Benefits of collaboration through M&A

In recent years, driven by robust economic growth, businesses have increasingly sought to enhance their competitiveness and expand their market share; consequently, mergers and acquisitions (M&A) have become an integral part of corporate development strategies. Such M&A-based collaborations yield significant benefits for both the enterprises involved and the economy as a whole.

1. What is M&A?

M&A stands for Mergers and Acquisitions. It refers to business activities in which a company or corporation acquires or merges with another to create a larger entity, potentially generating economic benefits for the parties involved. M&A is frequently employed as a strategic tool to expand business scale, strengthen market position, accelerate growth, or achieve other objectives.

- Mergers: A form of alliance between enterprises—often of similar size—to create a new business entity. The merging company transfers all its assets, rights, obligations, and legal interests to the receiving company, effectively ceasing its own existence to become part of the new entity.

- Acquisitions: A form of combination where a larger enterprise purchases smaller or weaker businesses. The acquired companies retain their original legal status, while the acquiring enterprise gains legal ownership of the newly purchased business.

2. Benefits of cooperation through M&A

Corporate cooperation through M&A yields significant benefits not only for the enterprises themselves but also for the economy as a whole. Specifically:

Firstly, benefits for the buyer or the receiving company:

- Expanding market share and business scale: Acquiring or merging with a company that already possesses an established customer base, distribution network, and brand enables the buyer to achieve rapid growth. Additionally, M&A enables enterprises to access new markets and customer segments that the acquiring party has not yet tapped into.

- **Enhanced competitiveness:** By combining resources, technology, and expertise, enterprises create competitive advantages and strengthen their market position, thereby helping to outperform or displace competitors.

- **Cost optimization and operational efficiency:** Merging allows enterprises to leverage economies of scale and reduce production, management, and operational costs. It also enables the consolidation of redundant activities, the optimization of production processes, and the efficient use of resources.

- **Access to modern resources and technology:** M&A facilitates the transfer of technology and intellectual property, allowing companies to quickly access advanced technology without the need for internal development, thereby saving time and costs. Combining resources also fosters a highly skilled workforce capable of meeting economic demands.

- **Product and service diversification:** M&A helps enterprises expand their product and service portfolios to better meet customer and market needs.

Secondly, benefits for the seller—the party being acquired or merged:

- **Capital recovery:** Selling the company allows the seller to recoup their investment and maximize asset value; it presents an opportunity for investors to recover capital and realize profits.

- **Transfer and restructuring:** Selling the business enables the seller to divest from non-core activities or areas that are not their strengths, allowing them to focus on business operations with greater potential. Thirdly, benefits to the economy

- Enhancing economic efficiency and competitiveness: M&A activities boost the competitiveness of participating enterprises, thereby fostering national economic development and elevating the national economy's competitive standing in the international market.

- Promoting economic innovation and restructuring: M&A drives economic restructuring, facilitates the efficient allocation of economic resources, and encourages enterprises to invest in technological development to improve productivity and product quality.

- Generating employment and economic growth: M&A helps expand business operations and attract foreign investment, thereby stimulating economic growth.

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We look forward to a long-term partnership and contributing to our clients' growth.

Sincerely,

(Author: Nguyen Bich Diep | Translator: Nguyen Phuong Anh | Date: April 1, 2025)

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