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General process of an M&A - Due Diligence (DD) deal

M&A is becoming a global investment trend and developing strongly in Vietnam, prospering in 2013 and strongly increasing in the last few years. It is predicted that in 2016 and the following years, with the introduction of the Trans-Pacific Partnership (TPP), M&A activities will boom and become a trend of investment in Vietnam.

Each M&A deal is not only a simple economic transaction among the parties but also an extended cycle, consisting of many stages and requires in-depth knowledge and practical experience on the market, information, finance, policy, and law. This article introduces the comprehensive process of an M&A deal, giving readers the most comprehensive view of mergers and acquisitions

1. Document for an M&A deal

  • A copy of the memorandum and terms of the legal association
  • Report of the Board meeting over the past few years
  • Report of all meetings and actions of all shareholders over a number of years lately
  • A copy of the stock certificate is issued to the main manager
  • Copies of all warranties to which the company is a party
  • All material contracts, including any joint venture or partnership agreements, limited liability companies or adjustment agreements.
  • License agreement or franchise
  • Copies of all loan agreements, banking financing agreements or credit limits to which the company is a one-side party

2. The general process of an M&A deal

In fact, there is no standard procedure or common method for an M&A deal, especially in the Vietnam market. Therefore, this article only provides the most general process whereby an M&A deal can be roughly divided into three main phases as follows:

Preparation stage – Preparing M&A :

The preparation stage for an M&A transaction plays a decisive role in the M&A deal: For the seller, careful planning and preparation is the key to the success of the transaction; For the buyer, the process of acquiring and assessing the buyer determines whether the party reaches the official transaction stage (in order to make a buying decision, the buyer usually has to find out). and overall assessment of the target audience).

In the stage of investment preparation, the activities of finding, approaching and evaluating the target audience can be temporarily divided into 2 steps as follows:

Step 1. Approach the subject (Merger/ Acquisition)

Step 2. Appraisal report

Phase of negotiation, transaction performance - Signing M&A:

Based on the results of the detailed evaluation, the Purchaser determines whether the target transaction is a full or partial acquisition, which is the basis for negotiating the M&A content. Some issues to note at this stage are as follows:

Buyer and Seller need to be familiar with the types and variants of M&A transactions to negotiate the contents accordingly and effectively. In case, Buyer and Seller cannot meet at the price of the transaction. To solve this problem, M&A parties tend to hire an independent valuation unit to determine the buyer value.

The result of this negotiation is a contract recognizing the form, price, and content of the M&A deal. If this step can be reached, it is close to the final stage of M&A.

Note: The acquisition of a Merger is only legally recognized when it has completed legal procedures relating to the recognition of the transfer from the Seller to the Purchaser, particularly with respect to the types of assets, right to register with the competent authority. Upon completion of this step, an M&A transaction can be considered as completed and completed.

Restructuring phase - Closing M&A:

The M&A corporate restructuring stage is a problem for the acquirer about not allowing M&A to fail. The challenges of the Purchaser in this period are often the instability of personnel, inactivity in management policies, conflicts of corporate culture, ...

At present, Vietnamese enterprises have not yet fully understand the nature of M&A activities, making the implementation of M&A in Vietnam has not achieved the best efficiency. Therefore, it is advised that the client engage professional law firm in Vietnam to assist with advisory and negotiation process. With the broad experience, Apolo Lawyers believes to provide the client with the smooth implementation of M&A  in the shortest time.

More information can be found on the website: www.apolo.com.vn

An Tran

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