Dispute Resolution Mechanisms in M&A Transactions: Negotiation and Mediation

As capital markets and corporate activities continue to evolve, mergers and acquisitions (M&A) have become vital tools for restructuring, scaling up, and enhancing the competitiveness of enterprises. However, due to the inherently complex nature of M&A transactions, disputes are often unavoidable and may arise at any stage – during negotiation, contract execution, or post-merger integration. Choosing an appropriate dispute resolution mechanism plays a decisive role in protecting legitimate rights and interests, mitigating risks, and ensuring legal certainty for the parties involved. This article analyzes two non-adjudicatory mechanisms frequently used at the pre-litigation stage: negotiation and mediation.

1.Negotiation

Negotiation is a process in which the parties engage directly with one another to discuss and reach a resolution without third-party intervention. This is a flexible method and often the first approach used in M&A-related disputes.

In the M&A context, negotiation helps preserve strategic partnerships, especially in deals where the seller retains a minority stake in the target company or remains involved during the post-merger phase. However, the effectiveness of negotiation largely depends on the parties’ goodwill and the balance of power between them. If one party lacks the willingness to cooperate or no incentives exist to promote negotiation, the process may be stalled or misused to delay performance.

To improve the practical effectiveness of negotiation, parties are advised to specify in the M&A contract: the negotiation period, representatives with decision-making authority, documentation methods for outcomes and conditions triggering transition to other mechanisms.

2.Mediation

Mediation involves a neutral third-party mediator who facilitates dialogue and assists the parties in reaching a voluntary settlement. Unlike litigation or arbitration, mediation emphasizes consensus-building over adjudication. Mediation may be conducted under institutional rules – such as those of the Vietnam Mediation Center (VMC) – or through ad hoc arrangements agreed by the parties.

Mediators are often professionals with expertise in facilitation and conflict resolution, helping parties manage emotions, overcome differences, and identify substantive interests. Mediation is especially effective in emotionally charged disputes or multi-party M&A deals involving investors of unequal status.

Under Vietnamese law, a mediation agreement is binding only if it is documented and signed by the parties in a “record of successful mediation.” For the agreement to be enforceable through civil enforcement authorities, the parties must petition the court for recognition of its validity pursuant to civil procedural law.

However, a key limitation of mediation is its dependency on the parties’ goodwill. If one party is uncooperative or acts in bad faith, the process may fail. Therefore, the parties should agree on mediator selection criteria in the contract or opt for a reputable mediation center. Additionally, the contract should specify the procedure, maximum time for mediation, and conditions for escalation to litigation or arbitration if mediation proves unsuccessful.

3.Recommended Dispute Resolution Framework

An increasingly popular model adopted by enterprises is a multi-tiered dispute resolution clause, structured as follows:

• Mandatory negotiation within 15-30 days from the date a dispute arises;
• Mediation before an independent mediator or through a designated mediation center if negotiation fails;
• Arbitration or litigation if mediation does not yield a resolution.

This three-tiered approach allows the parties to:

• Retain autonomy in resolving disputes;
• Preserve long-term business relationships;
• Increase legal efficiency while minimizing litigation costs and risks.

Negotiation and mediation are essential mechanisms for managing disputes in M&A transactions, particularly for businesses seeking to minimize financial and reputational damage. An optimal combination of these methods, supported by experienced legal counsel, not only facilitates dispute resolution but also fosters stable and sustainable development post-transaction. In the next article, TNTP will explore the remaining adjudicatory mechanisms: commercial arbitration and court proceedings.

This concludes TNTP’s article titled “Dispute Resolution Mechanisms in M&A Transactions: Negotiation and Mediation”. Should you have any questions, please do not hesitate to contact TNTP for timely support.

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