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A Life of Negotiation. Mergers and Acquisitions of Companies

A Life of Negotiation

Chapter 10: Mergers and Acquisitions of Companies

In economic life,

it is normal to buy and sell companies

or merge two or more companies.

From the 60s or 70s of the last century,

in countries such as the United States or the United Kingdom,


and Germany,

the merger culmination began to prevail along with the growth of capital.

Even before that,

in the 19th century,

there were a few companies that managed to do this.

As in France,

a number of family wineries merged after the death of the owner,

but there were no heirs.

And in England,

there were a number of electrical

and machinery companies that merged at the same time

because there were no heirs,

or the children did not want to continue the legacy.

By the end of the 20th century,

mergers were an everyday affair.

The following reasons are given to explain this widespread phenomenon:

The economy in general

and the consumption market in particular expanded very quickly,

companies had to expand as well.


the growth from internal capabilities is very slow,

the strategy of buying the company

and then restructuring the team allows

to follow the development momentum more quickly.

At the same time,

there are many startups that grow like mushrooms,

but also dissolve very quickly.

They are a good bait for long-standing companies that

need to recruit young and dynamic employees to refresh.

The merged companies already have the team,

the product,

the tools,

the strategy,

the customer loyalty,

the track record,

the market share,

the brand,

and sometimes even a local niche that’s hard to capture.

Their prestige has been cultivated after years of competition

in the market,

even hundreds of years.

It is not easy for a new company to gain market share

without buying existing companies in that market.

In general,

a merger or acquisition allows

for a moment to take a foothold.

The need to research

and manufacture new products requires more

and more spending on research

and development (R&D).

Sometimes a company is aware of the need to merge

with another company in the same field

to contribute its resources

and capabilities to research.

On the other hand,

the nature of the capitalist market is so intelligent,

we rarely see the waste of budgets caused

by two companies splurging money on the same research area

without collaborating.

The pharmaceutical manufacturing industry is a very clear example

of the need for mergers.

Corporations like Pfizer

or Sanofi today are the result of many “huge” mergers decades ago.

Today, the amount of capital to be invested in the manufacture of drugs,

for example,

or telecommunications,




green energy reaches extremely large numbers.

As a result,

corporate mergers allow for spreading costs over a larger volume of sales,

something that is only possible

when merging multiple sales.

The market also judges companies by sales.


experience shows

that way is very superficial,

because there are many companies with very high sales

that do not operate well,

have low profits,

or even suffer losses.

The stock market rates these companies very low.

Factors that are more important than sales are profits,

cash assets,

investment ability

or monopoly position in the country or in the world…


high sales still allow the consolidated company

to become a more attractive company in the market,

easier to convince customers.

It is undeniable that in large projects,

customers are more secure

when assigning contracts

to companies with large capital

because the possibility of bankruptcy is considered lower.

I will not mention many cases of mergers

and acquisitions

due to companies having many operational problems.

These objects are very interested in mergers

and acquisitions of companies.

Doing so helps them change operating territory,

diluting year-end results into the new company,

erasing traces of the old company’s strategic

or operational mistakes.

Changing at the same time the name of the company,

the field of operation,

financial figures,


even working methods allows a Chairman or General Director

to extend his term before satisfactory supervision of the Board of Directors.

Of course,

the market eventually discovers the truth,

but at least buying the company means buying more time

to solve the problems the company is facing.

Foreign companies have an advantage that

when their currency is high relative to the Vietnamese dong (VND),

they have the opportunity to buy Vietnamese businesses even cheaper.

This event was very common for Japanese companies,

especially in the 1980s and 1990s.

The Japanese government at that time had a strategy

of letting the Yen (JPY) appreciate 6 months

and then depreciate 6 months.

When the yen was low,

Japanese companies were instructed

to massively export their products at artificially cheap prices.

When the yen appreciated,

they used the purchasing power of the yen

to buy foreign companies massively!

