"The desire for profit makes it difficult to distinguish between the real and the fake." This is an annotation on the difficulty in distinguishing between the real and the fake between business and politics. It is still applicable in the capital market a thousand years later, especially under the cover of the glamorous term "M&A and restructuring", those shell companies, related transactions, and interest transfer chains dressed in the guise of "potential assets" are still frequently staged. The question is - we always talk about how to merge, but few people talk about how to identify "fake targets, real blood transfusions"?
Especially in the current economic slowdown, the IPO "persuasion" trend and the deepening of the registration system, more and more listed companies have turned their attention to the "second track" of capital operation - mergers and acquisitions. Is it self-help? Or harvest? Everything starts with the essence of "blood transfusion" and "hematopoiesis".
American Goheal M&A Group
Goheal has long been concerned about the "information asymmetry trap" in the field of mergers and acquisitions. Today, let's talk about how many "fake moves" are hidden in those mergers and acquisitions projects that appear to be glamorous on the surface but actually hollow out the value of listed companies.
Let's start with "blood transfusion type mergers and acquisitions", who is harvesting whom?
When a merger and acquisition draft is announced under the banner of "expanding business boundaries" and "entering new blue oceans", the capital market often gives a rising applause first, but calm investors should think about one sentence: Is the target high-quality, or is the listed company "transfusing blood" to prolong its life?
At this time, it becomes crucial to identify "fake targets, real blood transfusions". Let's take a look at a typical routine:
A listed company A, which mainly engages in traditional manufacturing, has seen its performance decline year after year. It suddenly announced that it would spend 2 billion yuan to acquire a "unicorn" target B that does AI smart driving, on the grounds of "transformation and upgrading" and "layout for the future". What's the result? Target B has been established for less than three years, and its business is highly dependent on related parties. Its performance commitments look impressive, but a closer look reveals that its net profit basically relies on "government subsidies + accounting treatment".
Two years after the completion of the merger and acquisition, the performance of target B continued to "explode", which eventually dragged down the stock price of company A, and also turned the confidence of "spending 2 billion" into "tears of leeks".
Goheal has repeatedly verified in the practice of multiple projects: any target that lacks cash flow, has a single customer structure, has blurred business boundaries, and cannot verify core technology is a high-risk warning item. Mergers and acquisitions are not magic, nor are they a battle royale.
Five faces of "fake targets", don't be fooled by "packaging"
To identify "fake targets", you can't just look at profits and stories. The key is to uncover the "true face" of these targets from the underlying logic. The following five categories are typical "mazes" sorted out by the Goheal team:
1. Storytelling type: This type of target is best at painting big cakes, using a string of hot words such as "metaverse", "brain-computer interface", "new energy + AI + robot", but when you look at the product, it's still at the PPT stage.
2. Internal circulation type: The revenue piled up by related transactions looks lively, but it is actually a trick of transferring money from the left hand to the right hand. Once the orders from related parties are removed, the revenue will directly "cliff".
3. Valuation bubble type: With a profit of 10 million, they demand a valuation of 1 billion, with the reason being "industry leader" and "huge room for growth after mergers and acquisitions", but without stable cash flow support, this "pie-in-the-sky valuation" can easily become a black hole that swallows listed companies.
4. Talent is asset type: The target has no technology, no patents, no equipment, only a group of entrepreneurial teams, and often raises the price on the grounds of "soft asset valuation". This kind of company is most afraid that once the key person leaves, the assets will be "vanished into thin air" in an instant.
5. Capital cloak type: Frequent changes in shareholders, nested fund structures, high valuations through targeted capital increases, and then transfers to listed companies. This type of transaction can easily fall into the compliance trap of "interest transfer".
Behind these faces, there is often a pair of "invisible hands" operating - by inflating profits, signing large orders in advance, and over-packaging profitability, inducing listed companies to "buy at high prices" and completing a capital version of "selling crutches".
