What Is a Company Sale? How the Law Regulates Company Sales

1. What Is a Company Sale?

A company sale—commonly referred to as M&A (Mergers and Acquisitions)—includes mergers, takeovers, or acquisitions intended to create rapid growth, access new resources, and optimize competitive advantages. The process requires deep understanding of finance, law, and markets and careful assessment of both risks and opportunities.

This article provides a comprehensive view of company sales—from reasons and process to challenges and strategies at each stage—so investors and business owners can approach M&A transactions intelligently and effectively.

2. Why Undertake a Company Sale?

In today’s highly competitive business environment, M&A transactions are not only part of a growth strategy but also a means of survival and development. Three common drivers lie behind M&A decisions: scaling and expanding scope, restructuring for operational efficiency, and accessing new technology and resources.

• Scaling and market expansion: Acquiring another company enables rapid entry into new markets or stronger presence in current areas. Example: Amazon’s acquisition of Whole Foods (2017) quickly expanded Amazon’s scale and influence in grocery retail, a segment in which it previously lacked strength.
• Restructuring for optimization: Through M&A, companies can streamline by eliminating or consolidating inefficient units and refocusing resources on areas with stronger competitive advantages. Example: Pfizer–Warner-Lambert (2000), which strengthened Pfizer’s R&D capabilities in pharmaceuticals.
• Access to technology and resources: M&A provides access to new technology and expertise that might take significant time and cost to develop internally. Example: Microsoft’s acquisition of LinkedIn (2016) expanded Microsoft’s cloud and productivity ecosystem and leveraged LinkedIn’s global professional data and network.

These deals illustrate that company sales are integral to sustainable corporate strategy—enabling scale, continuous improvement, and innovation to meet shifting market demand.

3. The Company Sale Process

Buying or selling a company is a complex, multi-layered process that requires attention to detail to ensure success. Core steps include:

3.1. Assess financial and legal health; determine valuation

Preparation begins with a comprehensive review of the company’s financial and legal health: financial statements, debts, assets, and any legal issues that could affect value. Valuation should consider both current status and future growth potential. Companies typically retain financial and legal experts to ensure accuracy and transparency.

3.2. Identify and select the right counterparty

Define clear selection criteria based on strategic objectives, corporate culture, and financial factors. Shortlist potential candidates, conduct preliminary interviews, and assess strategic fit. Market data, SWOT analysis, and industry advisors are especially useful at this stage.

3.3. Negotiation

Both sides negotiate deal terms—price, payment structure, and other conditions. A strong yet flexible negotiation strategy is essential to reach a mutually beneficial agreement. Negotiations can be lengthy and require patience and willingness to compromise.

3.4. Contract signing

Once terms are agreed, the parties execute definitive agreements. Legal counsel is crucial to ensure all terms comply with applicable law and protect client interests, clarify complex provisions, and address any subsequent legal issues.

3.5. Closing, transfer, and integration

The final stage involves transferring control and integrating the acquired business. A detailed plan is needed to keep operations running smoothly, align corporate cultures effectively, and support employees through the transition. Project management teams and specialist consultants often help ensure a smooth and effective integration.

Overall, a company sale demands professionalism, rigor, and broad expertise across business and legal domains. Each step must be handled carefully to secure a successful outcome.

4. Common M&A Deal Models

M&A features multiple models, each with distinct characteristics and strategies. Two frequently used comparisons are full-business acquisition vs. partial acquisition and merger vs. takeover.

4.1. Full-business acquisition vs. partial acquisition

• Full-business acquisition: The buyer acquires the entire company, including all assets and liabilities. Example: Disney’s acquisition of 21st Century Fox (2019), covering film and TV studios as well as domestic and international cable networks, substantially expanding Disney’s content ownership.
• Partial acquisition: The buyer acquires only a part of another company, such as a division or product line. Example: Microsoft’s 2021 acquisition of Qualcomm’s custom chip design unit (to bolster chip development for Windows devices and Azure).

4.2. Merger vs. takeover

• Merger: Two companies combine into a new entity, often of similar size, to scale or access new markets. Example: Daimler-Benz and Chrysler (1998) formed DaimlerChrysler, then one of the world’s largest automakers.
• Takeover (acquisition): A larger company acquires a smaller one, sometimes without the target’s consent. Example: Kraft Foods’ acquisition of Cadbury (2010) to expand its global presence in fast-moving consumer goods.

Each model has its own benefits and challenges. The choice depends on strategic goals, financial condition, and corporate culture. Full or partial acquisitions let companies focus on specific assets or business lines, while mergers and takeovers often aim to boost scale or market share.

