietnamese founders often value adaptability, many foreign investors—particularly from Singapore—prioritize structured transparency. This mismatch can lead to strained relationships and threaten the long-term health of Vietnam’s investment ecosystem.