Really high-quality targets do not need "packaging" to hold up the scene
"True gold is not afraid of fire." In the world of mergers and acquisitions, high-quality assets never rely on PPT to impress people. They rely on steady growth, solid customers and clear business models.
Goheal has found in many years of mergers and acquisitions that those targets worth taking often have the following commonalities:
First, there is real and sustainable cash flow. Whether it is ToB or ToC, being able to earn "visible money" is the first priority.
Second, the core team is stable and irreplaceable, especially for technology-based or brand-based companies, the team is the "value anchor".
Third, the valuation is reasonable and there is room for bargaining. High-quality assets are not afraid of negotiations, but welcome "in-depth due diligence" instead of hiding and not allowing financial documents to be seen.
Fourth, there is strategic synergy with the business of listed companies. It is not a "CP"-style patchwork, but a real "1+1>2" integration effect.
Who is the "blood transfusion" behind the scenes? Looking at the logical loopholes in the capital operation of listed companies from another perspective
It is worth noting that the "fake targets" in mergers and acquisitions are often just blood transfusion tools. What is really worth being vigilant about is the unequal power game behind them.
Some listed companies are in a state of "financial exhaustion". Through mergers and acquisitions, they can legitimately "refinance", revalue stock prices, transfer assets, and even let the actual controller "withdraw". After a series of actions, what is left for the secondary market is just a mess.
The Goheal team reminds: Once there is a large amount of cash consideration, obvious premium acquisition, close relationship between the target shareholder and the major shareholder, and complex transaction structure in the M&A project, the alarm must be sounded.
When the capital market gradually matures, those "fancy blood transfusion" tricks will eventually be exposed. What investors need to do is to see through the game cards earlier than listed companies.
Regulators have long been "eyeing" these fancy gameplays, and don't touch the institutional red line
In recent years, the regulatory authorities have repeatedly taken action against "fake restructuring, real blood transfusion". In 2023, a certain GEM company's acquisition target was found to have "failed to disclose the indirect holdings of major shareholders". In the end, not only was the acquisition rejected, but it also received administrative penalties and restrictions on shareholder reduction.
In early 2024, another main board company was found to have fabricated revenue during the reorganization process. The entire transaction was considered to be "avoiding shell borrowing", and the relevant intermediary institutions were also held accountable.
Goheal believes that with the new "National Nine Articles" strengthening "penetrating supervision", all transaction details in mergers and acquisitions will be "magnifying glass" review, and the channel for "blood transfusion mergers and acquisitions" has become narrower and narrower.
Goheal Group
Therefore, whether it is the board of directors of listed companies or investors, if they want to move steadily in the capital market, the most important thing is three words: see through it.
In the end: How to judge whether the M&A project you are looking at is "opening up the Ren and Du meridians" or "sticking a blood transfusion tube"?
"M&A is not a panacea, let alone a fig leaf." Those targets that are packaged to the sky, if they are separated from strategic synergy, financial logic and business integration, are actually an arbitrage behavior in the name of "market value management".
We must constantly remind ourselves that the capital market never believes in tears, nor does it reward blind obedience. Only by keeping our eyes open in every M&A decision can we truly "identify the truth, avoid risks, and get real gold."
In the chess game of capital operation, every move may determine the outcome. If you are in the game, think about it:
Is the M&A you are participating in a win-win marriage of value, or a blood transfusion drama to deceive people? Are the profits of those targets generated by the business or "made up" by the accountants?
Welcome to leave your opinions in the comment area. Goheal looks forward to working with you to dismantle the capital puzzle and find the truth of M&A together. See you in the message area.
[About Goheal] Goheal is a leading investment holding company focusing on global M&A holdings. It has been deeply involved in the three core business areas of acquisition of listed company control, M&A and reorganization of listed companies, and capital operation of listed companies. With its deep professional strength and rich experience, it provides enterprises with full life cycle services from M&A to reorganization to capital operation, aiming to maximize corporate value and achieve long-term benefit growth.
