1. What is M&A?
M&A stands for two English words “merger” and “acquisition“.
M&A is an activity carried out by an individual or an organization that acquires an existing property of another individual or organization. Such existing property can be in the form of a company or a combination of assets, human resources, and methods. model for conducting certain business operations.
2. Types of M&A transactions: M&A is executed under two main types: buying shares and buying assets.
Factors affecting the reason parties choose to buy shares or buy assets to include: commercial, legal, tax, third-party consent, time required to refund transaction, etc. Sometimes, two methods of buying shares and buying assets are combined in one transaction in order to take advantage of advantages and disadvantages of each method.
– Share acquisition: the purchaser will buy shares / capital contribution in an existing and established company to become the sole owner, shareholder or member of that company -> The purchaser has the right to operate and indirectly own the assets that the target company has. Shares purchased by the purchaser become the property of the purchaser and the purchaser has the right to dispose of such shares in accordance with the laws, the charter and a separate agreement between the buyer and other shareholders of the company.
– Buying assets (Business acquisition): the purchaser acquires ownership of the property sold by the seller. Assets can be tangible or intangible, in a broad sense: reputation, human resources, resources, distribution network mạng The purchaser becomes a direct owner of the property and operates the business according to his way. Business acquisition is executed in Vietnam under the form of transfering of investment projects.
– Merger / consolidation (Merger): can also be considered as the third type of M&A transaction, however, in essence, merger / has many similarities with the share purchase: the shareholders of the merged or consolidated company often become shareholders of the merging or acquiring party; The merging or acquiring party inherits the rights and obligations of the merged or consolidate company and often does not have a choice of assets when conducting the merger / consolidation process. This is a stepping stone for two or more companies to be merged / merged together because they are the same owners.
3. The legal nature of M&A:
The decision made by an individual or organization to whether to buy property or to buy shares will be affected by the laws of Vietnam. For example, Vietnamese law does not allow foreign investors to directly buy land in Vietnam, but it is allowed to buy shares in Vietnamese enterprises even if they are “owned many land lots.
Vietnamese regulations is also the reason why this method has many advantages over the other. For example, the law also sets out quite strict conditions that a company that is an investor of a real estate project must meet many conditions in order to be allowed to transfer a real estate project but hardly sets any coditions to shareholders of that company to sell their shares in the company.
An advantage of the ethod of share acquisition:
The purchaser will indirectly own all the assets of the target company and all the government licenses and approvals which the target company has in order to continue conduct current business. In contrast, the purchaser in business acquisition must apply for re-issuance (by amendment or new grant) of almost all the licenses and approvals of the government necessary to carry out the acquired business operation.
If in the business acquisition, the buyer does not inherit any of the seller “sobligations and responsibilities with respect to the purchased property, then in share acquisition, the purchaser must inherit the obligations and responsibilities. of the target company from the seller, equivalent to the
percentage of traded shares. Such obligations and responsibilities may be obligations to partners in contracts signed by the target company, obligations to employees in collective labor agreements, tax obligations to the state or legal liability that has arisen or is potential due to the law violation of the target company.
4. M&A in Vietnam
In fact, merger is rarely used in M&A transactions in Vietnam because the laws of Vietnam are still sketchy, general and lack of detailed instructions. The administrative procedures for transferring assets from the merged or consolidated company to the merging or acquiring company are unclear, time-consuming and do not have a common operating mechanism. The merging or acquiring company must inherit the debts and other obligations of the consolidating companies and the merged companies. This creates a risk for the buyer.
When buying shares in the merged or consolidated company, the purchaser is only at risk with all the assets of the company being merged or merged. When consolidating, merging, the purchaser must be responsible with all his assets.
5. M&A support services
M&A in Vietnam is a form of activity that has not really developed, therefore businesses and investors, especially foreign investors, often face many difficulties.. Clients wishing to transfer, purchase, merge or consolidate can contact us for assistancein finding a transfer partner and legal support.
If you need to use the service, please contact us:
INCO MINH ANH Co,.Ltd
Email: [email protected]