VALUATION IN MERGER AND ACQUISITION ENTERPRISE

The business merger and acquisition (M&A) market in Vietnam in 2021 will reach nearly 10 billion USD, an increase of nearly 20% compared to 2020 despite difficulties due to the Covid-19 pandemic. In 2022, when the pandemic has passed its peak and economic activities are gradually restored, it is expected that corporate M&A activities will develop even more strongly.

What is corporate M&A?

M&A is an acronym for the two phrases Mergers and Acquisitions. M&A is the merger or acquisition of part or all of the shares of an enterprise to control and participate in the operation of that enterprise. Basically, the purpose of investors in a corporate M&A deal is not only to own shares, but also to participate in the management and control of activities or to administer the merged and acquired businesses there.

The importance of business valuation in M&A

According to actual surveys, more than 70% of the failures of corporate M&A deals are due to disagreements about determining the value of the merged - acquired business. Usually, mergers and acquisitions companies always value businesses too high, not close to reality, so they cant convince investors. On the contrary, investors always tend to value businesses that need to be merged - acquired below the market value to limit risks, price errors, and economic losses.

Therefore, in order to find a "common voice" between the merging enterprise and the merged/acquired enterprise, both parties need a reputable, professional and independent valuation unit to accurately determine the price. value of that enterprise according to current standards and regulations on price law.

For a Bank or a credit unit, the valuation of the merged - acquired business is mandatory in order to review and approve loan and credit applications in accordance with the Banks regulations, the law on organizations and individuals Credit.

In addition, for state management units involved in M&A activities of enterprises, valuation is also a mandatory step in the merger and acquisition process of that enterprise to have a basis for arbitration if it occurs. arising, litigation or other undesirable factors during the implementation of M&A.

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