M&A (short for English phrases mergers and acquisitions means mergers and acquisitions) is the purchase, sale and merger of businesses in the market. In some other cases, people translate this phrase as merger and acquisition. These two concepts often go together because there are many similar businesses, in many cases people can’t tell the difference and don’t have enough information to make a judgment.
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Distinguish between mergers and acquisitions
This distinction is only relative to better visualize the M&A transaction
Similarities:
– Change of owner, change of management
– The company merged or acquired after the M&A process is a larger company than the old company in terms of size, financial potential, and personnel. …
Differences:
Although M&A and M&A are often referred to together with the popular international term “M&A”, there is a difference between the two terms.
When a company acquires or acquires another company and puts itself in the position of the new owner, the transaction is called a Sale. From a legal perspective, the acquired company no longer exists, the buyer has “swallowed” the seller, and the buyer’s shares are not affected. Literally, a Merger occurs when two businesses, often of the same size, agree to merge into a new company instead of being operated and owned individually. This type of merger is often referred to as a “peer merger”. Shares of both companies will cease to be traded and new company shares will be issued.
However, in reality, the form of “peer merger” does not happen often due to many reasons. One of the main reasons is that publicizing information needs to be beneficial to both the acquired company and the new company after the Merger. Typically, one company purchases another, and the negotiated agreement allows the acquired company to declare to the outside that the operation is a “peer merger” even though it is essentially an acquisition. sale.A sale can also be called a Merger when both parties agree to join together for the common benefit. But when the acquired party does not want to be acquired, it will be considered a sale. Whether a deal is considered a merger or acquisition depends entirely on whether the deal is amicable between the two parties or forced to take over.
| Merger | Repurchase |
| Do not use cash. usually done by sharing shares | Business acquisitions are usually paid for in cash or by check |
| Valuation: by determining the value of the merged company by how many shares of the merged company | Valuation: Do not reduce the value of the acquired company to shares but determine its value in cash |
| The Board of Directors of the merged company after the merger has a position that is not equal to that of the merged company | The Board of Directors of the acquired company has no say and no authority in the reorganization of the new company |
| After the merger, the merged company usually disappears | After the transaction the acquired company may still exist. |
Basic M&A process
M&A has a rather complicated process with many different stages. The M&A process is very detailed for the parties and consulted in detail by the investment bank. However, within the knowledge base, M&A is divided into 3 stages:
| Pre-transaction phase | Transaction phase | Merge phase |
| Strategic planning | Contact and filter | Unified aspects |
| Define expectations | Target appraisal | Carrying out the merge |
| Prepare resources | Transaction | Post-merge control |
| Route plan | End of transaction |
M&A motives
Derived from the expected benefits of the M&A deal, the company’s management board makes decisions for M&A. In fact, the decision to merge and merge is not a normal or situational decision, but a strategic decision, creating a big change in the business as well as its vision and direction. go of the business later.
Synergy is an important engine that company leaders expect it to create a new bounce in the business and enhance corporate value. Therefore, although according to statistics of M&A cases, there is a small failure rate, showing that M&A is a risky decision, but M&A is still a strong development trend in recent years.
Benefits of M&A
| Improve your financial situation | Strengthening market position |
Short-term cost minimization | Leverage long-term scale |
| Improve your financial situation | Increase market share | Reduce duplication in the distribution network | Optimizing technology investment results |
| Increase capital use | Increase customers | Operational cost savings | Take advantage of the successful experience of the parties |
| The ability to access more capital | Leverage customer relations | Save administrative costs | Reduce the overall cost for each product unit |
| Share the risk | Take advantage of the ability to cross-sell services | Reduce costs when buying in bulk | |
| Enhance transparency | Leverage product knowledge to create new business opportunities | ||
| Improve competitiveness |
Key drivers
– Entering new markets
– Lowering entry costs
– Acquiring knowledge & human assets
– Reducing competition
– Reducing costs and improving efficiency (thanks to scale)
– Diversification and market expansion
– Diversification of products and brand strategy.
Types of M&A
In terms of transaction channels, M&A can exist in channels such as: Initial Public Offering (IPO), Private placement for strategic partners, investment cooperation with strategic partners, transfer projects.
In terms of transaction objects, M&A can be divided into two types: buying assets and exchanging shares.
| Buy an asset | Buy shares | |
| Define | The acquisition of all or part of the assets of another company by one company and the simultaneous transfer of ownership. | A company that buys back most or all of the shares of another company and becomes the largest shareholder of that company. |
| Advantage | In this form, the buyer can choose the property to buy as well as a number of liabilities. This protects the buyer from unforeseen liabilities. Buyers only have to work with the seller’s representative, not negotiate with many shareholders like buying shares |
By buying only shares of the acquired company, there will be no shareholder dilution like mergers Faster and easier than buying assets |
| Defect | Expensive in terms of time, effort and expense to value many types of assets, preparing procedures and paperwork to transfer ownership makes the transaction cumbersome. | Buyers may encounter liabilities that may cause “unforeseen disputes” (environmental, tax, litigation) |
Describe some methods
of buying shares: through participating in buying shares when the enterprise increases charter capital or auctioning to issue shares to the public. This is a form of partial but sufficient acquisition to participate in the decision of ownership and management according to the strategic objectives of the buyer.
Buying shares: to gain ownership and control is also a strategy implemented by many businesses. In Vietnam, in the second half of 2008, when the stock market dropped and many listed companies with low capitalization became the target of acquisition.
Stock swap: usually takes place for companies that are closely related, such as in the same corporation. For these cases, the most important issue is pricing to ensure the interests of the shareholders of the parties, while the business strategy or legal procedures usually do not cause major problems.
Acquiring part of a business or corporate assets: this is also a way to implement an M&A strategy. In this case, the acquiring enterprise only buys a part or a part of the assets of the selling enterprise without participating in ownership in the selling enterprise. The part sold can be tangible assets (factory, machinery, land…) or intangible assets (brands, copyrights, human resources, distribution channels…) that are separated from the selling company.
Acquisition of a real estate project: It is quite common in Vietnam, especially for real estate investment and development businesses. In essence, real estate is also considered an asset class and in theory will be done as mentioned above about buying a part or business property. However, for businesses that develop real estate projects, the term “secondary investor” has become more common than M&A. In this field, some businesses have the strength and potential to get large projects, but when deployed, they are divided into “reselling” to secondary investors for development.
Buying debt: Also a way to conduct indirect M&A. When a business becomes insolvent and cannot pay its debts, creditors can find a financially capable business to buy back the debt at an agreed price. The business that buys the debt becomes the new creditor and can negotiate to convert the debt into equity and exercise ownership. This is often the case with the former creditor, the bank. Instead of letting the business go bankrupt, the best way is for the bank to sell the debt for less than the debt’s value. Debt-buying enterprises generally tend to convert debt into shares to intervene to save the business rather than expecting to receive debt repayment.
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