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Why exclusivity is essential in Việt Nam’s M&A market

Update: January, 18/2020 - 07:10

 

Brian Spence

Brian Spence *

I was recently embarrassed to find that a securities business my firm was engaged by had been sold without my knowledge – after I’d approached one of our best acquiring clients about a potential purchase. They were disappointed as they had wasted time researching the business, and were ready to make an offer. Not only was this embarrassing for me, but also a disaster for the securities firm, because the acquirer we had lined up was willing to pay much more and had a far better infrastructure to take the new business forward.

Bringing in additional advisers because people rush in promising to deliver a lot for relatively little seldom works out well. Worse still is going for the cheapest option without due regard for alignment of expertise and interests.

So, to assist any would-be business seller, here are my top tips for selling your business, smoothly and for the right price to the right people.

Engage a specialist international broker. They will be able to ensure that your business is presented before a broad range of clients who will pay premium prices for any business that will give them an immediate foothold in the dynamic Vietnamese market. Don’t limit your chances by using a broker limited just to Việt Nam.

Ensure the vendor gives you exclusivity. This is essential to the success of any sale. If not, you may find yourself in the same situation as my example above – resulting in a lower price and embarrassment all round. My experience in Việt Nam is that many unqualified people have got away with styling themselves as real estate brokers or acquisitions specialists, simply because there is so much activity going on. You need professional help for what is, after all, one of the most important decisions of your life.

Be willing to pay an up-front engagement fee followed by a success fee. Don’t be afraid of paying what you feel is perhaps a large fee: the right consultant will always get the best price from a good company that benefits clients, owner and acquirer alike. We have a saying in the UK, ‘if you pay peanuts, you get monkeys’. Think long-term and pay for a value-adding service that will provide exclusivity, even if only for a limited period of time.

Don’t go it alone. Acquirers will always seek the lowest price, but a good broker is an experienced and highly successful maker of sophisticated deals. This is not like a sale in the local market. The structure of every deal is as important as the price. Key questions include: How long must the seller remain with the company? How many shares will they sell initially, and will they retain a majority or minority holding? How will the company be valued?

Ensure that any non-disclosure agreement has legal ‘teeth’. There will always be bad actors who illicitly share information and a business for sale can be crippled by information reaching the public domain or getting into the wrong hands; staff, suppliers, and clients can be unsettled and business disrupted. This is one of the reasons that owners often are reluctant to put their businesses up for sale.

Prepare your accounts in an international format. One of the roles of an adviser is to create a really good ‘shop window’ and it may be that your business requires some ‘beautifying’ before it is ready for sale. Like the property ‘dressers’ that help properties fetch their maximum value, your M&A specialist can be on hand to implement a few judicious touch-ups wherever needed. Presenting your accounts in an international format is one way to make your business a far easier sell and any good adviser can easily do this.

Make broader improvements wherever possible. Make sure you also leverage the expertise of a good adviser well in advance of a planned sale. They will be able to assist you in making adjustments that will increase the profitability and therefore increase the value of your business on an EBITDA (earnings before interest, tax, depreciation and amortisation) basis.

The simple fact should also be remembered that any owner will always look more professional by using a broker to sell their business. It creates a very positive impression to potential acquirers and shows that you are a serious player – rather than someone who is prone to unwise penny-pinching – and this can only make your business look even more attractive.

Finally, if an acquirer comes to you directly, do not be tempted to allow them to cut the broker out. The likely results will be a lower price, a less-than-ideal purchaser and the wrong infrastructure going forward for your clients.

* Brian Spence is managing partner of S&P Investments. He has more than 35 years of experience in the UK financial services industry as an investment manager, financial planner and M&A specialist. He is a regular contributor to the UK financial press and has a deep understanding of the financial services community. Brian’s column will reflect on all the challenges and opportunities within the Vietnamese market, bringing a fresh perspective to today’s hottest issues. The columnist’s email address is brian@sandpinvestments.com.

 

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