The Vietnamese market has many characteristics that

attract foreign companies:

a new market,

few powerful companies,

a large population,

a cheap market share,

a very weak and depreciating currency, cheap labor,

active and wise

the company’s leaders have not yet reached international standards…

Since the economic institutions tend to be more open,

many companies have sprung up in the country

due to market demand.

However, not all companies are strictly managed

according to scientific methods.

Therefore, risks are not properly assessed,

cash flows are not handled carefully,

market visibility is sometimes limited.

Most of these companies need to be consolidated and restructured.

All the above favorable conditions are more than enough

to encourage foreign companies to massively land in our country.

Those are the reasons why buying

and selling companies is something we will see often.

* * *

Negotiating to buy

or merge a company is one of the most difficult types of negotiations.

First of all,

the merged company is often struggling.

Usually when buying and selling in general,

no one is looking for things that are rotten,



old, outdated.

But when buying and selling companies,

it is difficult to find a company that is strong,


and achieves annual targets

but wants to sell itself in the market!

Second, the opportunity to buy a company is very rare,

sometimes there is only one suitable company in the whole market

for many years.

Third, when that opportunity comes,

the buyer knows they are good bait,

so he bargains and demands a high price.

They know that sooner

or later the company

they want to buy will be forced to proceed at any cost,

because they also know that

they themselves are a golden opportunity.

In addition, usually,

the acquiring company also has internal problems

that cannot be resolved,

so it also needs to be restructured

and restructured.

The purchase is necessary

for these companies.

Fourth, a large number of Vietnamese companies are

still in their infancy,

the founders are still alive

and still in leadership roles.

The mentality of these people is very strange.

They see their company as a beloved child,

like a “golden nugget”

and do not see its true value.

That subjective view obscures management methods

that are backward compared to international standards,

how to use feudal people,

how to use cash flows indiscriminately,

and if asked about a long-term vision,

they do not hesitate to

I’m afraid to compare my “darling” to an Apple or Coca Cola,

while sales are only up to a few hundred

or a few thousand billion VND,

not comparable to a year’s salary of a leader

of a foreign company mentioned above.

Negotiating with founders full of pride and dignity

(although legitimate) is an unpredictable pain!

Fifth, for some Vietnamese companies present on the stock market,

their value is objectively too easy to calculate,

because it is only necessary

to multiply the stock price in the market

by the total number of shares of the company.

But the objective price does not reflect the true price of the company

because the stock market is too small and narrow,

has too few actors,

and of course is easily manipulated.

So who knows what the real value is?

Sixth, in Vietnam,

there is still an Asian culture,

so sometimes in the newly merged company,

people still respect the old man who founded the company

that was bought as Chairman.

This is not absurd but unscientific and rational.

So right from the top of the new company

there was already a seed for a dysfunctional organization.

In short,

if you want to compare a company merger with a wedding,

the situation is very similar to a handsome,


well-educated groom being forced to ask a very poor girl in a poor family,

but both beautiful and charming.

Taking is not necessarily good,

but not taking will definitely lose all opportunities!

Honestly, what do you enjoy

when you have to negotiate with a goal that must be achieved,

and the person who is about to be bought is weak

but still bargains as if he has the upper hand?

The person being bought is a beautiful person,

my friend.

What’s hard to swallow is that they think they’re beautiful!

Normally, a negotiation to merge a company is personally undertaken

by the chairman

or general director of the company.

This is not a negotiation with a commercial character,

a project contractor,

but a matter between shareholders who own two companies.

Employees on both sides are not allowed to attend,

have no roles,

or even share secrets

before the merger intention becomes a reality.

But if you are not the President or CEO,

you can still be mobilized to actively participate,

because there is a lot of work to do,

requiring a powerful negotiating force

(although it must be kept secret).

In the initial stage,

the exploration and consultation

between the two sides was extremely delicate and difficult,

although it was the first step,

it was decisive for the outcome of the negotiation.

