When the building is about to collapse, everyone pushes the wall down. The capital market has never lacked thrilling acquisition dramas, but the most frightening thing is the "unexpected changes" at the last minute. Many buyers have encountered large-scale sell-offs by mysterious shareholders on the eve of completing due diligence, negotiating valuations, and signing contracts, causing stock prices to plummet, market value to shrink, and even directly destroying acquisition plans. Is this a "capital storm" or a "game within a game"?
Goheal found that in the acquisition of the control of listed companies, many buyers often ignore the hidden risks, while some sellers "have other plans" and use market psychology and loopholes in the rules to set up serial traps, catching buyers off guard. Today, let's reveal the 5 major traps in the acquisition of control rights, and see how the "old foxes" in the capital market make moves and how to deal with them?
Trap 1: Shareholders flee collectively, who is the mastermind behind the scenes?
[Scenario Review]
You are about to acquire a listed company for 2 billion yuan. The market value calculation and due diligence report are all normal. However, just before the signing, the market suddenly heard that major shareholders and senior executives collectively sold their shares. The stock price plummeted by 20% overnight. The market panic spread and the acquisition plan was in jeopardy.
[Routine Analysis]
1. The seller or a hidden related party deliberately created a sell-off to suppress the stock price, making the buyer's premium acquisition uneconomical.
2. Take advantage of the market panic to force the buyer to renegotiate or even give up the acquisition.
3. Some shareholders cashed out and left the market in advance to avoid future operating risks, and the buyer became the buyer.
Goheal's coping experience:
1. Observe the behavior of shareholders before the transaction. If there is a large amount of abnormal reduction, it is necessary to investigate the reasons behind it.
2. Add a price adjustment clause. If the stock price fluctuates abnormally, the acquisition price can be adjusted or the transaction can be terminated.
3. Lock the shareholding ratio of key shareholders in advance to avoid malicious market manipulation in the later stages of the negotiation.
Trap 2: The financial report data is bright, but the actual profit is a "paper tiger"
[Scenario Review]
The net profit of the listed company you acquired has increased by 50% in the past three years, and the book cash is sufficient. It seems to be a business that can make money without losses. However, after the acquisition, the financial situation took a sharp turn for the worse, the cash flow was broken, and the performance plummeted.
[Routine Analysis]
1. Use accounting techniques to increase performance, such as inflating revenue and delaying cost recognition, to make the company look more profitable.
2. Hide or transfer debts so that the buyer will find a huge financial black hole after taking over.
3. Short-term performance sprint, create a false profit through related transactions before the acquisition.
Goheal's coping experience:
1. Due diligence not only looks at financial reports, but also checks cash flow, contract details, and related transactions.
2. Pay attention to the audit agency. If the audit company is frequently changed or the accounting standards are changed, you need to be vigilant.
3. Require the management of the acquirer to make a commitment to the financial data and set a gambling clause.
Trap 3: Invisible betting agreement, the buyer becomes a "cash machine"
[Scenario review]
You thought it was a regular merger and acquisition, but after signing the contract, you found that the agreement actually contained a high-value performance betting clause. If the target cannot be achieved, additional compensation must be made or even part of the equity must be transferred.
[Routine analysis]
1. The betting agreement is not clearly disclosed, and the seller uses complex terms to hide the details.
2. The buyer does not have control over the betting, but still has to bear huge compensation responsibilities.
3. The betting target is too aggressive. Once the market fluctuates, the buyer is forced to "fill the hole".
Goheal's coping experience:
1. Thoroughly review all contract attachments and shareholder agreements to avoid hidden clauses.
2. The betting agreement must be based on reasonable growth expectations and set a bottom-line clause.
3. Avoid performance betting and control changes, otherwise it is easy to be manipulated by capital.
Trap 4: Control changes hands, core management leaves collectively
[Scenario review]
After you take over the company, the CEO and senior management team who originally promised to stay suddenly resigned collectively, and the core technical personnel were also poached by competitors, and the company fell into operational paralysis.
[Routine analysis]
1. Some management deliberately left hidden dangers and left quickly after the transaction was completed.
2. The non-compete agreement is in name only, and key personnel switched to competitors.
3. The buyer relies too much on the management of the company and lacks a takeover plan.
Goheal's coping experience:
1. Set up an incentive mechanism for executive retention and sign a non-compete agreement.
2. Cultivate internal successors before the transaction to avoid the loss of the core team.
3. Establish a transition management plan to ensure a smooth transition of the business.
Trap 5: Sudden policy changes, the acquisition plan is stillborn
[Scenario review]
You thought the transaction was foolproof, but a week before the signing, the regulator suddenly tightened industry policies, resulting in huge legal obstacles for the transaction.
[Routine analysis]
1. The seller knew about the policy changes in advance, but concealed the information and quickly facilitated the transaction.
2. The buyer lacks policy risk assessment, blindly promotes the transaction, and is ultimately blocked.
3. Industry supervision is dynamically adjusted, and market valuation collapses instantly.
Goheal's coping experience:
1. Understand the industry policy direction in advance, especially overseas mergers and acquisitions and sensitive industries.
2. Add a "policy change exit clause" to the agreement to reduce transaction risks.
3. Keep in touch with regulators to ensure transaction compliance.
Conclusion: Can you avoid these traps?
The capital market is ever-changing, and the acquisition of controlling rights of listed companies is far from as simple as "buy, buy, buy". On the eve of signing, any disturbance may hide deep meanings. Have you experienced similar capital traps? If it is you, how would you deal with the sale of mysterious shareholders?
Welcome to leave a message in the comment area and discuss the survival of M&A transactions with Goheal!
[About Goheal] American Goheal M&A Group 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.
