What should be done before and after a business merger?

Article overview

A business merger is a strategy that helps companies expand their scale, optimize resources, and enhance their competitiveness in the market. To carry out a successful merger, businesses need to master legal regulations and carefully evaluate relevant factors. Below, Long Phan will present issues that businesses need to pay attention to before and after conducting business mergers.

Note when implementing business mergers
Note when implementing business mergers

Regulations on business mergers

Pursuant to Article 201 of the Law on Enterprises 2020, business merger is the process in which one or several companies (hereinafter referred to as the merged company) can merge into another company (hereinafter referred to as the receiving company merger) by transferring all assets, rights, obligations and legal interests to the merging company, and at the same time terminating the existence of the merged company.

The merger must comply with competition, tax and labor regulations under current law. The merger process is clearly regulated to ensure transparency. Compliance with legal regulations is a key factor.

Conditions for business merger

According to Clause 3, Article 201 of the Law on Enterprises 2020, merging companies must comply with the Law on Competition to ensure fairness in the market. Article 29 of the Law on Competition 2018 considers mergers as a form of economic concentration, which can improve competitiveness but also poses the risk of monopoly. Therefore, Article 30 of the Law on Competition 2018 stipulates that mergers are only allowed if they do not cause or are likely to cause a significant impact on restricting competition in the Vietnamese market.

Benefits and risks of business mergers

Opportunities from business mergers

  1. Increase production scale and expand markets
    Mergers allow businesses to quickly increase production scale, reach new customers and expand the scope of their market operations. By combining resources, businesses can create greater competitive power in the market, not only from scale but also from the diversity of services and products provided.
  2. Increase operational efficiency and optimize costs
  3. Diversify products and services
    Mergers allow businesses to combine different product and service lines, creating diversity and meeting diverse customer needs.
  4. Take advantage of the strengths of both sides
    Mergers create conditions to take advantage of existing advantages such as advanced technology, strong brands, wide distribution networks or experienced staff from both sides. This helps create a competitive advantage, enhance business value and bring a better experience to customers.
  5. Access new financial capital
    In many cases, mergers help businesses expand their financial capacity, thanks to combining the capital sources of both parties. This supports businesses in implementing new investment plans or expanding scale more easily.

Risks from business mergers

  1. Difficulties in business management after merger
    When merging, businesses often face difficulties in managing new structures and systems, especially when the two businesses have different cultures or operating methods.
  2. Conflicts of interest between groups
    Mergers can create conflicts between stakeholders, especially if the interests and values ​​of the groups are not guaranteed equitably. Differences in interests can cause internal conflicts, negatively affect employee morale and hinder cooperation.
  3. High merger costs
    Merger implementation costs, including legal fees, consulting and operational adjustment processes. These costs can create financial pressure for businesses and affect capital available for other business activities.
  4. Risks in business valuation
    Inaccurate valuation is one of the significant risks when merging, especially when there are differences in valuation processes or incomplete information about the merged enterprise.
  5. Operational efficiency is not as expected
    Mergers sometimes do not bring economic efficiency and benefits as expected. The cause may come from unforeseen factors such as difficulties in integrating corporate culture, differences in management methods or market instability. This causes businesses to incur opportunity costs and can cause financial losses.

To optimize benefits and minimize risks, businesses need to prepare a detailed merger plan, evaluate cultural and legal factors, and establish an appropriate new management system.

Things to keep in mind before and after a business merger

The business merger process requires careful preparation and a clear strategy. Enterprises need to build a detailed roadmap for each stage. Meticulous planning helps minimize risks and increase the chances of success.

Pre-merger period plays a decisive role in the success of the entire process. Businesses need to conduct a comprehensive legal appraisal of their legal status, assets, liabilities and potential disputes. The detailed financial assessment includes reviewing the financial statements, cash flows, assets and liabilities of the parties participating in the merger. At the same time, accurately determining business value through appropriate valuation methods will create a basis for negotiation and negotiation.

Resource preparation work Finances need to be calculated in detail. Enterprises must fully budget for the merger process, including consulting costs, appraisal fees, legal costs and contingencies. Assessing the impact on stakeholders such as shareholders, investors, customers and partners also needs to be done carefully to have appropriate handling plans.

During the merger implementation phase, compliance with the legal process is key. Enterprises must ensure that procedures are carried out in the correct order, with complete documents and on time according to the provisions of law. Information and communication management needs to be focused to avoid negative impacts on the reputation and operations of businesses. Maintaining stable business operations during this period is especially important so as not to affect revenue and profits.

After completing the merger, Restructuring requires high concentration. Rearranging the management apparatus needs to ensure efficiency and compatibility with the new scale of the enterprise. The process of harmonizing corporate culture between parties needs to be done delicately to avoid conflicts and create a positive working environment. Businesses need to build new operating processes, optimize resources and establish appropriate management systems.

Human resource management after merger requires professionalism and sensitivity. Enterprises need to have clear policies on the arrangement, transfer and training of personnel. Building appropriate remuneration policies will help retain talent and maintain team motivation. At the same time, businesses need to establish a performance evaluation system to ensure long-term development goals.

Post-merger monitoring and evaluation process needs to be done regularly.

Finally, building a new development strategy needs to be based on the advantages and potential of the post-merger business. Businesses need to clearly identify short-term and long-term goals and propose specific solutions to achieve these goals. Taking full advantage of the advantages of scale, market and resources will make an important contribution to the sustainable development of the business in the future.

Merging businesses and things to keep in mind
Merging businesses and things to keep in mind

Comprehensive and professional consulting services, support for mergers, acquisitions, and implementation of corporate M&A in Long Phan

Long Phan provides professional consulting services, specifically focusing on strategic and legal needs during business mergers. These services not only support businesses at each specific stage but also provide an overall roadmap from start to finish, ensuring the merger process takes place effectively and legally.

In-depth and comprehensive consulting and support services at Long Phan include:

  • Merger strategy consulting helps ensure that mergers are carried out with a clear strategy and in accordance with the development direction of the business.
  • Comprehensive legal appraisal of legal issues such as ownership, liabilities, and potential legal disputes.
  • Supporting negotiation and implementation of mergers helps the parties reach an agreement on the value and conditions of the merger.
  • Tax and financial consulting helps businesses optimize economic benefits from mergers.
  • Support related legal procedures such as registering changes to business licenses, updating legal information, and other necessary legal documents.
  • Post-merger management consulting to ensure stability and development.
Comprehensive consulting and support for business mergers
Comprehensive consulting and support for business mergers

The business merger process requires careful preparation and a deep understanding of the law. Long Phan commits to accompanying customers throughout the merger process, ensuring legal compliance and optimizing benefits. Contact Long Phan immediately via the hotline 0906735386 for detailed advice and best support for your merger project.