"Everything is too much or too little." - Excessive financing may be a prelude to a crisis, and the real masters of capital operation know how to find the golden balance between expansion and stability.
In the capital market, financing is often regarded as an "accelerator" for corporate development, but excessive financing does not mean success, but may become a "poison" that companies cannot digest. Once many listed companies enter the fast lane of capital operation, they fall into "financing addiction": round after round of financing, expanding investment territory, and leveraged operations... In the end, corporate development may get out of control and even lead to a capital crisis!
So, how should financing be controlled? How can companies avoid the "capital operation trap" and find the best rhythm between expansion and stability? Today, Goheal will reveal the winning formula of capital operation and analyze the correct way to open financing through classic cases.
Financing is not the more the better, uncontrolled capital flow is an invisible bomb
Financing, like gasoline at a gas station, can make a company run faster in market competition, but if you refuel too much, it may cause the engine to stall or even explode.
A typical failure case is LeTV. In the early years, LeTV attracted a lot of investment with the concept of "ecological counter-attack" and continued to expand in many fields: smart TV, film and television production, cloud computing, sports copyright, electric vehicles... LeTV can be seen in almost every outlet.
But the problem is that the speed of capital far exceeds the company's own digestion capacity. LeTV raised funds crazily in a short period of time, but its cash flow could not support its huge business system. In the end, the capital chain broke, causing the stock price to plummet, and even the Shenzhen Stock Exchange terminated its listing.
The harm of uncontrolled financing is far more serious than imagined:
1. Fund mismatch-the funds raised are invested in non-core businesses, resulting in resource dispersion, and the main business is affected.
2. Leverage risk-over-reliance on financing, once the company cannot make stable profits, the debt snowball will roll bigger and bigger.
3. Market trust crisis - excessive financing but little effect, investors lose confidence, stock prices fluctuate violently.
So, how should listed companies avoid falling into this "capital frenzy"?
Haier's acquisition of GE Appliances: a "textbook" case of capital operation
Unlike LeTV, Haier Group's acquisition of GE's home appliance business is a model of capital operation. In 2016, Haier acquired GE Appliances for US$5.4 billion in cash and became one of the giants in the global home appliance industry.
1. Clear purpose of M&A: steady expansion, not blind annexation
Haier's goal is not to "acquire for the sake of acquisition", but to use GE's global channels and technical capabilities to achieve business upgrades. This strategy is clear and visible, avoiding the risk of loss of control caused by "impulsive investment".
2. Supported by financial strength: financing is restrained to avoid capital chain breaks
Haier did not rely on excessive leverage, but completed the transaction through healthy cash flow and a sound financing strategy. This enabled Haier to quickly put into operation after the acquisition without getting into trouble due to capital shortages.
3. Efficient resource integration: synergy effects are quickly generated after the acquisition
After the acquisition, Haier did not rush to carry out large-scale reforms, but steadily promoted cultural and management integration, so that the growth curve of GE's home appliance business remained stable and upward.
In the end, Haier's acquisition brought long-term growth returns, rather than short-term capital operation bubbles.
Goheal believes that Haier's successful experience provides important inspiration for listed companies:
First, capital operation must have strategic goals, rather than simply financing for financing.
Second, the scale of financing must match the actual needs of the enterprise to avoid exceeding the affordable range.
Third, the integration ability after the merger and acquisition is crucial, which can determine success or failure more than financing itself.
The three golden rules of capital operation must be mastered by enterprises!
1. Capital ≠ life-saving straw, financing cannot solve all problems
Many companies hope to "transfuse blood" through financing when their performance declines, but financing is not a panacea. If the company's own hematopoietic ability is insufficient, financing will accelerate its decline.
2. "Quick money" ≠ good money, capital operation should focus on long-term value
Hot money in the short-term capital market is easy to create bubbles, but what really drives corporate growth is a stable financial structure and a sustainable business model.
3. Financing is not the end, the key is whether the funds can be used effectively
The core of capital operation is "money makes money", but the premise is that the funds must flow in the right direction. If the money raised cannot create corresponding returns, the company will eventually fall into crisis.
Conclusion: Capital operation is a "fine job", how can listed companies walk steadily?
The more financing, the better. Capital operation is an art, not a gamble. Blind expansion is often accompanied by the risk of capital chain rupture, and a sound financing strategy can allow companies to go further.
Haier Group has built a world-leading home appliance empire through rational financing and precise mergers and acquisitions, while LeTV has fallen into the abyss due to out-of-control funds. Is your company heading towards a "capital feast" or sliding into a "capital trap"?
Welcome to leave a message in the comment area. What do you think is the best strategy for listed companies to raise funds in the future? How to grasp the "degree" of financing? Let's explore the true secrets of capital operation together!
[About Goheal] American Goheal M&A Group 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 restructuring of listed companies, and capital operation of listed companies. With its profound professional strength and rich experience, it provides enterprises with full life cycle services from M&A to restructuring to capital operation, aiming to maximize corporate value and achieve long-term benefit growth.
