If a controlling rights acquisition is compared to a siege, signing a non-disclosure agreement (NDA) may just be a "pass" in front of the gate. But here comes the problem: although the gate has been opened, most people hesitate at the door. Do you think the easiest place to make mistakes is to negotiate prices, do valuations, and raise funds? Wrong. Goheal's years of practical experience tells us that the stage that is most likely to fall into the pit is often "after signing the NDA and before the bid negotiation" - this foggy area in the front and middle stages.
This is the "gray area" of the acquisition of controlling rights. Information asymmetry, ambiguous attitudes, time pressure, and transaction sensitivity, every seemingly simple move may become the key inducement for the transaction to eventually be stranded. Even in our Goheal's M&A work, 70% of the controlling rights transaction projects are "stillborn" at this stage, which is a pity.
1. The fog begins to rise: NDA is just the starting point, not a gold medal of immunity
At the moment of signing the NDA, many acquirers will suddenly have an illusion that "I am already in the field". In fact, the significance of signing a confidentiality agreement is only to protect information exchange, which does not mean that the target party has recognized your identity, nor does it mean that you will definitely be able to participate in the final transaction.
In many projects operated by Goheal, we have encountered the most "fatal" illusion: as soon as the acquirer signs the NDA, it immediately requires the other party to provide a full set of data room information, organize on-site due diligence, and even start to point out the situation and plan the future board structure... The result is conceivable. The other party closes the communication window and says "unruly visitors are not welcome."
In reality, NDA is more like a limited-time pass. Whether you can see the core secrets and whether you are qualified to participate in subsequent negotiations depends on your performance at every step thereafter - whether you are a "real buyer", whether you have professional ability, and whether you can be a "negotiation expert" who can be low-key and unobtrusive but can press step by step.
2. Information War: Are you seeing "data" or "scripts" shown to you by others?
After signing the NDA, the target company will often provide a simplified "Investor Information Package" (Teaser/IM), which may also include a historical financial report and a board memorandum. At this time, many acquirers begin to get excited: they can finally "see the bottom card"!
But we at Goheal repeatedly remind our clients: the information you get is not necessarily the "truth". In fact, the materials provided by the target party are essentially a packaged "story outline" - how to make themselves reasonably valued, risk-controlled, easy to integrate after holding, and have future growth. This is the first risk of information asymmetry.
American Goheal M&A Group
At this stage, truly experienced acquirers will do three things:
First, build a "M&A radar chart" and draw a list of doubts from the financial reports, directors' resumes, major lawsuits, supply chain and customer structure, and look where there is thick fog.
Second, start "silent cross-validation" and establish an "intelligence control group" through public channels, interviews with former employees, peer comparisons, etc. Don't just listen to what the other party says, but see how the outside world evaluates it.
Third, start the "shadow due diligence" mechanism in advance. We have specially established a data shadow group at Goheal. Before getting the complete data package, we still use the model to analyze the target company's business focus, asset utilization and cash flow trends in the past three years, and "hear the thunder" from the macro level.
3. The art of asking questions: You are not asking questions, but value judgment questions
In the early and middle stages of the controlling rights transaction, it is far more important to ask a "weighty" question than to make a quotation.
We have seen too many beginners who start asking some "irrelevant" questions after signing the NDA: How big is the factory of this company? How many employees? What is the proportion of main revenue? These contents have been clearly written in the financial reports and announcements. Asking these questions makes you seem unprepared.
On the contrary, an experienced buyer often asks questions like:
Why has the accounts receivable collection cycle changed dramatically in the past three years?
Why has a certain executive changed his position frequently recently? Is there any potential shareholder conflict?
There are a lot of "additional performance clauses" in the related contracts. What kind of control structure does it belong to?
In Goheal's practice, we will divide these key issues into three categories: deal-breaker, value-adjuster, and post-deal risk, and release them rhythmically and gradually. If you can make the other party realize that you are "not here to make soy sauce" in your questions, you may be able to move to the subsequent quotation and exclusive negotiation stage.
4. Relationship operation: "people" are the king of variables in controlling rights transactions
After signing the NDA, we enter a highly sensitive game period: the original major shareholders of the target company, the board of directors, intermediaries, and even other potential bidders of the other party will become potential game players.
Many people ignore the fact that the core promoter of the controlling rights transactions behind Hong Kong stocks, Chinese concept and even A-share companies is often not the board of directors, but the "actual controller" behind them. If you are still obsessed with discussing the model with the CFO and the wording of the announcement with the board secretary, it is very likely that another potential acquirer will overtake you from the "control channel" before the transaction even starts.
Goheal emphasizes this point very much: in the early and middle stages after signing the NDA, you should identify the "key person map" of the target company as soon as possible. We use the "power penetration map" model to find out who is the decision-maker and who is the influencing variable that persuades them, and then configure the corresponding negotiation words and progressive paths. The core of the transaction is the allocation of people's hearts, not the actuarial calculation of contract terms.
5. Exclusive period trap: Don't think you are the "only player"
Once you complete the initial due diligence and deliver the offer, you will enter the exclusive negotiation period. In theory, this means that the target company shall not negotiate with other parties within the agreed time - but in reality, this is often not the case.
We have seen a Hong Kong stock controlling stake acquisition case. On the 10th day of the exclusive period, Goheal assisted the client in discovering that the target party secretly met with the senior management of another acquirer. Although no contract was signed, an offer intention was formed. Once the exclusive clause is found to be in breach, the acquirer faces the triple risk of wasting time, information leakage, and missed opportunities.
Therefore, do not relax during the exclusive period:
To set up "regular update clauses", the target party needs to provide communication progress briefings every 5-7 days;
Through "soft information channels", grasp whether the target party is "playing both sides";
Introduce the "liquidated penalty for violation of exclusive agreements" mechanism to make compliance pay for real money.
This is a window period that is highly sensitive to resource scheduling and rhythm control. Any vague move will turn the controlling rights transaction from "about to be completed" to "yesterday's flower".
6. Goheal's conclusion: Your next step is not just buying, but "planning"
Goheal Group
In the controlling rights transaction, everyone is staring at the "ultimate winner takes all", but what really determines success or failure is often the "front and middle" after signing the NDA, whether you step on the right rhythm, ask the right questions, and understand the right people.
The key to the transaction is not "talking", but "planning". Signing the NDA is just an admission ticket, and the real battle has just begun.
So, are you ready? How will you avoid being tricked, stepping on landmines, and being replaced after signing a confidentiality agreement? Welcome to leave a message for discussion, we are waiting for you in the comment area.
[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.
