"If you don't plan for the future, you will have immediate worries." In the capital market, successful capital operation can make the company take off, but failed operation may make the company fall into an abyss of no return. In recent years, a series of cases such as the bankruptcy of Silicon Valley Bank (SVB) and the abortion of the Volocopter project have sounded the alarm for the market: the road of capital operation is not a smooth road. If you are not careful, you will fall into an irreversible predicament. Goheal has studied these failed cases in depth and summarized the most common "pitfalls" that listed companies step on in the process of capital operation, in order to provide reference for investors and entrepreneurs.
Blind expansion: the cliff after high-speed sprint
The capital market has never lacked "ambitious" companies, and they hope to quickly grow bigger and stronger through capital operation. However, without sound planning and sufficient financial support, blind expansion will often only end in collapse.
The bankruptcy of Silicon Valley Bank (SVB) is a typical case. This bank was once the "financial owner" of technology startups and had unlimited glory in the capital market. However, in the face of the Fed's interest rate hike cycle, SVB failed to adjust its asset structure in time, resulting in the depreciation of a large number of long-term government bonds it held. At the same time, SVB's clients, many start-ups, also withdrew their capital due to the capital winter. Worse, when SVB tried to save itself through financing, venture capital institutions such as Founders Fund accelerated the withdrawal of funds, which eventually led to the loss of $40 billion in bank deposits in just a few hours. The collapse of SVB is a painful lesson of blind expansion without doing liquidity management in advance. Goheal suggested that when companies operate capital, they must consider the security of the capital chain to avoid falling into a liquidity crisis due to changes in the market environment.
Policy Misjudgment: One Wrong Step, All Losses
The world of business is not only a game of capital, but also a stage of policy. The growth of any company is almost inseparable from the influence of the policy environment. If the policy direction is misjudged or even compliance requirements are ignored, the company is likely to face huge risks.
The failure of Volocopter is a typical policy misjudgment. As the world's leading electric vertical take-off and landing (eVTOL) aircraft company, Volokopt was expected to make a breakthrough in the field of air traffic. However, the company has long failed to obtain the airworthiness certification of the European Aviation Safety Agency (EASA) and has failed to obtain a commercial operating license, making the seemingly bright market prospects out of reach. At the same time, due to the lack of policy support, the company was unable to establish a sustainable business model, its financing capacity dropped significantly, and eventually the capital chain broke, and the project was forced to abort.
American Goheal M&A Group
Goheal reminded entrepreneurs that policy research is an important part of capital operation. Whether it is cross-border mergers and acquisitions or investments in emerging industries, it is necessary to conduct in-depth research on the local regulatory environment to ensure compliance, otherwise it may be abandoned due to policy risks.
Over-reliance on external capital for financing: The capital market is not an ATM
Many companies habitually regard external financing as a "life-saving straw" when operating capital, but over-reliance on the capital market may eventually backfire. The success of an enterprise cannot rely solely on continuous investment, but must have its own stable profit model, otherwise it will eventually become a victim of the capital game.
From another perspective, SVB's bankruptcy is also a microcosm of technology startups' over-reliance on external financing. Many startups in Silicon Valley have long relied on financing rather than stable cash flow operations. Once the market environment changes, these companies will not be able to generate their own blood and can only rely on bank deposits. When the capital winter came, SVB's customers withdrew their capital, and the bank collapsed due to its own poor liquidity management.
Goheal believes that when listed companies operate capital, they must ensure that they have healthy profitability and cannot use financing as the only means of survival. Over-reliance on external capital is equivalent to leaving the fate of the company to the market, and the direction of the capital market can never be fully controlled by any company.
Lack of M&A integration capabilities: the painful reality of 1+1 < 2
Many companies regard M&A as a "shortcut" in capital operations, hoping to quickly gain market share or technical capabilities through acquisitions. However, M&A is not a simple superposition of resources. The real challenge lies in the integration after the M&A. If the integration is not strong, not only will it fail to create synergy, but it will drag down the company's overall performance and even lead to the failure of the company.
A typical example is the merger between the US communications giant AOL and Time Warner. In 2000, AOL spent a huge amount of money to acquire Time Warner, trying to create the world's strongest combination of media and the Internet. However, due to the huge differences between the two parties in culture, management and strategy, the integration work after the merger fell into chaos, and ultimately not only failed to bring the expected growth, but also caused the stock price to plummet and the company's valuation to shrink significantly. This case fully illustrates that capital operation is not a simple "buy, buy, buy", and how to efficiently integrate resources is the key to truly determine the success or failure of mergers and acquisitions.
Goheal believes that before conducting mergers and acquisitions, companies must formulate detailed integration plans, including management structure, cultural integration, business synergy and other aspects. Only by planning the integration strategy in advance can we ensure that the "1+1>2" effect is truly achieved after the merger and acquisition, rather than falling into the "1+1<2" trap.
Conclusion: Capital operation is an opportunity, but also a trap
The capital market is full of opportunities and traps. Blind expansion, policy misjudgment, over-reliance on financing, lack of integration capabilities... Behind these failed cases are the neglect of risks and misjudgment of market changes. When listed companies are operating capital, they can only move forward steadily in the storm of the capital market by careful consideration and careful planning.
In your opinion, what are the other regrettable cases of capital operation failures in the current market? Which industries do you think are most likely to fail in the future? Welcome to leave a message in the comment area to discuss the gains and losses of capital operation!
Goheal Group
[About Goheal] Goheal is a leading investment holding company focusing on global mergers and acquisitions, focusing on the three core business areas of listed company control acquisition, listed company mergers and acquisitions and restructuring, and listed company capital operation. With its deep professional strength and rich experience, it provides enterprises with full life cycle services from mergers and acquisitions to restructuring and capital operation, aiming to maximize corporate value and achieve long-term benefit growth.
