Consulting on building M&A transaction structure at Long Phan

Article overview

Building an M&A transaction structure is one of the decisive steps to the success of the deal. Choosing the appropriate transaction structure not only helps optimize benefits for participating parties but also ensures compliance with legal regulations. This article will analyze the types of M&A transaction structures and factors affecting the selection and construction of an effective M&A transaction structure.

Building M&A transaction structure
Building M&A transaction structure

What is an M&A transaction?

M&A is the abbreviation for the terms Mergers and Acquisitions. Accordingly, M&A is understood as the activity of gaining control of a business through merger or acquisition between two or more businesses.

In other words, one business will partially or completely own another business through acquisition or merger. M&A activities bring many benefits to businesses such as expanding scale, increasing market share, accessing new technology, improving competitiveness…

Common types of M&A transaction structures

Depending on the objectives, scale and characteristics of each transaction, parties can choose one of the following popular M&A transaction structures:

Buy back business assets

Asset acquisition is a common M&A transaction structure in which the buyer selects and acquires some or all of the target company’s assets. These assets may include land use rights, factories, machinery and equipment, intangible assets (trademarks, patents,…), and other assets with economic value.

Advantage:

  • The buyer can choose the necessary assets, avoiding buying unwanted assets.
  • The buyer is not responsible for the debts of the target business.
  • The target company still exists and operates normally after the transaction.

Disadvantages:

  • Transferring certain types of intangible assets can be difficult.
  • The tax rate applied to asset purchases is usually higher than that of stock purchases.

Buy back shares or contributed capital

The buyer will buy back shareholders’ shares or members’ capital contributions to own the target company.

Advantage:

  • Transactions to buy shares or contributed capital are easy to negotiate
  • The tax rate applicable to stock purchases is usually lower than that of asset purchases.
  • Procedures for making share purchases are relatively simple and quick.

Disadvantages:

  • The buyer must be responsible for all debts of the target company.
  • The buyer may have difficulty controlling the target company’s operations if it does not own a controlling percentage of shares.

Merger

Business merger is when one or several businesses transfer all of their assets, rights, obligations and legal interests to another business, and at the same time terminate their business operations.

Advantage:

  • Create a new business with larger scale and stronger resources.
  • Improve business efficiency, take advantage of the merger parties.
  • Expand the market, enhance competitiveness.

Disadvantages:

  • Merger procedures are complicated, time-consuming and costly.
  • Difficulties in integrating corporate culture and managing human resources after the merger.
  • There may be opposition from shareholders of the parties participating in the merger.
Forms of M&A transaction structure
Forms of M&A transaction structure

Factors affecting the selection and construction of M&A transaction structures

Choosing the appropriate M&A transaction structure depends on many factors, including:

  • Objective of the transaction: Each M&A transaction has a specific goal, for example: expanding the market, eliminating competitors, accessing new technology… The goal of the transaction will affect the choice of structure.
  • Financial situation of the parties: The financial capacity of the buyer and the financial situation of the target company are important factors to consider. For example, if the buyer has limited financial resources, an asset acquisition structure may be more suitable than a stock acquisition structure.
  • Legal risks: Potential legal risks related to the target company’s assets, debts and obligations need to be thoroughly assessed. An asset buyback structure can help the buyer limit legal risks compared to a share buyback structure.
  • Tax factor: Different M&A transaction structures will have different effects on the tax obligations of the participating parties. Customers need to carefully analyze the tax impact of each structure to choose the most optimal option.
  • Human resources factors: Handling personnel issues after the transaction is completed is also an important factor. A merger structure can cause personnel disruptions, while an asset acquisition structure has little impact on the target company’s staff.

Consulting services for building effective M&A transaction structures at Long Phan

With a team of experienced experts in the field of M&A, Long Phan provides consulting services to build a comprehensive M&A transaction structure, including:

  • Consulting on popular M&A transaction structures;
  • Consulting on the pros and cons of each M&A transaction structure;
  • Analyze the company’s characteristics, scale and needs to advise on appropriate M&A transaction structure;
  • Consulting on factors affecting building an effective M&A transaction structure;
  • Analyze and evaluate risks of M&A transactions and corrective measures;
  • Consulting and guiding the M&A process;
  • Drafting documents such as sales contracts, merger contracts, memorandums of understanding…;
  • Representing customers in negotiations with related parties;
  • Support customers in completing procedures after mergers and acquisitions;
  • Consulting on issues related to structuring M&A transactions.
Consulting on building effective M&A transaction structures
Consulting on building effective M&A transaction structures

Building a suitable M&A transaction structure is a factor in ensuring the success of the deal. Long Phan, with a team of professional and experienced experts, will accompany customers throughout the process of implementing M&A transactions, from consulting, drafting contracts, to completing the transaction. Please contact us via the hotline: 0906735386 for detailed advice and best support.