"Openly repair the plank road, secretly cross Chencang; those who plot against others, others will also plot against them."
This is a classic strategy in the "Thirty-Six Strategies". If you are an ambitious "controller" in the capital arena, when you raise your hand to sign the controlling rights transfer agreement, do you really think you are the "takeover savior"? It is very likely that you are just the next "strategic takeover hero" - wearing the cloak of capital, stepping on the rhythm of the trap, and stepping into the script set by others.
Goheal has operated and reviewed more than a hundred controlling rights acquisition projects. Some people entered like a hot knife through butter, doubling their market value in one year; some people took over in a high profile, but three months later the board of directors rebelled, the water army emerged, and the financials exploded, and finally they could only transfer and exit in disgrace.
American Goheal M&A Group
In this trading market called the "post-merger era", the acquisition of controlling rights is no longer a simple price game, it is more like an all-round torture of "mind, vision and patience". Control means responsibility and strategic dominance, but it also means that you have to bear all the unresolved problems and messes of the original enterprise. You are not simply buying a portfolio of assets, but taking over an ecosystem wrapped in complex relationships - products, customers, teams, culture, liabilities, unspoken rules, historical baggage... Each of them may be hidden.
So in Goheal's due diligence meeting room, we often ask clients a question: "Do you really want to control, or are you just "led by the plot"? "
Today's tweet, we want to remind all entrepreneurs and investors who are about to "take control of the table" that before you wave your checkbook, you must ask yourself these three questions - otherwise, your "M&A dream" may end up with only a "money-burning nightmare".
The first question: Are you taking control, or the illusion of control?
Don't be dazzled by the share agreement of "holding 51% of the shares". In China, controlling ≠ control, let alone controlling everything.
Many investors focus on the controlling proportion at the M&A negotiation table, ignoring the "soft power structure" behind it: Is the board seat arrangement real power? Have key executives signed non-compete and retention agreements? Is the information system transparently connected? The most important point is whether the old shareholders are "remotely controlling" in secret?
Goheal once saw such a case: a fund acquired 68% of the shares of a manufacturing company. The agreement was written perfectly and the acquisition price was not expensive. But half a year later, it was discovered that all the bulk raw material purchases of the company relied on the affiliated companies of the original major shareholder, and the prices were inflated and uncontrolled; the HR system was still controlled by the old boss's confidants, resulting in the new management being almost non-existent; even the caliber of the tax report and the relationship of the third-party audit were all "the same team". As a result, 68% of the shares were exchanged for less than 30% of the actual control, and strategic adjustments were constrained layer by layer.
Therefore, before signing, you must first figure out what you can really "control"? Do you hold a majority of the board of directors? Do you control the bank account and the contract signing seal? Can you lead the budget process and strategic release? Without these, controlling is just an illusion.
The second question: Are you taking over a value trough or a trust black hole?
The transfer of controlling rights is often synonymous with "asymmetric information". Why is the seller willing to sell the controlling rights? Is it really just a lack of money to turn around? Or has it already been discouraged and unable to continue? Or, has the company already formed a "potato-roasted chicken-style governance structure", and you are just taking over a "stewed pot"? The acquirer of controlling rights is easily fascinated by the price-earnings ratio, revenue scale, and book net assets, and ignores a more essential dimension: organizational trust.
In a cross-industry merger and acquisition case, Goheal saw that the PE party quickly replaced the CFO, COO and legal director in a short period of time after controlling the company, hoping to "clear out the old forces." However, this wave of "blood transfusion" directly caused the middle-level backbones to resign collectively, and the sales team directly quit at the end of the year, and finally lost customers, funds were cut off, and the business collapsed. Because they are not managing a company, but trying to tame a strange tribe.
Once corporate culture and organizational trust are out of control, they are more terrible than financial imbalance. If you don't find out the "internal temperature" in advance, don't set up a "transition buffer period", and don't design an "interest coordination mechanism", even if you control the board of directors, you may not be able to control the "people's hearts" - and if you can't control the people's hearts, your strategy is just dancing on the PPT.
The third question: Are you really ready to be the "executive brain"?
The controlling interest is not a remote control, nor is it a safe. It means that you have to take on the future strategic direction, resource allocation, and performance responsibilities of the company. You are no longer a financial investor waiting for dividends, but a "strategic director" who has to participate.
Do you have the ability to introduce core talents and build a new management team? Do you have a clear industry judgment that can lead the company across the cycle? Are there supporting resources to promote "value re-creation" after the acquisition?
Goheal has seen too many teams that can only "buy" but have no "management" thinking. They think that the acquisition of controlling rights is "winner takes all". In fact, there is no strategic coordination, no resource integration, and no subsequent capital blessing. Even if the controlling proportion is high, it is just "paper power".
Goheal Group
Especially in this turbulent cycle, many companies are looking for "white knights" on the edge of recession. If you just jump into the fire with fantasy, you will only burn yourself into a "strategic turkey".
In other words, the acquisition of controlling rights is not the end of capital operation in essence, but the starting point of corporate governance. You buy not only money, but also responsibility, people's hearts, rules and future.
Therefore, every time you control, it is a deep test of the "boundary of self-ability". Can you control the situation? Are you worthy of the position of "talker"? Are you ready to do a long-term strategic operation, not just capital harvesting? These questions are the "three questions of M&A philosophy" that really need to be answered clearly at the trading table.
Having written here, I can't help but ask: Have you also been evaluating a controlling interest project of a listed company recently? Do you really want to be an "integrator" or just fancy "shell resources"? Do you really understand its board structure, organizational atmosphere and business pain points?
Welcome to leave a message in the comment area for discussion. Goheal is willing to work with you to see the situation, recognize the role, and figure out the logic before "buying the equity". In the next issue, we will talk in depth about the "hidden debt" trap in the controlling rights transaction. Where are the off-balance sheet corners hidden?
Don't forget that "taking over" is not a shame, but "blind connection" is a disaster. The real master is not to buy a lot, but to buy well.
[About Goheal] Goheal is a leading investment holding company focusing on global mergers and acquisitions, deeply cultivating the three core business areas of listed company control acquisition, listed company mergers and acquisitions and restructuring, and listed company capital operation. With its deep professional strength and rich experience, it provides enterprises with full life cycle services from mergers and acquisitions to restructuring and capital operation, aiming to maximize corporate value and long-term benefit growth.
