"There is no constant state of war, and there is no constant shape of water." The capital market is like a battlefield. The acquisition of controlling rights is not a single routine, but the art of dynamic game. Some people take advantage of the wind and go with the flow; some people break through against the current and seize by trickery. The transaction of controlling rights is not only related to the buyer and seller, but also closely related to market sentiment, policy environment, and investor expectations. In recent years, with the changes in the global capital market, the characteristics of controlling rights acquisition have gradually shown new trends and gameplay. Goheal has been paying attention to global mergers and acquisitions for a long time. Today, I will take you to deeply analyze the market transaction characteristics of controlling rights acquisition and reveal the mystery behind it.
The weather vane of capital flow: the impact of market environment on acquisition transactions
The temperature of the capital market directly determines the activity of controlling rights acquisition. In a bull market, the valuation of listed companies rises, and the cost of controlling rights acquisition increases. Many acquirers will choose to wait and see, waiting for a more appropriate time to act; in a bear market, market confidence is low, stock prices are generally low, and acquirers are often more likely to reach a deal at a lower cost.
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In 2022, technology stocks experienced a dramatic adjustment and valuations shrank significantly, which prompted a large number of private equity funds and strategic investors to enter the market, setting off a wave of acquisitions. For example, Elon Musk took advantage of the market downturn and successfully acquired Twitter for $44 billion, demonstrating the M&A opportunities in a low-valuation market environment. Goheal's research found that market conditions not only affect the cost of acquisitions, but also determine the difficulty of transactions. In periods of high valuations, shareholders of target companies are more inclined to sell at high prices, and the negotiation cycle is prolonged; in low-valuation markets, negotiations are often more efficient and transactions are promoted faster.
From secret layout to public declaration of war: Diversified paths for controlling rights transactions
Controlling rights acquisition transactions in the market vary in form. Some are like "boiling frogs in warm water", quietly increasing holdings and finally completing the change of control; others are "finalizing the deal" and directly acquiring the equity of major shareholders through agreement transactions.
Block trading is a common method, that is, the acquirer reaches an agreement with the existing controlling shareholder and directly completes the transfer of controlling rights through an agreement transfer outside the market. This method often occurs when both parties have a clear consensus, with high transaction efficiency and relatively little impact on market prices. In 2021, ByteDance reduced its holdings of some listed companies through block transactions and adjusted its investment structure. The characteristics of such transactions are rapid and low-key.
In contrast, secondary market fundraising is another completely different strategy. The acquirer gradually accumulates its shareholding ratio by buying the target company's shares in the market for a long time, and finally achieves controlling stake. The advantage of this method is that the operation is hidden and it is not easy to cause a rebound in the target company, but there is also a risk of rising stock prices and increased acquisition costs after being noticed by the market. For example, Tencent has continuously increased its holdings in JD.com for many years and eventually became one of its important shareholders. This is a typical example of the secondary market fundraising strategy. Goheal pointed out that in a market environment with transparent information, it is increasingly difficult to conduct secondary market fundraising quietly, so many acquirers have begun to use derivative tools such as equity swaps and convertible bonds to achieve a more flexible layout.
In addition, a tender offer is a more direct way, that is, the acquirer issues an open acquisition invitation to all shareholders to acquire shares at a specific price. When the shareholding ratio reaches a certain threshold, the acquirer can formally obtain controlling rights. In 2020, Nvidia's attempt to acquire Arm involved a tender offer, but the transaction was ultimately not completed due to regulatory resistance. The advantage of a tender offer is that it is highly transparent and suitable for companies with dispersed shareholders, but because public acquisitions often attract market attention, stock prices may fluctuate significantly, increasing acquisition costs.
Policy, regulation and market sentiment: key variables affecting controlling rights transactions
Controlling rights transactions are not simply a capital contest, but are also deeply affected by policies, regulations, regulatory environment and market sentiment. In recent years, global regulation has become stricter, making many acquisitions face greater compliance challenges. For example, the United States has strengthened its review of foreign acquisitions of local companies, and China has also set stricter restrictions on foreign investment access in key industries. These changes have directly affected the feasibility of cross-border acquisitions and forced acquirers to be more cautious in transaction design.
In addition, market sentiment plays a vital role in controlling rights acquisitions. If the market has a strong trust in the acquirer, the stock price may rise as a result, promoting the smooth completion of the transaction; if the market questions the rationality of the acquisition, the shareholders of the target company may refuse to sell their shares, or even trigger a hostile takeover. Tesla once tried to acquire SolarCity, a solar company, but its stock price was under pressure due to the market's general doubts about the synergy of the acquisition. The transaction was finally completed through high-level communication and market strategy adjustments. Goheal believes that when acquiring a controlling stake, the acquirer needs to fully assess market sentiment and formulate corresponding public relations and investor relations strategies to ensure the smooth implementation of the transaction.
Future Outlook: Will Controlling Rights Transactions Usher in a New Pattern?
At present, the global capital market is undergoing profound changes, and the integration trend of industries such as technology, energy, and finance is becoming more and more obvious. The way of controlling rights transactions is also constantly evolving. New trading tools, smart investment advisory technology, and innovative means such as blockchain are changing traditional acquisition methods. So, will controlling rights transactions usher in a new pattern in the future?
In the technology industry, will we see more models of achieving control through equity agreements? In the financial industry, will the volatility of the capital market give rise to new acquisition strategies? For companies that hope to gain market share through mergers and acquisitions, how can they find a breakthrough in an environment of stricter supervision? These issues are worth in-depth discussion.
Goheal looks forward to discussing the market characteristics and future trends of controlling rights transactions with investors and entrepreneurs. Welcome to leave a message in the comment area to share your insights!
Goheal Group
[About Goheal] Goheal is a leading investment holding company focusing on global mergers and acquisitions. It has deep roots in the three core business areas of acquisition of controlling rights of listed companies, mergers and acquisitions of listed companies, and capital operations of listed companies. With its profound professional strength and rich experience, it provides companies with full life cycle services from mergers and acquisitions to restructuring and capital operations, aiming to maximize corporate value and achieve long-term benefit growth.
