CNA938 Rewind - SG60 Special (Ep 1): Ho Kwon Ping expects next generation of Banyan Group leaders to do more than maintain the status quo
Since being founded in 1994, the locally-established hospitality business now manages over ninety hotels and resorts, nearly 100 spas, nearly 70 galleries, and 3 integrated resorts in 22 countries.
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[HO CHI MINH CITY] A planned stake sale by shareholders of EQuest Education, one of Vietnam's biggest private education groups, is facing setbacks after a school acquisition in Hanoi collapsed, in a case highlighting the broader risks of doing business in the country's fast-growing, but often unpredictable, business sector. KKR, the largest shareholder with a 54.8 per cent stake in EQuest, held through its Singapore-based vehicle Equinox II, invested more than US$200 million into the Vietnamese group in two funding rounds in 2021 and 2023. The PE juggernaut and other shareholders of EQuest were eyeing a stake sale this year, in hopes of raising funds and paving the way for KKR's exit four to five years since its investment in EQuest, sources familiar with the matter told The Business Times. That plan now hangs in limbo. The dispute has delayed negotiations and the due diligence process, causing uncertainties, particularly over valuation-related matters, a source noted. KKR did not respond to BT's queries. In 2021, a member company of EQuest signed deals worth one trillion dong (S$49 million) to acquire 80 per cent stakes in two schools in Hanoi. At the time, EQuest had already consolidated some 20 education institutions in Vietnam. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up The schools were part of the Ngoi Sao school system, a prominent private education network co-founded by Pham Bich Nga, a 66-year-old educator. The transaction for the second school, which was established in 2023, hit a deadlock. In a statement issued on Wednesday (Jul 16), EQuest alleged that Nga and her team withdrew funds from the first school and declined to transfer the agreed stake and management control of the second school. EQuest said it has lodged a police report on the matter, alleging embezzlement, misappropriation and fraud. In a Facebook post on Jul 16, Nguyen Quoc Toan, co-founder, chairman and chief executive of EQuest Education, alleged that the former partners claimed they 'did not understand' or had a 'different interpretation' of the contract, while retaining all the investor's funds over the past few years to develop the schools. A day earlier on Jul 15, Nga wrote on Facebook that she had proactively ended the partnership, citing major differences in educational direction and operational culture during their 2022 collaboration. 'Trying to forcibly maintain a partnership when the other party no longer wishes to continue – or attempting to claim what doesn't belong to them – cannot lead to a positive outcome for either side,' she wrote. Familiar red flags The case underscores the travails of doing business in Vietnam, which experts warn could weigh on investor confidence and undermine dealmaking in the long term. In fact, observers say disputes after deal closure between investors and Vietnamese target firms are fairly common, especially in private equity (PE) and venture capital (VC) circles; legal experts cite mismatched expectations and poor mutual understanding as key sources of friction. David Harrison, a partner for global law firm Hogan Lovells in Ho Chi Minh City, said: 'We do a lot of transactions with Vietnamese targets – family businesses in many cases – where there's no law firm on the other side to help them understand what they're signing.' They may be eager to close the deal and secure cash for their business by taking a pragmatic view, which, in the long run, may not serve their best interests, he added. Tran Duy Canh, managing partner at Dentons LuatViet in Ho Chi Minh City, said post-deal disputes often arise when critical conditions in sale agreements are not met. These do not always arise out of bad faith; more often, it comes from 'overconfidence' or misunderstanding, he said, adding that some local firms assume they can sort things out later or renegotiate if the deal veers off course. One notable case involved Vietnamese plastics firm Rang Dong and Japanese investor Sojitz Pla-Net, over a 2017 deal in which Sojitz bought five million shares in Rang Dong's Long An Plastic unit for more than 174 billion dong. Sojitz later alleged that Rang Dong failed to meet post-closing obligations. On its part, the Vietnamese firm claimed that there were 'unreasonable' terms in the contract, such as requiring it to sign employment contracts with 700 people that Sojitz appointed. Their conflict lasted about three years, from 2020 to 2023, including arbitration at the Singapore International Arbitration Centre in 2022 and subsequent onshore court proceedings in Vietnam. The ruling ultimately went Sojitz's way. However, it remains uncertain whether Rang Dong can fulfil its financial obligations to Sojitz, because the Vietnamese company is now facing bankruptcy proceedings. Lessons from soured deals Such cases worry investors, who often bear the bulk of financial losses and face lengthy investigations and legal battles. Legal counsel typically recommend mediation over taking the matter to court, especially when both sides genuinely want to resolve the misunderstanding. Another high-profile case was VinaCapital's Vietnam Opportunity Fund (VOF) investing US$32.5 million for a 34 per cent stake in Vietnamese egg and poultry giant Ba Huan in early 2018. The deal quickly unravelled after founder Pham Thi Huan publicly sought to cancel it, claiming the investor's terms risked eroding family control. She claimed VinaCapital imposed a 22 per cent annual return rate without consent, and that the Vietnamese contract included clauses missing from the English version, such as penalties for missed targets and a possible transfer of at least 51 per cent of the company's shares. VinaCapital maintained that all terms were lawful and in line with market norms, but later agreed to an amicable exit from the deal. Vu Nguyen Khanh, managing director and lead portfolio manager at VinaCapital's VOF, told BT: 'We may have a very clear view of what those terms mean, but at the same time, we want to make sure that the person on the other side of the table also understands that.' Founded in 2003 and managed by VinaCapital, VOF is a closed-ended investment trust listed on the London Stock Exchange with net assets exceeding US$970 million as at the end of June; it invests in listed equities and private companies in Vietnam. Khanh said the fund has invested in more than 200 companies in Vietnam over the past two decades. Harrison from Hogan Lovells stressed the importance of robust financial, legal and technical due diligence and forging direct ties with local partners, rather than relying on 30- to 40-page term sheets drafted for deals in other markets. He also highlighted the value of including downside protection mechanisms for investors – in the form of put rights, redemption rights, pull-back clauses, or earn-outs, for example – in case deals do not go as expected. 'The diligence, monitoring and the engagement process throughout the investment should pick up a lot of the flags,' VOF's Khanh added. He said if a situation calls for renegotiation, the first step should be to revisit the original agreements, which ought to include an avenue to resolve the issues before turning to the court. 'At the end of the day, our objective as investors is to create value and exit at a return. Disputes rarely create that kind of return,' he noted. Cultural gaps Hoang Minh Duc, special counsel at Duane Morris Vietnam, said investors are usually open to dialogue if founders stay transparent and actively work towards the best solutions for the businesses when obligations become difficult to meet. Drawing on his experience advising deals between foreign VCs and Vietnamese startups, he said many disputes stem from cultural gaps between Vietnamese business norms and those in more developed markets. He noted that Vietnamese startup founders often sign agreements without fully grasping the terms, sometimes without legal counsel or under guidance by inexperienced advisers. And when problems arise, some try to sidestep the investors. 'Vietnamese founders often value flexibility, while most VC investors, many of whom are from Singapore, prioritise transparency and an agreed structure,' he said, adding: 'This cultural gap can lead to painful partings, which may ultimately undermine dealmaking in Vietnam over the long term.'
