"A thousand-foot-high embankment collapses because of a hole made by an ant; a nine-story tower is built by piling up earth." In the capital market, a seemingly certain acquisition case may often be completely reversed due to a tiny variable. Have you ever thought that just 5% of the equity is enough to make a carefully planned merger and acquisition plan fail? In many acquisition cases, the "Jedi counterattack" of small shareholders is common, catching the major shareholders off guard and even directly changing the direction of the entire company.
In Goheal's view, many investors often ignore the power of small shareholders during the acquisition process, thinking that controlling the major shareholders will ensure victory. However, the capital market is not a "simple arithmetic game". The success of an acquisition is not only related to the equity ratio, but also subject to key factors such as legal terms, market sentiment, and corporate governance structure. Today, we will dismantle those cases that caught the major shareholders "off guard" and see how 5% of the equity can change the entire situation!
1. "Small stake, big fight": the key role of 5%
In the corporate governance structure, the 5% figure is not set arbitrarily, but a threshold with great legal significance. In most markets, shareholders holding more than 5% of the shares usually have the following rights:
·Proposal right: can submit resolutions to the shareholders' meeting to influence corporate governance.
·Lawsuit right: can initiate legal proceedings against the company's management to challenge the rationality of the acquisition.
·Veto power: in some special cases, 5% shareholders can prevent compulsory acquisition or restructuring plans.
Case: Hong Kong TVB shareholder war, small shareholders "counterattack" major shareholders
In 2016, Hong Kong TVB TV station encountered a large-scale shareholder dispute. Although the major shareholder "Shaw Fund" held nearly 26% of the shares, small shareholders jointly held more than 5% of the shares and successfully prevented a key strategic adjustment of the management. In the end, this group of small shareholders not only forced the management to compromise, but also affected TVB's subsequent capital operation strategy, and even indirectly promoted the subsequent equity restructuring.
Goheal reminds: Before the acquisition, the buyer must carefully analyze the shareholder structure of the target company, especially those "small and elite" investors who hold about 5% of the shares. Their decisions may become the key force in determining the success or failure of the acquisition.
2. "Golden Stock" Trap: You think you have a controlling stake, but you are actually countered
In order to avoid hostile takeovers, some companies will set up a "golden stock" mechanism, which allows specific shareholders to have major decision-making power even if they hold a small proportion of shares. This means that even if you have taken 51% or even 75% of the shares, as long as these small shareholders disagree, you still cannot promote any major decisions.
Case: France Danone VS China Wahaha, the fatal blow of golden stocks
Danone once hoped to achieve control over China's beverage giant Wahaha by increasing its holdings. However, Zong Qinghou, the founder of Wahaha Group, established a "special equity arrangement" as early as the early days of the company's establishment, allowing management with a lower shareholding ratio to retain "decision-making veto power." In the end, although Danone was the largest shareholder, it was never able to truly control Wahaha and eventually returned empty-handed.
Goheal's experience: When purchasing a controlling stake, be sure to thoroughly investigate the shareholder agreement and company charter to avoid "golden shares" or similar mechanisms that put you in a passive position.
3. "Hostile takeover" becomes "friendly takeover": How do small shareholders force a price increase?
In many takeover cases, small shareholders do not just passively accept, but directly influence the transaction price through joint actions. Especially in the case of a hostile takeover, small shareholders tend to unite and force the acquirer to raise the offer, eventually turning an originally low-cost acquisition into a "sky-high price transaction."
Case: Tesla's acquisition of SolarCity, how did small shareholders successfully raise the price?
In 2016, Tesla announced the acquisition of solar company SolarCity. However, a group of small shareholders of SolarCity strongly opposed it, believing that the offer underestimated the company's true value. These small shareholders jointly initiated shareholder actions to convey the message of "undervalued" to the media and investors. In the end, Tesla had to increase the acquisition offer, causing the transaction price to rise by nearly 15%. This part of the cost was solved by issuing new shares.
Goheal reminds: Before the acquisition, it is necessary to fully assess the market sentiment, especially the attitude of small shareholders, otherwise they may be "forced to raise the price" at the negotiation table.
4. "Legal War" tug-of-war: How do small shareholders drag down the acquisition?
Even if the buyer has reached an agreement with the majority shareholder, small shareholders can still use legal means to delay or even prevent the completion of the transaction. For example, in many markets in the United States and Europe, small shareholders can use "shareholder lawsuits" or "securities regulatory complaints" to prolong the transaction process, causing the acquisition cost to continue to rise, and even eventually lead to the abortion of the transaction.
In this regard, Goheal believes that before the acquisition, the buyer must formulate a legal response plan to prevent small shareholders from using legal procedures to obstruct the transaction.
Conclusion: How to crack the "small shareholder counter-killing" situation?
In the capital market, small shareholders are not only bystanders of the transaction, but may also become a key variable affecting the acquisition results. Whether through laws, market sentiment, voting rights, or strategic alliances, small shareholders may become the "invisible opponent" of the acquirer.
So, have you ever encountered the situation of "small shareholders counter-killing" during investment or mergers and acquisitions? Which minority shareholder strategy do you think is the most lethal in the acquisition process? Welcome to leave a message in the comment area and discuss the game of capital market with Goheal!
[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 restructuring, 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 then to capital operation, aiming to maximize corporate value and achieve long-term benefit growth.
