In English, M&A means "Merger & Acquisition". Accordingly, M&A is an activity to gain control of a business through a merger or acquisition between two or more businesses.
The merger is a connection between businesses of the same scale and the birth of a new legal entity. The new enterprises will own all assets, benefits as well as rights and obligations of the merged enterprise. Two businesses join together for common benefits.
Acquisition is a form in which a large enterprise will purchase smaller and weaker enterprises and the being purchased enterprise will still retain its old legal status. The acquiring business has legal ownership of the purchased business.
M&A deals are all aimed at participating in and deciding on important issues of the merged or acquired business, not simply owning shares.M&A often brings many benefits to businesses: expanding market share, achieving better business efficiency, reducing the number of employees, reducing unnecessary costs, and taking advantage of transferred technology, etc.
Vietnamese law regulates several forms of M&A implementation as follows:
- Contribute capital directly to a business through contributing charter capital to a limited liability company or purchasing shares issued to increase the charter capital of a joint stock company.
- Buyback capital contributions or issued shares of members or shareholders of the company. Unlike direct capital contribution to a business, this is a form of investment that does not increase the business's charter capital but can change the capital/share ownership structure of the business.
There are also business mergers, business amalgamations, and business divisions and separation.
There are still many different definitions when approaching diverse levels of M&A, so the definitions are only relative.