VALUATION OF BUSINESSES IN M&A IN VIETNAM

How to conduct due diligence on mergers and acquisitions in Vietnam?

The business buying and selling market in Vietnam is developing and challenging. Regardless of whether you are buying a business such as buying company shares, merging companies or buying and selling companies, it is essential to conduct an appraisal of the company to be purchased in Vietnam.

Due diligence is a process of investigating the details of a potential investment, such as performance checks and data management and due diligence. Due diligence is critical to determining the risks and benefits of entering into a particular transaction and should not be overlooked, avoided or overlooked under any circumstances.

Due diligence involves an in-depth investigation of the business. It requires reviewing a lot of documents such as legal documents, financial statements and tax returns etc. to fully understand the business and be able to determine a fair purchase price of the business, and determine any unexpected business debt that the buyer may be responsible for after you become a business owner.

In general, there are three main areas of due diligence: legal due diligence, financial due diligence, and intellectual property due diligence. All three areas are related, but each has distinct issues that are of particular importance.

1. Financial appraisal of mergers and acquisitions in Vietnam

 Financial due diligence is mainly concerned with establishing a clear picture of the business continuity in terms of goals. Areas of interest are financial records and forecasts of sales, profits and cash flows; list of assets and liabilities; analysis of customer lists; review supply agreements and purchasing practices; Review bank accounts and tax records.

Financial due diligence is not an audit. The audit is only relevant to the historical financial statements and provides an opinion on whether the financial statements present a "true and fair view" of the companys activities. Financial due diligence, on the other hand, will incorporate a larger scope.

 A financial due diligence will not only look at the financial performance of a business, but also look at the projected financial performance for the company under the current business plan and consider the reasonableness of that forecast.

 A major difference between an audit and a financial appraisal is that, since the audit report is based solely on the truth and reasonableness of the financial results, the financial audit will investigate the reasons for the trends observed in the financial statements. the results of the companys activities for the relevant period of time and this statement of suitability for the proposed transaction.

In general a financial due diligence will often involve looking at the following areas: historical financial results, current financial position; forecast financial results; working capital needs; regulations on employee benefits; pricing impact; risks and opportunities; and tax impact.

Key issues in financial appraisal include determining the true financial position of the target business, especially in relation to obsolete inventory, R&D costs, excess fixed costs. , off-balance sheet debt, bad receivable accounts and tax provisions.

a. What information is needed for a financial appraisal?

The information required to complete a financial due diligence assessment is determined by the scope of the agreement as well as the reporting capabilities of the target company. Key sources of information for financial appraisal review include:

Financial history data includes statutory accounts, detailed management accounts and income tax returns and reports. Where accounts have been legally audited, access to audit records can also aid the financial due diligence process. In Vietnam, the successor of a business can be liable for tax debts incurred in the years preceding the purchase of the business. To make sure you have the same revenue already filed with the tax authorities, you can ask the seller for written approval so you can request a copy of the actual tax return directly from the agency. applicable tax. Any tax liens paid on any property owned by the target business should be considered.

Current financial figures such as year-to-date management accounts. Business sellers must provide detailed financial statements (including balance sheets and profits and losses) for the previous 3 to 5 years.

Business plan and forecast financial information (including budget and cash flow forecast).

Minutes of meetings of the Director and of management meetings.

b. What to get out of a financial due diligence assessment?

Depending on the scope of the procedure conducted, the financial due diligence assessment will answer the following questions:

Is the information provided by the target/vendor reliable?

Does the company have a solid history of historical earnings?

What is the companys potential future earnings?

What are the possible synergies regarding the proposed acquisition?

What are the immediate and future tax consequences of the sale?

Is the purchase price reasonable given the results of the appraisal process? Based on the results of the appraisal are there any hidden money deal breakers, is the structure of the purchase appropriate and are there any issues such as including a guarantee in the purchase record?

2. Intellectual property appraisal in mergers and acquisitions in Vietnam

IP due diligence focuses on establishing what interests a company may have in various intellectual property and where it may rely on another companys intellectual property. Areas of interest are patents, copyrights and trademarks; introduce the companys IP protection procedures; license agreement.

An important consideration in IP due diligence is establishing the ownership rights that the target business holds in a certain portion of the IP. The discovery of a "cloud" in IP asset ownership can significantly reduce the value of the target business.

Intellectual property includes patents, copyrights, trade secrets, trademarks, service marks and trade names. Patents, copyrights and trade secrets tend to be the most important types of intellectual property.

According to Lawyervn.net