VALUATION OF BUSINESS IN M&A IN VIETNAM

When intending to merge - buy and sell businesses, besides the legal procedures, the business valuation is indispensable for both the buyer and the seller. According to statistics, up to 70% of mergers and acquisitions (M&A) failures are due to incorrect valuation of the business or inconsistency between the buyer and seller.

Why is business valuation necessary when M&A businesses?

• For the seller: Valuing your company before conducting an M&A will help business owners see the current value as well as the ability to increase/decrease in value in the near future, avoiding loss of business value. when negotiating. Simultaneously, hiring a third party to appraise the business price will increase the persuasion of investors by the objectivity and accuracy of determining the value of that business.
• For investors (buyers): Enterprise valuation helps to accurately determine the total current and near future value of the business, verifying the legality of that business. From there, determining the feasibility as well as minimizing risks when making financial investments in corporate M&A projects.
• For management agencies: Appraisal of enterprises before M&A helps management agencies and public authorities to have a legal basis for reference and arbitration if there is a dispute or lawsuit between the parties.
• It can be affirmed that enterprise valuation in M&A is an indispensable requirement for both the seller, the buyer and the State management agency.

Cost of business appraisal in M&A

The issue of business valuation costs for M&A purposes is also something business owners are very interested in. Currently, there is no specific state regulation on enterprise valuation fees in M&A. However, professional appraisal units often offer two ways to calculate business valuation fees in M&A, including:

• One is the percentage (%) of the total value of the business being appraised. After the unit appraises the preliminary value of the business, the price will be quoted to the customer. Accordingly, the higher the business value, the lower the percentage will be. Usually will range from 0.08 - 0.02%.
• The second is the package appraisal fee which is agreed between the valuation unit and the enterprise.

Dossier of enterprise valuation in M&A

• Registration form requesting enterprise valuation (According to the form of valuation unit)
• Certificate of business registration.
• The tax registration certificate.
• Decision on establishment of affiliated units.
• Minutes of capital contribution, association and capital contribution to establish the company.
• Corporate financial statements
• Certificate of Trademark/IP registration (if any)
• Business and Marketing plan (if any)

Business valuation process in M&A

According to the Enterprise Valuation Standard (Vietnam Valuation Standard No. 12) issued by the Ministry of Finance and the Vietnam Valuation Association, the enterprise valuation process includes:

• Step 1: Receive request for appraisal from customer
• Step 2: Make a business appraisal plan
• Step 3: Field survey, collect information
• Step 4: Prepare detailed appraisal report
• Step 5: Control the report
• Step 6: Issuing Appraisal Report & Certificate

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