In investment and M&A activities (M&A), price appraisal is one of the most important steps that determine the success of a deal. According to statistics, up to 65% of investment deals and M&A fail right from the stage of valuation and negotiation. The common mistake is that the seller is over- or under-pricing his business, which makes it difficult for businesses to attract potential investors, not finding the right partner for them. mine. On the other hand, on the investors side, the valuation is too high or too low, which will make them unable to complete the deal, or complete but the investment performance is not as expected.
Currently, the level of understanding of mergers and acquisitions (M&A) of many companies and businesses is very limited, making it impossible for them to find suitable investors and partners on their own. Therefore, the transparent valuation of enterprises by the companies Appraisal plays an important role as intermediaries, connecting (for buyers and sellers) businesses to attract direct investment in their operations. M&A activities.
The effective M&A process for acquiring / merging businesses includes the following steps: approaching the business that needs to be acquired / merged, legal evaluation, corporate valuation, terms of negotiation, contract signing, changes business registration and solving "post-M&A" issues.
Step 1 - Access to businesses: The parties must determine the exact type of M&A transaction when starting the deal. This helps to properly apply the amended laws, the mechanism, the process of conducting transactions, and the orientation of establishing the terms of the M&A contract; and determine information obligations, notify the governing body of the parties.
Step 2 - Legal evaluation: Help the buyer understand the legal status, legal rights and obligations, legal regime for assets, labor contracts, land records, construction , investment ... This is the basis for determining the status and legal risks when making a decision to buy a business. This work is usually done by M&A consulting lawyers on behalf of the buyer.
Step 3 - Enterprise valuation (financial appraisal): Assess and draw conclusions about the enterprise actual value (both tangible and intangible) in order to provide a fair price and help the two sides move forward. come together to come to an agreement. This evaluation requires the expertise of auditing firms or independent auditors. The commonly used methods are P / E Ratio, Enterprise Value-to-Sales Ratio (EV / Sales), Replacement Costs, Discounted Cash Flow (DCF). In which DCF is the most important tool in pricing.
Step 4 - Negotiation: There is no common format for all M&A transactions, so the parties must fully specify the basic terms related to the M&A transaction, making requirements, benefits, and transparency. separate M&A obligations of enterprises, "post-M&A" issues ... Otherwise, the M&A contract will lead to internal conflicts within the M&A process.
Step 5 - Signing the contract: This transfer and sale contract must be agreed in writing by the Board of members (Limited Liability Company) or the General Meeting of Shareholders (Joint Stock Company). The contracts contents include: transfer price, total unpaid debts of the enterprise, buyer or seller responsible for debts, labor contracts and other contracts signed and unrealized. done now ...
Step 6 - Change of business registration: To complete this transfer, it is necessary to register with the business registrar about the change. The purchaser may change the business registration with a number of contents: Change of member, industry .... The transfer of shares or contributed capital is best represented in a notarized state certificate. take.
Step 7 - Handling after MA: Handling difficulties after merging 2 enterprises, in the field of human resources, corporate culture, operation and management system, responsibilities of the seller and the buyer enterprise.
