"When times are tough, one's loyalty is revealed; when the wind is strong, one can see the strength of the grass." In the great waves of the capital market, every change in the economic cycle is a severe test of the capital operation capabilities of enterprises. Especially in the environment of capital tightening, financing channels are narrowed, and market confidence fluctuates. Capital operation is more like a "battlefield" that tests endurance and wisdom. In the past few years, a large number of companies have enjoyed the capital dividend brought by the low interest rate environment, and financing, mergers and acquisitions, and expansion have been completed in one go. However, with the tightening of global liquidity and the increase in financing costs, the capital market has become more rational, and the capital challenges faced by companies have become unprecedentedly severe.
In this context, how can listed companies find opportunities for survival and growth in the "capital winter"? Is it to take the initiative to find value depressions, or to maintain core businesses and wait for spring? Goheal's research found that during the period of capital tightening, companies that can truly grow against the trend are often not shaken by the market environment, but "capital warriors" who can accurately capture market mismatches and flexibly adjust capital strategies.
Capital tightening: battlefield or opportunity?
Many companies will choose the "lying flat" strategy during market fluctuations, suspending expansion and waiting for the market to pick up. But in fact, the winners in the capital market are often those companies that act decisively during low tides and invest against the trend during contraction periods. Historically, many top companies have completed key acquisitions during economic downturns, laying the foundation for long-term competitive advantages. For example, Apple increased its R&D investment during the 2008 financial crisis and launched the iPhone 3G, laying the foundation for its subsequent global smartphone dominance; Disney acquired Marvel in 2009 and exchanged $4 billion for a box office empire for decades to come.
During periods of capital tightening, the market often sees asset pricing distortions, the valuations of many high-quality companies are underestimated, and even some companies with healthy cash flow are forced to sell their core businesses, providing excellent M&A opportunities. Goheal observed that in the context of global capital tightening, the following capital operation models are becoming the winning magic weapon on the "battlefield".
Three major capital operation strategies during capital tightening periods
1. Countercyclical M&A: Buy at a low price and lay out the future
The pricing of the capital market is not always rational. In an environment of depressed market sentiment and tight funds, the valuations of many high-quality companies are underestimated, providing acquirers with opportunities to "pick up bargains". Successful counter-cyclical mergers and acquisitions can not only acquire high-quality assets at a lower cost, but also lay out the future growth curve in advance.
For example, during the 2008 financial crisis, BlackRock acquired Barclays Global Investment Management (BGI) at a low price and became one of the world's largest asset management companies. If BlackRock had chosen to "wait for the market to recover" at the time, it might have missed this once-in-a-century opportunity. Goheal believes that now is the best time for companies to lay out their future through counter-cyclical mergers and acquisitions, especially in long-term growth tracks such as technology, medical care, and green energy, where there are a large number of potential high-quality investment targets waiting to be discovered.
2. Precision investment: lock in value depressions and look for "undervalued" opportunities
During the period of capital tightening, the capital market usually has a "wrong killing" phenomenon, that is, the market's valuation of some companies is lower than their true value. Smart investors will take advantage of this market mismatch, accurately lock in "value depressions", and make long-term layouts.
In the Chinese market, industries such as new energy, semiconductors, and AI have experienced roller-coaster valuation fluctuations, and the price-earnings ratios of many core technology companies have plummeted from highs to historical lows. But in fact, the long-term development trends of these industries have not changed. On the contrary, the short-term capital retreat has provided more attractive entry opportunities. Goheal observed that around the world, many leading technology companies are quietly increasing their investment in core technology fields to prepare for the next round of industrial upgrading.
3. Strengthen capital structure and enhance risk resistance
The period of capital tightening is not only a good time for investment layout, but also a critical period for optimizing corporate capital structure and improving financial stability. Many companies expanded through high leverage during the market boom, and once liquidity tightened, they faced huge financial pressure. Therefore, in the current environment, companies should give priority to optimizing capital structure, such as reducing leverage, increasing cash reserves, and optimizing debt structure to enhance risk resistance.
At the beginning of the epidemic in 2020, Tesla quickly adjusted its capital strategy and raised a large amount of cash by issuing additional shares to ensure that the company maintained sufficient liquidity during the supply chain crisis. This move not only helped Tesla overcome difficulties, but also allowed it to rapidly expand its market share after the supply chain resumed in 2021. Goheal believes that listed companies should take advantage of the current market adjustment period to actively optimize their capital structure and lay a solid foundation for future growth.
Conclusion: The period of capital tightening is a challenge and an opportunity
During the period of capital tightening, market uncertainty increases, and the capital operation of enterprises becomes more difficult. But it is in such an environment that the most strategically minded companies can stand out. History has proven that true capital masters will not be trapped by market cycles, but will look for opportunities in adversity and plan for the future in advance.
In the current market environment, which industries do you think have the most counter-cyclical investment opportunities? How should companies adjust their capital strategies to cope with market changes? Welcome to leave a message to discuss!
[About Goheal] Goheal is a leading investment holding company focusing on global mergers and acquisitions holdings. It has been deeply involved in the three core business areas of acquisition of listed company control, mergers and acquisitions of listed companies and capital operations of listed companies. With its deep 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.