* * *

Let’s pause for a moment

to learn more about the intended consequences of a merger.

Mergers or acquisitions must increase value

for shareholders on both sides.

The new value of the two merged companies must be greater

than the combined value of the two companies

before the merger.

Competitiveness must be higher.

The market share must be larger.

Costs must be reduced.

Operational efficiency must increase.

The share price of the company being purchased must increase.

The image of the new (or old) brand must be strengthened or improved.

The role and impact of the new company is more clearly seen

by the market,

customers applaud and support,

sometimes requires the backing of several key investors.

Although in a short time some member companies were eliminated,

the strategy of the newly established company must be clear.

In the short term,

the new company’s personnel,

from the board of directors to each employee,

must be aware of the principles of the merger

and be motivated for a new,

more dynamic perspective.

The culture of the new company will be more complete and open,

and the reporting methods

and decision lines more transparent.

In case of merger with a foreign company,

there is also the need to define the official language used in the company.

Nowadays English is often chosen.

This is a bad thing for Vietnamese personnel

due to poor foreign language skills.

I hope you understand this:

your staff can be very good at plain English,

which is something to be proud of.

But working in English is much more complicated than the TOEFL level!

Your employees must be able to communicate

and work directly in English;

report writing in 10 minutes;

attend five-hour meetings

without feeling tired

and without losing a word;

When things go wrong,

they know how to reprimand each other delicately.

But that’s still not the hardest thing!

The British working culture

and English style naturally contain a legal mind,

while in Vietnam,

we do not have enough people with this level

to run the economy with a priority on foreign affairs.

A new history has begun.

The history page only retains the assets of the two merged companies,

but deploys a new spirit,

a new strategy,

a new vision,

and a new way of life.

Most importantly,

all employees of both buying

and acquiring companies must think of themselves

as new members in an entirely new company.

They have to forget about old biases,

hidden interests,

unwritten preferences.

They must all be treated equally

as citizens of a single newly established country.

* * *

Thus, you better understand that

before negotiating with the company you want to buy or merge,

you must open an internal deliberation meeting,

open a negotiation with yourself,

whose purpose is to to clearly answer the question

“Is our company really ready

for a new adventure,

is it ready to deal with fairness

within the framework of the start-up company,

among employees who are colleagues?

from many years with the “new citizens”?

If there’s any bias in your mind,

your company isn’t ripe for taking on another company!

And that’s just a preliminary condition,

because soon after,

a detailed negotiation will begin

to evaluate the company you want to buy.

* * *

When buying or merging a company,

even if it is a company on the stock exchange,

evaluating the company is extremely difficult and difficult.

In a very short time,

you have to access a lot of information,

and have to evaluate all the risks that

you will have to operate after the merger.

Compared to a wedding

between two young people,

usually in their twenties,

the health of the young couple must be good,

in the case of a company merger,

the opposite is true!

The companies that are candidates for a merger

and acquisition are usually a disease-carrying organism.

There are many diseases

that are evident right from the first meeting

such as the profit and loss table,

the stock price continuously falling,

the overcrowding staff,

the continuous resignation of employees,

dissatisfied customers,

the number of company contracts,

company a little less each year…

But there are also many potential illnesses,

like the company that is about

to be acquired has signed unfulfilled commitments in some contracts,

or the steady stream of income is about to come to an end.

Senior personnel have many scandals,

internal corruption,

or private emotional affairs in the company.

Then there are also a number of internal commitments written on black and white paper

such as compensation for certain individuals

who are given special privileges in the company

if they are unfortunately fired,

which in English is called “golden” umbrella”.

If not careful,

it is these people

who will be fired in the near future

with huge compensation terms,

thereby causing a huge hole in the company’s finances.

Then there were other commitments,

very reckless,

already included in the project contracts of the acquired company.

I used to live with the situation of a company

that wrote a commitment in a small contract,

that they would get the power plant back up

and running at “any cost”.

