M&A is confirmed as one of the indispensable strategies of businesses. Therefore, it is extremely important for businesses to grasp the knowledge of M&A. Let’s “pocket” immediately “basic acquisition structures” if you want to understand this issue.

What is M&A? What is the purpose of M&A?

M&A is a business merger and acquisition activity. Gaining control over the business to a certain extent is the first and most basic purpose of M&A. Controlling an enterprise is not merely owning a part of the capital contribution or shares of the enterprise like small and retail investors but also taking control of the company’s decisions. When a Buyer achieves the level of ownership of the Target Party’s contributed capital and shares enough to participate in and decide on important issues of the enterprise, then it will be recognized as an M&A activity. On the contrary, if a party only buys for the purpose of profit and cannot participate in the decisions of the business, it will not be called an M&A but just a normal form of investment and purchase.

What is a business acquisition?

Clause 3, Article 29 of the 2018 Competition Law stipulates: “Acquisition of an enterprise is an enterprise that directly or indirectly buys all or part of the contributed capital and assets of another enterprise, which is sufficient to control and pay expenses. to coordinate the enterprise or a line or trade of the acquired enterprise.”

As such, a business purchase is a process in which the shares or assets of one party are transferred and owned by the Buyer. A business transaction can take the form of an asset purchase or a share purchase. This sale is usually done through bidding, open bidding to buy shares directly from the shareholders of the seller.

There are two ways to structure an acquisition: share, equity, or asset purchase. Depending on the circumstances and strategy of the business, we can apply the following ways of structuring the acquisition.

Two basic acquisition structures

Buy shares and contributed capital

The Buyer may purchase shares or capital contributions from shareholders, members of the Members’ Council of the Target Party’s company if the Target company is an internal joint-stock company. In this case, the purchase and sale will be made based on the agreements between the two parties. On the other hand, if the Target Party is a public company (the number of shareholders will be too many to work individually), this will be done by a bidding office, where the Seller will give officially and directly to the shareholders of the Target Party’s company.

Buy assets

• Acquiring part of a business or property

In the world, this form is quite popular and is being carried out by many businesses in emerging economies with the aim of reaching out to the global market. Typical is the deal Holcim Cement Company acquired with the Cotec Cement Factory of Cotec Group. One of the most famous deals is the Chinese computer company Lenovo’s acquisition of the personal computer business of IBM Corporation. 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 intangible (brands, copyrights, distribution channels…) or tangible assets (land use rights, factories, machinery, …) that are separated from the selling company.

• Acquiring a real estate project

Buying a real estate project is a widely used form in Vietnam, especially for real estates investment enterprises such as Vingroup, Sungroup, and Sengroup. In essence, real estate is also considered an asset class and in theory should be done as mentioned above on purchasing a part or business property. In fact, there is not only one investor involved in a real estate project so the term “secondary investor” has become more common. In this field, some businesses have the strength and potential to get large projects, but when they are deployed, they are divided and sold to “secondary investors” for development. This fact also causes a lot of disputes between investors, between investors and customers, investors and construction owners, etc. The case of Bao Son Group (investor) can be mentioned. ), D&T Company (secondary investor) with individual customers buying real estate under Bao Son’s project. Thus, in these cases, the parties involved, if they are not strict from the beginning on the forms of M&A, may cause complicated disputes later. That is also the reason why there should be strict rules and regulations and careful advice of lawyers.

M&A Legal Advisory Services provided by Hong Bang Law

• Consulting on Vietnamese policies and laws related to M&A;
• Advising on legal issues related to M&A transactions, conducting legal due diligence for clients;
• Assist and/or represent clients in negotiations with partners in M&A transactions;
• Advising and/or drafting various types of agreements and arrangements related to M&A transactions;
• Advise and/or represent customers to make necessary registrations with competent state agencies

If you need more detailed advice and answers as well as how to access this service, please contact directly the Deputy Director of Sales: Lawyer Nhat Nam via hotline: 0912.35.65.75, 0912.35.53.53 or call the toll free legal consultation hotline 1900.6575 or send a service request via email: lienheluathongbang@gmail.com

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