5. Legal Regulations on Company Sales (Vietnam)

5.1. Limited Liability Companies (LLCs)

Under Vietnam’s Law on Enterprises 2020, Article 52 governs the transfer of capital contributions in multi-member LLCs:

• Members may transfer all or part of their capital contributions to others, except in special cases under Clause 4 of Article 51 and Clauses 6 and 7 of Article 53.
• The transferring member must first offer the stake to other members in proportion to their existing ownership.
• If, within 30 days, the remaining members do not purchase or purchase only part, the member may transfer the remainder to a non-member.
• Until the transferee’s information is fully updated in the Member Register as per Points b, c, and dd of Clause 2 Article 48, the transferor retains rights and obligations tied to the stake.
• If the transfer results in a single member, the company must convert into a single-member LLC and register the change within 15 days of completion.

5.2. Private Enterprises

Article 192 of the Law on Enterprises 2020:

• The owner of a private enterprise may sell the business to an individual or organization.
• The former owner remains liable for debts and asset obligations arising before the transfer, unless otherwise agreed among the former owner, the buyer, and relevant creditors.
• Both the former owner and the buyer must comply with labor regulations.
• The buyer must register the change of ownership in accordance with the Law on Enterprises 2020.

5.3. Joint-Stock Companies (JSCs)

Article 127 of the Law on Enterprises 2020 on share transfers:

• Shares are freely transferable unless restricted by the company’s charter or under Clause 3 Article 120. Any restriction must be stated on the share certificate.
• Transfers may be conducted via contract or on the stock market. Contract transfers must be signed by both transferor and transferee (or authorized representatives). Market transfers follow securities law.
• Upon the death of an individual shareholder, heirs under a will or law become new shareholders. If there are no heirs or inheritance is declined/forfeited, shares are handled under civil law.
• Shareholders may gift shares or use them to settle debts; recipients become shareholders once their information is fully updated in the Shareholder Register.
• The company must update changes in the Shareholder Register within 24 hours of a valid request, consistent with the charter.
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6. Challenges and Risks in Company Sales

M&A brings opportunities but also significant challenges and risks. Cultural differences, stakeholder reactions, and financial/legal risks can materially affect deal success.

• Cultural differences; employee and customer reactions: Divergent corporate cultures can cause conflict, reduce productivity, and prompt the departure of key talent. Customers may react negatively if trust erodes post-merger. Companies should plan careful culture integration and maintain open, frequent communication with employees and customers to mitigate concerns.
• Financial and legal risks: Risks include over/undervaluation, failure to meet financial targets, and difficulties integrating finance systems. Legal risks include contractual breaches, data privacy/security issues, and third-party claims. Mitigation requires thorough due diligence and engagement of financial and legal experts through negotiation and signing.
• Risk mitigation strategies: Prepare comprehensively—conduct full financial and legal due diligence before signing; develop a detailed integration plan with participation from both companies; and establish effective communication channels with all stakeholders (employees, customers, partners) to maintain trust and transparency throughout the M&A process.

By proactively identifying and addressing these issues, companies can improve their chances of success and maximize value for all parties.

7. Optimizing Strategies in a Company Sale

A successful company sale is not only about reaching financial terms; it also depends on strategic approach and careful preparation.

7.1. Guidance for investors and owners

• Deep diligence: Understand the target thoroughly—history, culture, financials, and industry outlook—to support accurate valuation and growth assessment.
• Clear objectives and expectations: Set explicit goals (market expansion, access to new tech, increased capacity). Clear objectives guide negotiation and post-deal collaboration.

7.2. Negotiation strategies and counterparty assessment

• Value-focused negotiation: Emphasize how the deal creates value for both sides—beyond price—such as technology sharing, market development, and managerial capabilities.
• Data-driven decisions: Use data and analysis (financial metrics, SWOT) to inform decisions throughout negotiations.

7.3. Importance of independent advisory

• Independent advice: Engage independent experts (finance, legal, strategy) for objective assessments and risk evaluation.
• Transparency and legal fit: Legal counsel ensures contracts comply with law and protect your interests during negotiations and after closing.

Applying these strategies not only reduces risk but also maximizes the likelihood of a successful transaction and sustainable growth for both parties post-closing.

8. Explore the Business Buying and Selling Platform at GMAJOR

In today’s dynamic business environment, finding opportunities to buy or sell a company can be a major challenge. At gmajor.biz, we offer an advanced online platform that efficiently and securely connects investors and business owners.

With the support of modern technology and an in-depth analytical system, Gmajor.biz helps you find the right partners, negotiate terms, and complete transactions quickly.

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Visit Gmajor.biz today to explore unlimited opportunities in business acquisitions and sales — and accelerate your company’s growth.