When starting a business, many traders choose to acquire a business instead of starting a new business. So what are the advantages and disadvantages of buying a business? Check out the article below!

1. Concepts

According to Clause 4, Article 29 of the 2018 Competition Law, the acquisition of an enterprise is “the purchase of all or part of the contributed capital or assets of another enterprise by an enterprise, directly or indirectly, by an enterprise, or a part of it. industry or profession of the enterprise being acquired”.

2. Conditions for business acquisition

Business acquisition is one of the economic concentration activities under the competition law, so it is necessary to comply with the procedures prescribed by the competition law. Acquiring enterprises must submit an economic concentration notification dossier to the National Competition Commission before conducting the acquisition if they fall within the economic concentration notification threshold under Article 33 of the 2018 Competition Law. Do not repurchase. when the act of acquisition falls under the cases where economic concentration is prohibited under Article 30 of the Competition Law 2018

3. Benefits of business acquisition

3.1. Expand the market share of the business

For two enterprises after merger or acquisition that operate in the same industry, the economic resources of both will help the enterprise’s share of the market to be larger.

3.2. Achieve better business performance

When acquiring a business, the new business will already have a network of familiar customers as well as a brand that has gained a certain recognition in the market. Therefore, at this time, businesses can focus on developing and expanding customer networks to reach new potential customers, boost business efficiency and strengthen competitive advantages.

3.3. Reduce time, cost and improve the quality of human resources

After implementing M&A activities, new businesses will significantly reduce costs to pay for unnecessary positions so that they can focus on fostering and developing the quintessence of human resources. Besides, businesses can also save a lot of time entering the industry because they can take advantage of the existing advantages of existing businesses in the market.

3.4. Leverage transferred technology

New businesses can take advantage of the existing advantages, ignore the negatives and shortcomings in technology and facilities to be able to operate the business in the best way.

3.5. Easy to raise capital

Buying an established business with good finance, investors can easily raise capital from different sources such as raising capital from individuals and other organizations. In addition, getting a bank loan can also be easier if the business has fixed assets and ongoing projects.

4. Disadvantages of business acquisition

Besides the available benefits, businesses also face some risks.

4.1. Lose a lot of initial cost

When buying a business, especially a business with a good image, a large number of customers, a good financial situation, the acquisition fee is extremely high. Therefore, to conduct this acquisition, businesses need to spend a huge amount of budget.

4.2. Difficulty in management

Acquiring a business means that the new business will inherit the culture, characteristics and existing customer base of the old business. The inheritance of a new business may easily cause internal conflicts, work processes that are not suitable for management, cultural differences, thereby causing difficulties in operating and managing the business. .

4.3. Facing the risk of losing customers and markets

Besides having an existing customer base, businesses are also prone to receiving negative feedback and losing existing customers. This trend may occur because the main purpose of mergers and acquisitions is to increase the value of the company’s shares in the market. meet the needs of customers, leading to customers leaving, not receiving the support of market segments.

Above is the advice of Khoa Tin on “Buying a business: Good or bad?”.

In case customers have unclear problems or need to discuss further, please call us immediately at 0983.533.005 for a free consultation.

Best regards./.