“Mergers and acquisitions deals in the information technology (IT) sector have become increasingly dynamic amid the rapid growth of artificial intelligence (AI) and big data technologies. Compared to other industries such as services or manufacturing, M&A in the IT field possesses distinct characteristics that require the involved parties to conduct thorough evaluations and adopt an appropriate approach.”
- The fundamental differences between M&A transactions in the information technology (IT) sector and those in other industries
Mergers and Acquisitions (M&A) deals in the IT sector possess fundamental differences compared to M&A in manufacturing, retail, or service industries. These differences primarily revolve around the nature of core assets and the human factor.
The core value of IT enterprises lies not in tangible assets but in intangible ones such as brand reputation, intellectual property rights (including copyrights, patents, and trade secrets), and innovative capacity. These assets are inherently difficult to quantify, requiring deep industry expertise and the ability to assess the development potential of the underlying technology. Therefore, the due diligence process must be carefully designed to evaluate these assets accurately at every stage of the transaction.
Products and services offered by IT target companies typically have short life cycles and evolve rapidly. Consequently, for an M&A deal to succeed, the participation of legal, financial, and management experts must be complemented by the involvement of technology specialists. These experts play a crucial role in assessing technical risks, commercialization potential, and the future market prospects of the company’s technologies and products.
Retaining key personnel in technology companies should also be given greater emphasis than in conventional businesses. In particular, founding members or core development teams — those directly responsible for creating the company’s essential products and technologies — are not only the driving force behind innovation but also play a decisive role in maintaining product security and ensuring the company’s long-term growth trajectory.
- Intellectual property assets
During the due diligence process for target companies operating in the IT sector, one of the most critical steps is to determine the company’s ownership and usage rights over its intellectual property assets. In practice, many technology enterprises encounter issues such as unregistered trademarks, unrecorded software copyrights, or the absence of proper intellectual property assignment agreements from employees to the company. These are all legal risks that must be resolved prior to the transaction or, at minimum, scheduled for remediation under a clear post-closing action plan once the M&A deal has been agreed upon.
Intellectual property assets such as source codes, software, proprietary APIs (Application Programming Interfaces), or trade secrets are not only the products of intellectual and technical investment but can also form the core foundation for a company’s valuation and future growth.
Furthermore, technology M&A transactions face other unique risks, including potential data breaches affecting the exploitation of IP assets, challenges in integrating the target company’s IT systems with those of the acquirer (if any), and the ongoing need to update or align the target company’s IP assets to keep pace with rapid technological innovation. These factors must be carefully evaluated to ensure the success and sustainability of the transaction.
- Key personnel
In the IT sector, key personnel not only play an operational role but are also the driving force behind technological development and product innovation. Retaining these individuals after the completion of an M&A transaction is crucial for the sustainable growth of the target company. Typically, M&A agreements include binding provisions requiring key employees to continue their employment for a certain period after the closing, along with a confidentiality and non-compete agreement (NDA).
However, to ensure the effectiveness of such provisions, they must be accompanied by appropriate incentive schemes. Common practices include offering Retention Bonuses or ESOP (implementing Employee Stock Ownership Plan) to align employees’ interests with the company’s long-term performance, thereby motivating them to remain dedicated to its growth and success.
- Transaction structure and implementation timeline
During the execution of an M&A deal, the valuation of technology can fluctuate significantly within a short period. Therefore, when structuring the transaction, the parties should anticipate factors that may affect the core technology and develop flexible mechanisms to adapt promptly without delaying the overall timeline. In particular, the purchaser should take into consideration the following aspects:
- – Performance-based incentives: Unlike traditional deals, technology-related M&A deals often adopt earn-out mechanisms, under which part of the purchase price is contingent upon post-closing business performance or technological development milestones. This structure not only safeguards the buyer’s interests but also motivates the seller and key personnel to sustain operational efficiency and innovation.
- – Speed and flexibility: Given the fast-paced and highly competitive nature of the technology market, transactions must be executed swiftly. This often results in shortened due diligence periods and the adoption of more flexible deal structures to keep up with market dynamics.
- – Technology integration costs (if any): Merging IT businesses may involve integrating existing technological systems, which could lead to substantial costs related to the alignment of hardware, software, cybersecurity infrastructure, and employee training.
- Other considerations
Technology companies often operate in an environment of continuous innovation and face a variety of social challenges, such as the impact of artificial intelligence and automation on employment, as well as data privacy concerns. The following are key factors that investors should carefully consider when conducting M&A transactions in the technology sector:
- – Data privacy and protection: The access, transfer, and use of user data and information systems during the M&A process, as well as the post-closing operations of the target company, must strictly comply with applicable laws. In Vietnam, Decree No. 13/2023/ND-CP and the Law on Personal Data Protection 2025 have established a comprehensive legal framework that imposes heightened requirements on data handling during due diligence and transaction implementation.
- – Influenced by international law: Globally, several legislative frameworks are shaping the digital future, including the EU’s Digital Services Act (DSA), Digital Markets Act (DMA), General Data Protection Regulation (GDPR), and the EU Artificial Intelligence Act — the world’s first comprehensive law governing artificial intelligence. These developments not only affect European enterprises but also extend their influence to technology companies engaged in cross-border operations, including those based in Vietnam.
- – Cybersecurity: Cybersecurity has become one of the critical assessment criteria during due diligence. It is essential to review the company’s incident response history, risk management capabilities, compliance with data protection laws, and vulnerability management measures. A previous data breach or weak cybersecurity infrastructure can expose the acquirer to significant legal risks and post-merger remediation costs.
The increasing number of M&A deals in the information technology sector presents both substantial opportunities and distinctive risks. For a transaction to succeed, the parties involved must not only rely on legal and financial expertise but also engage technology specialists to comprehensively assess the target company’s value, potential, and inherent challenges.
Time of writing: 02 March 2026
The article is based on the current law at the time of recording as above and may no longer be relevant at the time readers access this article due to changes in applicable law and specific cases that the reader wants to apply. Therefore, the article is for reference only
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