At the time of taking the commitment,

an employee was too naive to think that

“it” had nothing to bring to the table with the boss

or with a consulting lawyer.

It involves a newly invented turbine,

which is in the experimental stage.

Until the failure due to turbine not running well,

the judge forced the company to fulfill its commitment,

otherwise the company would have to compensate the investor.

These types of commitments are very common in merged companies,

which have long had no quality control.

Therefore, the buying company must carefully review all contracts

and commitments of the company

they are about to buy before making a decision.

I know work very well

The French company had to pay a US company more

than 200 million dollars just

for making an unconscious commitment that could not be fulfilled.

It was arduous and laborious

as all the review work had

to be done in record time.

One is because the purchase

and sale of the company must be kept secret,

especially for the company on the stock exchange.

The second is

because there are many other candidates

who are also looking to buy the company

you are considering at the same time.

Going fast and going carefully to the smallest detail forces

you to work night and day with many consultants.

Crowded and many things,

but still have to keep absolute secrecy.

When the due diligence is done,

you must set a purchase price for the company.

You see a lot of problems in them like people with scabies,

sores, tuberculosis,


unsteady legs.

Come here,

if you feel discouraged,

it’s understandable,

but you have to comfort yourself that healthy,

fat companies will never let you buy!?

And at the same time you get the information that despite scabies,



they still refuse to sell below a number that

you see exceeds their true valuation.

Yet, at the same time,

you realize that this is still a rare opportunity.

If you let it go,

another company can buy for you

and then maybe your own company will not be able

to maintain its leading position in the market!

The bad luck rarely comes once,

because of the “unlucky painting” that!

One more “unfortunate” story for you:

The chairman of the company you want to buy is an elderly founder

who is always subjectively thinking

that his company is still too beautiful.

This man belongs to a generation of old-fashioned administrators,

who unintentionally or intentionally refuses to understand that he is in danger.

I venture to compare this generation to a 70-year-old woman

who used to be the beauty queen of the village school in her twenties,

now still thinking that after three generations her husband

still has the beauty of the country.

But you still have to come up with some reason

to insist on buying this company anyway.

That means you have to get the old man’s heart from the start,


True contradiction,

because the buyer is clearly in a weak position!

This is a common paradox in negotiations to buy or merge companies.

* * *

Now is the time to negotiate the price of the acquired company.

Theoretically there are many scientific models

that allow to calculate the selling

or buying price of a company very precisely.

And there are also dozens of the world’s leading consultants

with extensive experience in estimating the value of businesses.

However, a dozen consultants

with their models will give different results when evaluating businesses.

Even companies listed on the stock exchange are the easiest cases

to calculate value,

because just multiplying the number of shares

by the price of the stock,

it is also very difficult to determine a value.

After all,

all numbers are just abstract numbers

when both buyers and sellers have not agreed.

In my experience,

I have never seen companies satisfied

with the prices calculated by the model.

Friends, the truth is that the price depends on two completely subjective points,

not objective.

One is how greedy the buying company is to buy,

the other is how much the company sells at a bargain price.

I wrote on the above page that

the sales company is like an old sister

who still has a lot of fantasies about her beauty.

That’s right!

If you have to negotiate to buy and sell a company,

you should find an old sister to practice

before entering the real match,

because the two matches are exactly the same.

In any case,

I advise you to pay the price firmly,

in the spirit that sooner or later,

that “old sister” will also have to come back to you,

if you don’t sell it,

it’s fine.

The main reason that

I will discuss in the coming pages is that objectively speaking,

it is unlikely that your company will be stronger after the merger.

A thousand problems related to the real life of the company

after the merger will remain for 3 to 5 years.

These problems will make the company weaker,

not stronger.


you should be tough on all sides.

In short,

if you can do it,

you can do it,

if you can’t,

it’s okay, but never give in.

