Important things to know about the merger and acquisition

1. What is merger and acquisition?

Merger and acquisition (M&A) is an activity to gain control of an enterprise through the form of merger or acquisition of part or the whole of another enterprise. In particular, this activity is taking place quite popularly in the business market at the present time.

Mergers and acquisitions are common activities in the business market

Today, the phrase M&A always seems to go hand in hand. But in essence, these two activities have certain distinct characteristics:

• Acquisitions are form in which a large business acquires smaller and weaker businesses, and the acquiring business retains its old legal status. The acquiring enterprise is entitled to legal ownership of the acquired enterprise.
• Mergers are form of combining two companies of the same size, agreeing to pool shares. After that, the merging company will transfer all legal assets, rights, obligations and interests to the merging company, and at the same time terminate the existence of the merged company to become a new company.

2. Merger and acquisition process

Mergers and acquisition process in Vietnam

Although it can take place with different times, the common point of successful mergers and acquisitions deals usually follows the following M&A implementation processes:

Step 1: Develop a strategy for mergers and acquisitions

• For the investor (buyer): It is necessary to clearly define the target of the M&A deal such as: How to acquire a business? What is the purpose?

• With the seller: Need to merge for what? Does the buyer help the development path or mission of the business?

Clearly identifying the buyer persona helps the seller to have a suitable roadmap to build and develop the business.

Step 2: Find the target company

After determining the goals of the M&A, businesses need to develop specific criteria (business products/services, profit margins, geographical locations, customer segments, etc.) to choose the right one. Target companies are in need of mergers and acquisitions.

Step 3: Approach the business

When the buyer and the seller have agreed on the merger or acquisition, the parties must determine the exact type of transaction. This helps involved parties to apply the right law and procedures, draft the merger and acquisition contract and identify necessary obligations.

Step 4: Legal due diligence

When completing the above step, the buyer has the right to request legal, financial information, etc. to understand the status, rights, obligations and legal regime for all types of assets, labor contracts, etc. , investment records, ... of the seller. This process is usually done by the legal department or M&A consulting law office on behalf of the buyer.

Step 5: Appraisal of business value

The next step is to determine the existing value of the business to be merged, including both tangible and intangible assets. The business valuation requires an independent unit with sufficient legal conditions and expertise to perform to ensure the most objectivity and accuracy.

Step 6: Negotiate

In fact, there are no legal forms or guidelines for all M&A transactions. Therefore, the parties must negotiate and establish comprehensive terms related to the merger, including requirements, benefits, the binding between businesses, post-M&A issues, etc. Failure to do so may result in inherent conflicts within the M&A contract once the merger and acquisition is completed.

Step 7: Sign the contract

The M&A transfer - merger contract must be approved in writing by the members' council (Limited Company) or the shareholder meeting (Joint-stock company). The contents of the contract include: transfer price, total outstanding debt of the business, buyer or seller is responsible for the debts, property ownership, labor contract and other contracts. others have signed and not yet done,...

Step 8: Change business registration

To legalize and complete the merger - transfer of businesses, the buyer needs to register with the business registration agency. The buyer can change the business registration with the Department of Planning and Investment with contents such as: Change of members, business lines, registered capital, .... This transfer of shares or contributed capital is best possible. presented in writing certified by a notary public.

Step 9: Post-M&A processing

Handling difficult issues after mergers and acquisitions such as: personnel, development plan, mission - vision, corporate culture, operating system, responsibilities of the seller and the buyer.

By understanding the business mergers and acquisitions process, investors and business owners can successfully execute the transaction faster and easier.

3. Regulations on business purchase and sale

According to the law, not all types of businesses can execute mergers and acquisitions, only private companies have the right to sell the entire business. For other types such as joint stock companies, the main form of purchase and sale is to gain control by the method of buying, selling, receiving and transferring the majority of shares. As for limited liability companies, the transfer of capital contribution within the company is conducted to gain management rights.

Regulations on business mergers and acquisitions

Buying and selling private businesses:

Pursuant to the provisions of Article 192 of the Enterprise Law 2020: “Article 192. Sale of a private enterprise:

1. Owners of private enterprises have the right to sell their private enterprises to other individuals or organizations.

4. The purchaser of a private enterprise must register the change of the owner of a private enterprise in accordance with this Law.”

The sole proprietorship has full discretion to sell his or her business to another individual or company. After the parties negotiate to determine the appropriate price, signing the purchase and sale contract needs to register to change the business owner within 10 days.

Buying and selling limited liability companies:

Pursuant to the provisions of Article 52 of the Law on Enterprises 2020, a limited company that wants to buy back in the form of transferring a capital contribution must go through negotiations to buy back the contributed capital of a member, thereby becoming the owner or co-owner of the company. ownership, depending on the share of capital. After completing the signing of the capital transfer contract, it is necessary to notify the other members of the change of members (if any) and make a meeting minutes of the Members' Council. Submit the notification file to the Business Registration Office where the company has registered its business to complete the registration procedure for change of business registration.

Buying and selling joint stock companies:

The parties agree and sign a share transfer contract on the basis of Article 127 of the Enterprise Law 2020. Make a written confirmation of completion of the share transfer procedure. Open the General Meeting of Shareholders to approve the transfer. Register to change shareholders with the list of new shareholders and change the legal representative.

Conclusion

In the era of the digital economy, mergers and acquisitions not only create a new economic, social, and cultural environment but also enable businesses to grow faster. By providing information related to M&A, INMERGERS has helped readers to better understand the essence, processes, and regulations of this activity.

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