Merger and Acquisition
(M&A) activities in Vietnam have been rapidly increasing over the the years
in value and number of transactions when Vietnam’s opening policies to attract
foreign investments loosen up. The M&A due diligence and
execution are therefore important steps to ensure a successful transaction.
For foreign investors wishing to take advantage
with a certain level of risks in Vietnam where the cost of labour are cheap,
mid-income populations are growing, and the need of capital are high, it
is imporatant to find the right target companies to invest. Challenges
might arise when approaching the right local companies, locating the right
decision makers within the local companies, encountering differences in
languages and cultures.
It is imporant that the local consultants with
the understanding of the business and legal environment in Vietnam where the
local companies are incorporated could be involved at an initial stage to
monitor and minimize the risks, improve the effectiveness of the M&A process in Vietnam.
The Vietnam consulting company could also
provide corporate intelligence and
insights of the Vietnam targeted companies to have an overall evaluation
of the compliance of
the Vietnam companies, possible risks involved and growth potential.
Financial forensic services might also be needed before other further
steps. Then, the following will need to be considered when undertaking
the M&A in Vietnam.
Due diligence
M&A duediligence in Vietnam is
a vital step because it determines whether the M&A will succeed or not.
There are some aspects that must be carefully considered:
- Financial
reports
Review all the financial reports of the
Vietnam targeted companies within 3 to 5 years to assess the current and
future financial situation. These data needs to be audited by a
reputable independent auditing company. Evaluating financial situation targets
on many aspects such as the reasonable connection between the financial
statements, operating and sales margin of the business in relation to the
average in that industry. These data allow valuation real value of the
target business.
- The
cash flow
Checking the dates on invoices showing that
whether targeted businesses have paid promptly or not. Term of payment may vary
from industry to industry, but generally 30 to 60 days. If the money order is
paid after the billing date period of 90 days or more, it means that the
business owner may be struggling with cash flow. Finding out that if the
clients’ inability to pay bills or not is very important.
- The
staff
Determining the importance of staff for the
success of the business considering work habits of employees, working time of
key employees; ability to remain working after a change of the owner occurs;
the incentives necessary to keep key employees; ability to easily replace key
employees; the relationship of key employees with the company’s customers.
- The
customers
This is the most important assets of the Vietnam
targeted company. Make sure that clients are as the other tangible assets of
the business. Evaluating customers on some primary aspects: the relationship
with the current owner of the business, customer history with business
relations and the contribution of each customer to the profits of the company;
assessing that customer will leave or stay when the business having new owners;
customer services and dispute of the company, the relationship of the former
owner of the business with the community or the industry.
- Business
location
This is especially important if the targeted
company is a retail company. Does the importance of business location play a
crucial role for the success of the company? How is the location of the company
you plan to acquire? Is there sufficient parking lot for customers? How does
the company depend on sales in the region? How is the prospects of the business
in this area? Does this place have been in the process of rapid change from new
residential district office building or not? Has business location become more
or less desirable because of contemplated changes in surrounding area or not?
- Competitors
Considering this aspect in order to define the
capacity of the targeted business in the industry, the following questions
would help: who are its competitor and what are their strategies?
Does the price war happen frequently? How has the competitive environment
changed?
- Business
registration, permits and zoning
It’s necessary to make sure that business
registration certificate and other legal documents can be easily given to the
buyer. It would be better to acknowledge the procedures to transfer these
documents and its fee with the help of local management consulting
company in Vietnam. If the targeted company is a joint-stocks company, what is
the procedure for the business registration? Can foreigners own the
company 100% according to Vietnam laws? Conditional investments in
Vietnam need to be considered carefully by lawyers in Vietnam to avoid mishaps.
- The
company image
Company image can be a significant asset and
that cannot be assessed in the financial report. There are many intangible
factors to consider when evaluating a company: how to serve customers, how
employees answer the phone and the level of support the community or the
industry.
Negotiate the price
It is important to understand the purpose and
motivation of both parties. The sellers’ motivation are formed and affected by
value drivers. There are two main value drivers which are approach value and
avoidance value. Approach value is our purpose such as prosperity and avoidance
value is the negative effect that we need to eliminate. Normally, the buyers
try to find out what are the reasons why the owner wish to sell the companies.
This will help the buyers plan a reasonable strategy beforehand.
A research analyzes the general aspects that the
buyers seeking for via conducting surveys companies’ owner who have sold or
transformed their enterprises. The research results are focus on profit
maximization (79%), minimization of tax payable (73%), protection of viability
of the company (71%)…(Source: Acquisition Marketplace Review, 2007).
The motivation of the buyer in most cases is
similar to the motivation of the seller, which is to maximize profits, expand
markets, increase revenue, operating areas, areas of activity, minimize taxes…
ANT Consulting is here to assist you from the
outset; providing corporate intelligence, risk advisory, management
consulting services that assist market entrance, and ensure efficient business
start-up operation. Our services are as following:
We strive to save your cost by guiding you
towards economical solutions that comply with local legislation and procedures.
We support you through early logistic solutions and carry you through as your
business grows. We aim to bridge the gap between international best
practices and local cultures and assist foreign companies and organizations
entering Vietnam market to overcome commercial and regulatory issues.
We could be reached at email: ant@antconsult.vn or
tel: +848 3520 2779 . To learn more about us, please visit www.antconsult.vn
Further
information
.jpg)
.jpg)
0 nhận xét:
Đăng nhận xét