Controlling stake acquisition is far more than a simple transaction. It is a multi-dimensional capital competition that requires precise strategies and strict planning. From market research to delivery, every step is crucial. If you are not careful, it may lead to the breakdown of the transaction or even legal risks.
In the global M&A market, Goheal has been deeply involved for many years and has witnessed countless cases of success and failure. What kind of capital game is the acquisition of controlling stake? How can companies go from 0 to 1 and complete the acquisition of controlling stakes in listed companies? Today, we will dismantle the whole picture of this process.
Step 1: Lock the target and identify "high-quality prey"
There are thousands of listed companies, and not all companies are worth acquiring. To succeed in "hunting", the buyer must accurately lock the target company and evaluate whether it meets strategic needs.
Key factors for target screening:
1. Industry track-Does the industry in which the company is located have growth potential?
2. Company valuation-Is the current market value reasonable? Is it possible to be undervalued?
3. Shareholder structure-What is the shareholding ratio of major shareholders? Are there any shareholders who can influence the acquisition process?
4. Financial status - What is the debt pressure? Is profitability stable?
Case: ByteDance acquires Musical.ly
ByteDance acquired Musical.ly for $1 billion in 2017 and integrated it into TikTok in August 2018. This move is precisely based on the explosive growth potential of the short video industry. Before the acquisition, ByteDance evaluated the growth trend of Musical.ly in overseas markets and quickly gained market share through mergers and acquisitions. Musical.ly has more than 20 million daily active users worldwide, especially popular in North America. By integrating Musical.ly's users and content, TikTok has rapidly expanded its influence in overseas markets and has achieved great success worldwide.
Step 2: Determine the acquisition method, cash or equity?
Once the target is clear, the buyer needs to decide the acquisition method. There are two main ways to acquire a controlling stake in a listed company: cash acquisition and equity payment.
Cash acquisition vs. equity payment: Which is better?
1. Cash acquisition: simple and direct, with high transaction certainty, but it puts a lot of financial pressure on the buyer.
2. Equity payment: reduces financial pressure and strengthens the seller's interest binding, but the approval process is complicated.
Case: Microsoft's $26.2 billion cash acquisition of LinkedIn Microsoft adopted an all-cash acquisition to avoid the impact of stock price fluctuations on the transaction and make the transaction more certain. This model is suitable for buyers with sufficient funds and who want to complete the acquisition quickly.
Goheal suggested that when designing an acquisition plan, companies need to combine their own financial situation, market environment and the wishes of the target company's shareholders to choose the best payment method.
Step 3: Negotiation and due diligence, details determine success or failure
Negotiation is a key link in the acquisition of controlling rights. A successful negotiation must not only ensure that the price is reasonable, but also ensure that the terms of the agreement are beneficial to the buyer.
Negotiation points:
1. Acquisition price: The buyer wants a low price and the seller wants a high price. How to find a balance?
2. Transaction structure: Is there a gambling agreement? Is there a performance commitment?
3. Shareholder attitude: Do small shareholders support the transaction? Is there potential resistance?
After the negotiation is completed, the buyer needs to conduct due diligence (Due Diligence), including legal, financial, commercial and operational aspects, to ensure that the company has no hidden risks.
Case: Nvidia's acquisition of Arm failed
Hindered by regulatory review In 2020, Nvidia planned to acquire Arm for US$40 billion, but the transaction ultimately failed due to regulators' concerns about market monopoly. This shows that due diligence is not just a financial audit, but also focuses on legal and policy risks.
Goheal reminded that ignoring due diligence may have devastating consequences, and any potential risks should be thoroughly checked before the transaction.
Step 4: Shareholders' meeting and regulatory approval, the final challenge
The acquisition of a controlling stake in a listed company is not a private transaction, and usually requires approval from the shareholders' meeting, and also requires regulatory approval.
Main approval obstacles:
1. Veto by the shareholders' meeting: Small shareholders may jointly oppose the transaction.
2. Antitrust review: Government agencies may determine that the transaction affects market competition.
3. Industry policy restrictions: Some industries have restrictions on foreign investment or cross-border mergers and acquisitions.
Case: Ant Financial's failed acquisition of MoneyGram in the United States
In 2017, Ant Financial planned to acquire MoneyGram for US$1.2 billion, but the transaction was ultimately rejected because the Committee on Foreign Investment in the United States (CFIUS) believed that the transaction involved national security risks.
Goheal believes that making compliance plans in advance and actively communicating with regulators can greatly increase the success rate of transactions.
Step 5: Delivery and integration, the test begins after the acquisition is completed
When the transaction is officially completed, the buyer needs to face a more difficult challenge-M&A integration.
Key points of integration:
1. Stability of management-how to appease the original executives and avoid talent loss?
2. Integration of corporate culture-how to make new and old teams collaborate efficiently?
3. Customer and supply chain integration-how to exert synergy and enhance market competitiveness?
Case: Disney's integration battle for Fox
Disney acquired 21st Century Fox for US$71.3 billion in 2019, and achieved business growth through IP integration and organizational structure adjustment. This shows that post-merger integration is the core link that determines the success or failure of an acquisition.
Conclusion: Can your M&A strategy stand the test of the market?
From target selection, transaction model, to due diligence, shareholders' meeting, M&A integration, controlling stake acquisition is a complex business game, and mistakes in any link may lead to transaction failure.
In the current economic environment, do you think cash acquisition is more likely to succeed, or equity payment is more attractive? How do you view the integration challenges after M&A? Welcome to leave a message in the comment area and share your insights!
[About Goheal] American Goheal M&A Group is a leading investment holding company focusing on global M&A holdings. It is deeply engaged in the three core business areas of listed company control acquisition, listed company M&A and listed company capital operation. With its deep professional strength and rich experience, it provides enterprises with full life cycle services from M&A to restructuring and capital operation, aiming to maximize corporate value and achieve long-term benefit growth.
