[NEWS] – Common risks in business mergers and acquisitions (M&A)

Merger and acquisition (M&A) are one of the ways to shorten a lot of time, effort, and experience and take advantage of the brand advantage that the enterprise has previously built. But these benefits are accompanied by many risks, especially legal and financial risks.

For a business transaction to take place successfully usually goes through several stages. In particular, the first stage is considered the most important stage, this is the preparation stage for the acquisition of the business (M&A).

At this stage, the parties will sign each other’s minutes and agreements related to business mergers and acquisitions. Accordingly, the parties must keep the trading information confidential and request the seller to provide all information about their business to the buyer or provide it at the request of the buyer.

Based on the provided information, the buyer can check, review or ask other units to check such as consulting, auditing, and appraisal units to review all legal issues, risks, and advantages that the buyer may face. On the basis of the appraisal report, the buyer can consider making a decision whether to buy or not to buy the business and whether the purchase price is high or low.Dựa trên quá trình mua bán, sáp nhập có 04 rủi ro mà doanh nghiệp thường gặp phải:

1. Legal risk

Legal risks include:

- Risks in the course of operation such as the business being suspended, owing taxes, or does not comply with the provisions of the law in the course of business (without a sub-license when doing business).
- Risks related to litigation, and disputes over civil and labor contracts.

Depending on each case, each actual transaction, the specific industry of the business, or depending on the agreement of the buyers and sellers, the seller must provide legal documents such as:

- Profile of establishment and operation
- Capital profile of business owners/members/contributing shareholders
- Profile of the company’s personnel and organizational structure
- Records on labor, contracts, and transactions of the enterprise
- Asset records of the business
- Tax, accounting, and banking records.

2. Financial risk

This is a risk that the buyer is particularly interested in, which may be related to capital contribution. The enterprise has not contributed enough capital, the source of business capital is not transparent, the risk of assets including the valuation of assets is not true to the actual value, and the risk of debts to state agencies and partners. Normally, to check and review financial-related contents, the buyer will hire independent audit units to review financial risks, and for assets, hire an appraiser to determine the value. enterprise again.

3. Market risk

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Making good use of these advantages will help the buyer save a lot of time, and build the market, but can instead begin to exploit the existing potential... However, the buyer also needs to Weigh these advantages with legal, financial, and other risks before deciding to enter into a business transfer contract.

Therefore, enterprises need to identify and control risks and take advantage of the advantages of other enterprises to promote their business models to new heights.

To avoid these risks, Indochina Holdings provides business consulting services. A team of experienced experts of Indochina Holdings, not only helps the company find the right strategy in mergers and acquisitions, but we also support throughout the process of implementing the deal, uncovering the key points and negotiations, and expedite the changes necessary to maximize post-deal synergies.

Thanh Long