* * *

As I mentioned above,

“pain without hope”,

your suffering is not over yet.

The old Chairman friend,

even though he sold the company,

still wanted to keep the chair of the newly merged company.

He argued that for many years he lived

and died with his colleagues,

now he cannot abandon them.

After saying that,

“he” cried and said that

he did not have much longer to live,

so keeping the chair for a few more months is not too much.

Friends, take my advice!

This is a humiliating plan that you must refuse,

because if you fall for the trick,

“he” will drag friends and relatives,

and especially his children and grandchildren in.

After all,

“he” even happily lived a long life,

all day long carrying other members of the new Board of Directors

to strengthen his position.

These members will be happy to keep him

as president for another decade.


“he” is older than you!

Because at the same time,

as the CEO of the newly merged company,

you have too many problems to deal with.

Then you will accidentally forget to carry some members

of the Board of Directors;

You will forget to eat,

forget to sleep,

forget your wife and children.

Meanwhile “he” keeps hiring servants as the Chairman;

go on drink,

go to work,

even bring some golf clubs with you…

Along with this,

negotiating a merger has a lot of other things to discuss.

The first is to select

and appoint a future board of directors.

For the buying company,

experience shows that

the proponent of the purchase has prevailed in the “buy or not buy” war.

Colleagues who lose

this battle will have a hard time getting into the new Board of Directors.

Thus, the model of leadership change in the buying company has begun to emerge,

and sooner or later it will become public.

Amazing things will come from the company being bought.

Experience shows that

they often recommend young people to new leadership.

They will both blame and dethrone those

who brought the company to the point of being bought out.

They will announce

that it is time to move on to the younger generation.

The result of the change is that some of the new members

of the Board of Directors will be a bit too young in addition to the veterans.

Europe is also something to accept.

The most delicate things you have to deal with

when merging are all around personnel and how money is used.

You will “open the guts” of the company you are about to buy and will panic!

For example,

the average salary of the secretaries of the company being bought

is one and a half times higher than your company,

and there will be no other solution than increasing your salary

to be fair.

But by doing so,

you will not avoid causing wage inflation!

Or the General Manager on the other side,

who is about to be your assistant,

earns twice as much as you;

and the Chairman of the other party enjoys the right to spend “splash”.

How will you handle it?

You would think of course,

if they have scabies,

they have to sell the company!

But keep in mind that

all salary issues will have to be cleared up before signing.

Financially, you will also discover

that the company you want to buy is murky,

terrifyingly lacking in transparency.

Then in that murky water you will find guys

who have been or are fishing,

will discover some cases of internal corruption

as well as corruption with customers.

You will be alarmed

when someone reports to you

about character problems in the company,

but at the same time you are aware that

they are part of the underground forces in the company

you are about to buy.

You’ll have to deal with them,

but at the same time fear that touching them will cause

even more problems!…

In short, you know you’ll have to use an iron fist after structuring;

you know you will lose some customers who keep old bad habits;

you’re going to have to fire some good engineers

and specialists who have a hard time treating it.

Negotiating a merger is,

in that respect,

a consideration for you and yourself.

My advice is that you simulate the future company after the merger,

with pessimistic assumptions,

with unexpected risks;

and if you think the prospect is still bright after a tough

and scientific overall restructuring,

then you should merge!

Listen to me,

for I have good reason to tell you the following:

in my life,

I have not seen a successful merger

or acquisition except for companies

that know how to analyze their difficulties.

They went through serious reviews,

set new modern and strict principles,

and did it with a radically progressive mind.

Such is the capital market!

But try to ask:

if it is so difficult,

why do you buy more companies,

is it worth it?

I will explain more in the following pages.

* * *

In merger or acquisition negotiations,

there are three main scenarios that readers must remember:

Merger of two or more companies to increase capital,


personnel but still operate in the same old field.

Buying and selling companies by financial funds only have money

but no technical activities

or products in the market.

