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How does business merger work?

A merger happens when a company finds a benefit in combining business operations with another company in a way that will contribute to increased shareholder value. Through this article, Apolo Lawyers (Tel: (+84) 903.419.479) would like to provide some the answer for the question "How does a business merger work?" about merging in Vietnam Law.

So, what is merger? And how merger is regulated under Vietnam current law?

1. How are mergers regulated by law?

According to the provisions of Clause 1, Article 201 of the Enterprise Law 2020, one or several companies may merge into another company by transferring all legal assets, rights, obligations and interests to the merged company, and at the same time terminate the existence of the merged company.

Thus, a merger is an activity that occurs when businesses, usually businesses in the same industry, agree to merge into a new enterprise with larger scale and higher competitiveness.

The result of the merger is the birth of a new company, which is different from the company before the merger.


2. Form of merger of enterprises

2.1. Based on the structure of the enterprise, the merger forms are divided as follows:

Merger in the same industry (also known as horizontal merger): Occurs when two companies compete directly and share the same product lines and markets.

Vertical merger: Occurs with businesses in the supply chain such as between a company and its customers or suppliers.

Market expansion merger: Occurs when two companies sell the same product, but in different markets.

Product Expansion Merger: Occurs when two companies sell different, but related products in the same market.

Conglomerate merger: Happens when two companies do not have the same business line, but want to diversify their business activities across multiple lines of business.

2.2. Based on the financial structure, there are two types of mergers as follows:

Acquisition merger: This type occurs when one company acquires another. The purchase of the company is done with cash or through some financial instrument.

Consolidated merger: Both companies are consolidated under a new legal entity and a new corporate brand is formed. The finances of the two companies will be consolidated in the new company.


3. What benefits do businesses have after implementing M&A procedures?

The cooperation is mutually beneficial: for example, a large strategic company or an equity investment fund will decide to acquire smaller competitors in order to reduce competitive pressure and form a conglomerate. union union.

Market expansion: Managers make acquisitions as a way to increase and expand the market.

Competitive prices: Some companies actively carry out M&A activities to expand the market. A higher market share will lead to an increase in purchasing power that exceeds supply capacity.

Diversification of products and services: Companies also acquire other companies with complementary products and services for the purpose of diversifying their products and services.

Operational efficiency: Because corporate customers will regularly evaluate the ability to provide goods periodically, once all production processes are running smoothly, businesses can increase production capacity and the trust of customers is also increased accordingly.

>>> Read more: Legal advice on tranfer of investment project in Vietnam

>>> Read more: Legal Due Diligence consulting service

4. How can Apolo Lawyers support foreign investors to conduct M&A activities?

Apolo Lawyers is a law firm with many years of experience in legal issues relating to merger and acquisition transactions, especially cross-border merger and acquisitions field. Clients who are conducting mergers and acquisitions transactions can contact Apolo Lawyers for:

  • Advice on the process of mergers and acquisitions.
  • Support due diligence process and intellectual property due diligence
  • Consulting for foreign investors about the regulations of tax law.
  • Advice on the notes when making M&A transactions, legal regulations and common risks when merging and acquiring businesses.
  • Consulting and representing in the negotiation process of merger and acquisition transactions

For further information, please contact us: Apolo Lawyers via email at or Hotline - (+84) 903.419.479 for the best legal advice and support.


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