Popular forms of business mergers and acquisitions

Article overview

Forms of business mergers and acquisitions are becoming a strategic development trend for many businesses in the Vietnamese market. M&A activities provide opportunities to develop scale, optimize resources, and enhance competitive position for businesses participating in transactions. Please follow the following article by Long Phan to better understand common forms of business mergers and acquisitions and things to keep in mind when performing M&A.

Things to know when buying, selling and merging businesses
Things to know when buying, selling and merging businesses

What is business merger and acquisition?

Mergers and Acquisitions (M&A) is a term that refers to mergers and acquisitions of businesses through capital and financial transactions. This is considered an effective business strategy, bringing benefits to both buyers and sellers. Specifically, the benefits of M&A include:

  • Save time and costs: Compared to establishing or expanding your own business, M&A significantly reduces time and related costs.
  • Take advantage of available resources: The buyer can immediately exploit the seller’s consumer market, human resources, facilities and business network.
  • Enhance value and reputation: Sellers, especially small businesses, can increase brand value and reputation when merging with larger businesses.
  • Escape from financial difficulties: For businesses that are facing difficulties, M&A is an opportunity to restructure and avoid the risk of bankruptcy.
  • Support rapid development: Newly established companies can expand their scale and market faster thanks to cooperation with large partners.

Therefore, when done carefully and reasonably, M&A is not only an effective business tool but also a sustainable development strategy, bringing great benefits to both parties involved.

Benefits when performing mergers and acquisitions
Benefits when performing mergers and acquisitions

Popular forms of business mergers and acquisitions today

Business mergers and acquisitions (M&A) take place in many different forms, depending on the specific goals and strategies of the parties involved. And each form has its own role and needs to be done properly to ensure success. Currently, there are popular forms of M&A as follows:

  1. Contribute capital to the business

Contributing capital to an enterprise is a form of increasing charter capital by directly contributing capital. For limited liability companies, this process usually involves contributing charter capital, while for joint stock companies, capital contribution is done through purchasing newly issued shares.

  1. Buy back members’ capital contributions or shares in joint stock companies

This form focuses on buying back capital contributions from members or issued shares of shareholders in the enterprise. Although it does not increase charter capital, it can significantly change the ownership and control structure within the company.

  1. Merging businesses

A corporate merger occurs when one or more companies are merged into another, larger company. All assets, rights and obligations of the merged enterprise will be transferred to the merging company. The merged business will cease operations, and the merged company inherits all rights and responsibilities.

  1. Business consolidation

A business merger is the process of combining two or more companies to form a new company. The original businesses will cease operations, and the new company will take over all assets, rights and obligations of the participating parties.

  1. Splitting the business

Business separation is a form applied to limited liability companies or joint stock companies, in order to reduce the size and restructure the organization. This process helps businesses easily achieve strategic goals or optimize control capabilities.

Forms of mergers and acquisitions are commonly carried out
Forms of mergers and acquisitions are commonly carried out

Things to keep in mind before carrying out business mergers and acquisitions

To ensure the business merger and acquisition process takes place effectively, accurately determining business value and checking the legality of documents and procedures are prerequisites. Below are the detailed tasks that need to be done:

  1. Review the target company’s financial activities

The first thing to do is hire law firms and professional financial consulting units to fully appraise and evaluate the asset quality of the target business. Financial contents that need to be checked include debt records, cash flow, internal control system, income, costs and profits. This process not only helps accurately assess asset value but also ensures transparency and reliability of data reported by businesses.

  1. Evaluate the target company’s business operations

Analyzing a business’s current business environment is an important step in understanding growth potential. It is necessary to specify the customer profile, evaluate the level of competition with competitors in the market and check the basic assumptions in the business plan. Through this, it is possible to clearly determine the feasibility and risks of the business’s commercial strategy.

  1. Check the target company’s legal records

One step that cannot be overlooked is to review all legal records of the business to assess the legality of the documents and detect potential legal risks. Legal appraisal also helps to identify potential disputes or violations, thereby protecting the rights of participating parties.

  1. Check the target company’s tax records

Full review of documents related to the business’s tax obligations, including tax receipts and declaration reports. This is to ensure that businesses do not make errors or deficits in fulfilling tax obligations, thereby minimizing tax-related financial risks.

  1. Agreement on value of business mergers and acquisitions

After completing the inspection and review, the participating parties will conduct a valuation of all assets and value of the business. This process requires detail and caution to set the right price. Finally, the parties will agree on a closing price and proceed with the transaction.

Therefore, fully implementing the above steps not only helps ensure transparency and legality in the M&A process but also creates the foundation for the long-term success of both parties. A thorough inspection and fair valuation will minimize risk and deliver maximum value from the transaction.

Consulting services, support for professional business mergers and acquisitions in Long Phan

With a team of experienced lawyers and experts, Long Phan provides comprehensive and professional M&A consulting services. We accompany customers throughout the process, from the planning stage, business appraisal to negotiation and completion of legal procedures. Specifically, our services include:

  • Consulting, analyzing and building M&A strategies in accordance with customers’ business goals and proposing reasonable options to optimize benefits from transactions.
  • Support legal appraisal of target businesses including business licenses, contracts and related legal documents.
  • Consulting and supporting target business valuations to provide accurate and transparent valuations.
  • Assist in drafting sales contracts, cooperation agreements, or capital contribution transfer documents to ensure clear, strict terms and compliance with legal regulations.
  • Support customers in negotiating important terms in transactions to ensure benefits for customers.

Long Phan is proud to be a reliable partner in mergers and acquisitions deals, providing customers with optimal solutions and the most professional services. If you need detailed advice on M&A services, please contact us via the hotline 0906735386. With our support, your business will easily carry out M&A transactions successfully and maximize benefits for participating parties from the transaction.