Merge two or more companies in completely different territories,

with new products for both parties.

The first case has been commented on at length since the beginning of the chapter.

This case is very common and classic.

The second case is also common.

A large financial institution,

such as a bank,

an insurance company,

or a securities finance corporation,

decides to buy your company like a commodity,

nothing more,

nothing less.

In this case they only focus on dividends.

When negotiating with these groups of people,

you must thoroughly protect your employees

and the company’s internals.

They can replace the President or CEO,

they can take control forever,

they have the right to resell the company they just bought,

but you have to get the solemn guarantee

that they never have the right to cut work. company to pieces,

as well as having to promise never to intrude

into the day-to-day management of the company.

Often these groups of people are not capable of day-to-day management.

They will destroy the company

if they let them cross the border between owner and operator.

The third case is less common.

For example, you are a real estate company that

buys a seafood business.

In such cases,

the negotiators must allow the acquired company

to retain their relative independence.

You will have little to ask:

Hold your finances

and personnel of the acquired company.

You will appoint yourself to the control responsibility,

and you will give yourself the right to interact

with the new company’s customers.

The most delicate is personnel.

You should renegotiate all employment contracts of all key employees

of the new company.

Legally this is not necessary

because they are already employees of the newly merged company.

However, when some employees are signed a new job contract with the new employer,

they will feel more trusted and respected by the new employer,

they will have confidence in the company’s future

and will automatically members in new circumstances.

They won’t think about resigning out of fear or ambiguity,

a very common occurrence during a major change…

Keeping people in a whole new field is paramount,


* * *

The morality of the merger is to strengthen and grow.

But in my life,

I have rarely seen a company that really succeeds in this.

If there is no personnel confusion,

there is also financial difficulty,

without uncertainty about the leadership team,

it is not comfortable with the customers of the new company.

In short, the price to pay is much higher than the price

of the merger or acquisition.

The time it takes for everything to flow

as expected is often a lot longer than expected.

Leaving employees is difficult to replace,

ongoing projects stumble causing problems for the leaderboard

that are difficult to remove.

If, after reading and pondering,

you still intend to merge with someone,

or buy or sell a company,

you should behave like a man who is too passionate,

determined to marry the woman you love.

Just get married,

newlyweds should have the courage to slap the East Sea

with patience and seriousness,

determination and optimism.

So mergers are still merging.

Buy and sell, buy and sell.

Because development,

you still have to grow,

and then if you stumble or fall later,

I would like to have more advice,

that you just keep following the launch,

keep buying and merging again,

and again, who knows.

Your business keeps growing,

growing bigger.

At least your salary will inflate very quickly!

And if the company’s shareholders are still happy,

what’s to blame?

If you can do that,

you will not be different from many famous businessmen in the world,

just speed up the car and pray that there is no risk.

Out of 100 men,

there were approximately 70 survivors,

even though they were sweating.

Their company swallowed many companies,

they didn’t really expand,

but at least they were able to explain well to shareholders that:

They made the market less of a number of actors

and competitors when they merged,

though in haste.

And best of all,

shareholders still follow,

and the Board of Directors is still happy.

What more could you want, mate?

Things To Remember

Corporate mergers are always the best option if the goal is rapid expansion.

Mergers allow both buying

and being acquired companies to dilute the problems

that were present before the merger.

The market is always well received by new actors,

with new images and reputations,

at least in the beginning.

However, experience shows that on the “inside,”

mergers pose more problems than they solve.

The financial numbers can offset,

but the vibrant staff is difficult to manage.

Like a slamming wedding,

the aftermath of a merger always lingers for years

with uncertainties within the company.

As a result, a merger will create a need for more mergers,

as the new merger “removes” the negative impact of the old merger.

What is certain is that the family companies

that have merged (Vietnam has many of them)

will not recognize their family character anymore after the merger.

On the contrary,

it allows “descendants” the opportunity

to work in a more scientific capitalist setting.

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