"Everything is prepared, and failure is failure."
The capital market is like a chess game, and every step is a contest. In the battlefield of the acquisition of control of listed companies, many investors seem to have a thorough plan, but they often get into trouble because they ignore key details. Shareholder rights, merger and acquisition agreements, regulatory risks, valuation strategies... Mistakes in any link may turn the acquisition that should have been completed smoothly into a "hot potato".
Today, Goheal will reveal the five major misunderstandings of the acquisition of control rights to help capital players avoid traps and move forward steadily in the market.
Misunderstanding 1: Only pay attention to the proportion of shares and ignore "actual control"
The truth: More shares ≠ control, the key lies in the voting rights structure!
Many investors believe that as long as more than 50% of the shares are acquired, absolute control of the company can be achieved. But the reality is often not the case. At the shareholders' meeting, the distribution of voting rights and voting rights may be more important than the simple shareholding ratio. For example, Larry Page and Sergey Brin, co-founders of Google's parent company Alphabet, hold far less than 50% of the company's shares, but they still have a firm grip on the company's decision-making power with their "dual-class share structure."
Case inspiration:
Goheal once assisted an investment institution in acquiring a technology company. Initially, the institution planned to acquire 51% of the shares to achieve controlling stake. However, after in-depth analysis, Goheal's team found that the company's founding team held "super voting rights" and still held the final decision-making power even if the acquired company's shares were reduced to 30%. In the end, Goheal adjusted the acquisition plan and ensured actual control through an agreement arrangement, rather than simply the number of shares.
Key point: Control is not simply "more than half of the shares", but control over the company's management, board seats and key voting rights.
Misconception 2: Ignoring the "counterattack" power of small shareholders
The truth: Small shareholders may become a key variable and even affect the success or failure of the acquisition!
In the acquisition of listed companies, many buyers only pay attention to the attitude of major shareholders, but ignore the reactions of retail investors, small shareholders and institutional investors. However, in the securities markets of many countries, if the acquirer wants to successfully complete the change of control, it must win the support of a certain proportion of circulating shareholders, otherwise it may face legal proceedings or hostile takeovers.
Case enlightenment:
In 2022, when Elon Musk acquired Twitter, he initially negotiated in a private transaction, but eventually had to face the demands of many small and medium shareholders, and even triggered a shareholder class action lawsuit, which caused the transaction to be deadlocked.
Key point: Small shareholders are not just "onlookers", they may be an important variable affecting the success or failure of the acquisition.
Misconception 3: Thinking that the M&A agreement is just a "form"
The truth: The terms of the agreement determine the success or failure of the transaction, and the details determine success or failure!
When signing an M&A agreement, many acquirers often pay more attention to the price and payment method, and ignore the key contents of the agreement such as "betting clauses", "exit mechanisms", and "financial commitments". This may eventually lead to disputes in the later stages of the acquisition, and even be forced to renegotiate, wasting time and money.
Case inspiration:
Goheal once helped a listed company acquire a pharmaceutical company. During the review of the agreement, it was found that the original shareholders tried to add a "future profit compensation clause" to the agreement, requiring the acquirer to achieve specific profit targets within the next three years, otherwise additional compensation must be paid. In the end, the Goheal team negotiated to modify the terms and avoided potential financial pressure.
Key point: The M&A agreement is not only a "document" for the transaction, but also a "legal shield" for the future development of the company. Don't be careless!
Misunderstanding 4: Blindly chasing market hotspots and ignoring long-term value
The truth: Following the trend of investment is often a high-risk behavior, and value investment is the king!
Many acquisition cases, especially those involving hot industries such as technology and new energy, often result in premium acquisitions due to excessive market heat. Investors bought on impulse, only to find that the target company did not have actual profitability, and eventually "bought too expensive" or even lost money.
Goheal has always emphasized that acquirers should focus on the fundamentals, market competitiveness and long-term profitability of the company, rather than simply chasing short-term market sentiment.
Key point: The hot spots in the capital market are unpredictable, but value investment is the magic weapon to cross the cycle!
Myth 5: Underestimating regulatory risks leads to transaction obstruction
The truth: Regulatory issues such as cross-border mergers and acquisitions, industry monopolies, and data security cannot be ignored!
In recent years, the supervision of the global capital market has become stricter, especially in mergers and acquisitions involving national security, sensitive technologies, data privacy and other fields. The approval of government regulatory agencies has become an important factor affecting the success or failure of transactions.
Case inspiration:
In 2018, Broadcom attempted to acquire Qualcomm for $117 billion, but the deal was eventually rejected by CFIUS (Committee on Foreign Investment in the United States) due to the US government's concerns about national security.
Goheal's practice shows that when investors conduct large-scale mergers and acquisitions, they must assess regulatory risks in advance, ensure compliance, and avoid encountering policy "roadblocks" in the later stages of the transaction.
Key point: In the global capital market, laws and regulations are always variables that cannot be ignored in mergers and acquisitions!
Conclusion: Acquiring controlling rights, what "pitfalls" have you stepped on?
The acquisition of controlling rights of listed companies seems to be a capital contest, but in fact it is a multi-dimensional game of finance, law, management, and market. Ignore the voting rights structure? Ignore small shareholders? Underestimating the impact of the terms of the agreement? Mistakes in every link may put the acquirer in a passive situation.
So, have you ever experienced similar investment decisions? In acquisition transactions, which misunderstanding do you think is most easily overlooked? Welcome to leave a message in the comment area to share your views and discuss the changes in the capital market together!
[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 capital operation. 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 long-term benefit growth.
