In recent years, besides direct and indirect investment forms in Vietnam, investment through mergers and acquisitions (M&A) is becoming a potential new wave of investment. M&A transactions are constantly increasing between domestic and foreign partners, and the scale and value of deals are increasing. M&A brings great benefits, contributing to economic development.
What is M&A? M&A is an acronym for the English phrases Mergers and Acquisitions. M&A is an activity to gain control of an enterprise through a merger or acquisition between two or more businesses to own part or all of that business. In which, Mergers (mergers) is a form of association between businesses of the same size to create a new business. The merged company transfers all legal assets, rights, obligations and interests to the merging company, and terminates the existence of the merged company to become a new company. And Acquisitions (acquisitions) is a combination where large enterprises will buy smaller and weaker businesses, these acquired businesses will retain their old legal status and the acquiring business will have legal ownership rights. law for the business you just bought. M&A in the world as well as M&A in Vietnam are recognized that will create added value (synergistic value) by reducing costs, expanding market share, increasing revenue or creating opportunities. new growth. The synergistic value gained from each M&A deal will help improve business performance and improve corporate value after the M&A. Therefore, M&A always brings great benefits. That is:
– Firstly, helping to increase the size of the business: The merger and acquisition of businesses will help businesses penetrate into new markets, have a new product line or expand distribution, open Expanding branches, transaction offices, projects… The increase in business scale and promotion of goods distribution will also help businesses have a larger market share.
– Second, reduce human costs: In fact, when two or more parties merge, there is a need to reduce jobs, especially indirect jobs. Therefore, M&A will be an opportunity for businesses to screen out inefficient positions, and at the same time, businesses will have the opportunity to receive a source of skilled and experienced labor to improve the quality of work. job.
– Thirdly, improve financial resources: One of the most prominent benefits of doing M&A is that the financial strength of the business will be significantly improved. After the M&A, businesses will be able to increase their capital use and access to capital, share risks, and enhance financial transparency.
– Fourthly, improve the level of technology – technique: Through the M&A, businesses can take advantage of each other’s technology or techniques to create competitive advantages and save investment costs as well as time. learn technologies and techniques. In addition, abundant capital is also one of the favorable conditions for businesses to equip modern technologies for business.
– In addition, M&A also brings many benefits in the field of real estate. That is shown through large and successful real estate M&A deals such as: Nomura Real Estate Co., Ltd (Japan); CapitaLand completes the acquisition of Ascendas and Singbridge Pte. Ltd.; Korean group invested 1 billion USD to buy Vingroup shares; Phat Dat cooperates with Samty Asia Investment or the Keppel Land deal;….
Based on the functions of member companies and the nature of mergers and acquisitions: M&A activities can be classified according to 03 (three) common forms as follows: horizontal M&A, vertical M&A and Combined M&A.
– Horizontal M&A (Horizontal) is a form of merger and acquisition between businesses that provide the same or similar lines of products and services to the end consumer, that is, in the same industry and in the same area. production phase. The companies, in this case are often direct competitors.
Example: In January 2016 Toyota announced that it was conducting a full acquisition of Daihats – the earliest established car brand in Japan. This approach of Toyota has concretized the expansion of local production scale of small car models.
– Vertical M&A (Vertical) is done with the aim of combining two companies with the same value chain to produce the same good service and service, but the only difference is the production stage in which the business is operating. motion.
For example: An enterprise specializing in the distribution of tires and tubes may merge with an enterprise specializing in rubber production. This can help businesses not be interrupted by suppliers, limit intermediary costs and reduce risks in the production process.
– Combined M&A (Conglomerate) is a form of merger and acquisition to form corporations. A consortium merger takes place between companies that serve the same customers in a particular industry, but that do not offer the same products and services. The products of the business can be complementary, the products go together, but they are not technically the same product.
Example: An interior design service company merged with a construction company. These two companies have the same customer profile and the same audience, so after merging, these products will complement each other and provide customers with the right, convenient help. of cutomer. The purpose of this form of mergers and acquisitions is to help companies achieve diversification of products and services. In addition, this also helps increase market share and profits, because when selling a service or product, it is easier to sell another product. After customers find interior design services, they will continue to have a need to find construction companies. And if the same department has two companies at the same time, after design and construction, customers can choose the same unit. This has brought great benefits to customers as well as helping the business activities of corporations grow and bring high profits.
M&A plays a strategic role in the growth of the merged companies and is a valuable tool in Social Media Marketing Campaigns.
Above is the article about “Benefits and popular forms of M&A” of Apra Law Firm. If you still have questions about the above issues and need to be answered, please contact the hotline for advice and support.
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