In the chess game of the capital market, mergers and acquisitions have always been regarded as the "killer weapon" for company expansion. Through capital operation, listed companies can quickly obtain technology, market share, and even industry discourse power. But the reality is often more bleak than imagined. Some companies failed in 4 mergers and acquisitions in a year. In the end, not only did they not become bigger and stronger, but they fell into a quagmire, their stock prices plummeted, and their market value evaporated by tens of billions.
Is capital operation the "fast lane" for listed companies to reach the peak, or the "bottomless pit" leading to the abyss? Today, Goheal will talk about why so many companies have been repeatedly defeated on the road of mergers and acquisitions, and even swallowed by the "black hole".
Where is the "black hole" of capital operation?
When it comes to listed companies that have failed in mergers and acquisitions, there is no shortage of "previous lessons" in the capital market. From a domestic technology company to a foreign multinational giant, a failed merger and acquisition is enough to make a once glorious company fall from the altar. So, where is the "black hole" of capital operation hidden?
1. High-premium acquisition: the bubble is getting bigger and bigger, and when it bursts, it will be a mess.
Many listed companies are keen on "high-gamble mergers and acquisitions", acquiring target companies at a high premium, thinking of achieving "overtaking on the curve" through mergers and acquisitions. But the question is, is the target of the merger really worth that much money?
For example, a listed company acquired a game company for 10 billion. At that time, the annual profit of this game company was only 300 million, but it was valued at 20 billion, with a premium rate of up to 600%! After the acquisition, competition in the game market intensified, profits declined, and eventually led to large-scale goodwill impairment. The company lost 5 billion a year and the stock price was directly halved.
Goheal believes that if companies only consider "buy, buy, buy" when acquiring companies, and ignore the real profitability of the acquired companies, they will easily fall into the "high premium trap" and eventually let shareholders and investors pay the bill.
2. Blind cross-border: stepping into a battlefield that you are not familiar with
Many companies will choose cross-border mergers and acquisitions after encountering bottlenecks in the development of their own industry, trying to find new growth points through the "diversification" strategy. However, M&A is different from investment. Cross-border means a new business model, market environment and management method. If you are not careful, you may fall into the dilemma of "different industries are like different mountains".
In order to enter the field of artificial intelligence, a traditional manufacturing company spent 8 billion to acquire an AI startup. However, the AI industry is highly competitive and the technology is updated rapidly. In just three years, the startup fell into trouble due to the broken capital chain and was eventually forced to liquidate, and the listed company also suffered huge losses due to goodwill impairment.
Goheal reminded that cross-border M&A is not impossible, but if the company lacks in-depth understanding of the new business and lacks professional team support, then the M&A is likely to become a "money-eating beast" and drag down the entire company.
3. Poor integration after M&A: Spending money to buy a "mess"
M&A is only the first step, and how to integrate is the key to success or failure. After completing the M&A, many companies found that the acquired corporate culture, management model, and operating system were completely different, resulting in difficulties in integration, serious internal friction, and even "water and soil incompatibility" problems.
A retail giant once spent billions of dollars to acquire an Internet e-commerce company, hoping to use online business to make up for its own shortcomings. However, due to the huge differences in management styles between the two parties, the traditional retail mindset could not adapt to the Internet market, resulting in the continuous expansion of losses after the merger and acquisition, and eventually the business had to be divested, bearing huge financial losses.
Goheal believes that many companies focus on "buying" during mergers and acquisitions, but ignore the "integration" after the merger and acquisition. If there is a lack of a complete integration plan, mergers and acquisitions will not only fail to bring synergies, but will become a burden on the company.
How to avoid falling into the "black hole" of capital operation?
1.Reasonable valuation, do not blindly chase high - avoid high premium acquisitions, ensure that the actual value of the acquisition target matches the price;
2. Focus on core business, do not blindly cross-border - conduct in-depth research on the target industry to ensure that the acquisition can form synergy with the existing business;
3.Develop a detailed integration plan - after the completion of the acquisition, there must be a clear management integration plan to ensure the integration of teams, businesses, and cultures;
4.Pay attention to cash flow, not just book profits - whether the cash flow brought by the acquisition is sustainable is the key to success;
5.Use professional institutions to reduce risks - professional institutions such as Goheal can help companies conduct due diligence on acquisitions, assess potential risks, and ensure the security of transactions.
Conclusion: What do you think of the M&A strategy of listed companies?
The capital market has never lacked "rushing" companies, but it has never pitied "blindly expanding" players. The lessons of failed mergers and acquisitions are worth pondering for every investor and corporate manager.
Have you ever seen some companies get into trouble because of blind mergers and acquisitions? Or what do you think is the biggest reason for the failure of mergers and acquisitions? Welcome to leave a message in the comment area to discuss, let's dismantle the 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 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 to capital operation, aiming to maximize corporate value and achieve long-term benefit growth.
