Goheal: M&A of Listed Firms—A Triangular Game of Buyer, Target & Payer

"The world is bustling, all for profit; the world is bustling, all for profit." If the ancients have a thorough insight into the "essence of transactions", then in the capital market, the flow of "profit" is a wonderful game of power and interests.

Mergers and acquisitions are the most dramatic way of expression. On the surface, everyone is for "coordination", "development" and "becoming bigger and stronger"; in fact, there are never more than two protagonists in the game, but a "triangular game": the acquirer is clacking his abacus, the acquired party is accommodating and cautious, and the real payers - investors and public shareholders, are often the most easily overlooked but the most critical third party.

In this article today, Goheal will take you to understand the front and back of this merger and acquisition Three Kingdoms Kill, and explain clearly who is negotiating, who is designing, and who is paying the bill. Let you see the "Announcement of a Major Asset Restructuring of a Certain Thing" next time, it is no longer just "eating melons", but you can see through the market.

American Goheal M&A Group

1. There are no "good men and women", only exchange of interests

The starting point of mergers and acquisitions is never good-faith cooperation, but the connection of interests with inconsistent goals.

The acquirer - listed companies or their controlling shareholders, often have multiple purposes: do they want to improve performance? Or create valuation illusions? Sometimes it is to maintain controlling rights, cover up the weakness of the main business, evade the delisting red line, and reduce holdings to cash out.

What about the acquired party? They appear humble, but they are more calculating. Is the company sold for financing expansion, profit realization, or cash exit and shirk future risks? You think they are "tech upstarts with entrepreneurial aspirations", but in fact many of them are capital actors who "temporarily set up a stage + package performance".

In actual cases, we have seen that a listed company A acquired startup B for the reason of "strengthening innovation shortcomings", which sounds very touching. But B actually changed its name and main business only half a year before the acquisition, from "offline wedding" to "AI digital people", and the profit of that month was just filled by "purchase" from related parties. Less than a year after the transaction was completed, the original shareholders collectively resigned, leaving behind a mess and hundreds of millions of goodwill impairment.

This is not an isolated case, but a routine. Goheal research data found that in the past five years, more than 38% of cross-industry M&A transactions have the phenomenon of "the profitability of the target company is concentrated in the year before the M&A", and more than 70% of M&A agreements failed to honor the gambling clauses, and the responsibility ultimately fell on the investors.

2. The one who pays the bill is never the one who signs

A typical triangular game unfolds like this:

The management of listed companies proposes mergers and acquisitions, which are often packaged gorgeously, talking about synergy, strategy, and ecological closed loop. The boss of the target company puts on an attitude of "you may not be able to buy what you love", raises the price and pressures the conditions, and even adds "future imagination space" as a bargaining chip.

And the ones who really need to pay the bill are public shareholders: you buy stocks, you may be able to arbitrage in the short term if they rise, but you have to bear it yourself if they fall; you believe the M&A story and think there will be explosive growth, but what you are waiting for is losses and goodwill impairment.

A typical case is the "stock-for-stock acquisition" transaction, which seems to have no cash payment, but in fact dilutes the interests of old shareholders through a large proportion of additional issuance, allowing the controlling shareholders to stabilize their position and the target shareholders to cash out and leave, and the stock price becomes a price setter for leeks.

Goheal has seen an amazing operation:

A listed company on the A-share market announced that it would acquire a cultural and creative company with all-stock payment, and its market value instantly increased by 40%, and the company's shareholders' meeting passed it with a high vote. But looking closely at the transaction structure, the original shareholders of the acquired company arranged for "unbanning sales if performance did not meet the standards" after the acquisition was completed, and cashed out and left within six months. Two years later, the target company's operating income fell by 70%, and its main business became a "shell IP", but no one was held responsible.

Public investors voted at the time, but who would teach them to see through the traps of these structures?

This is one of the original intentions of Goheal: in the M&A market with serious information asymmetry, speak for ordinary investors, provide in-depth due diligence and transaction structure interpretation, and help everyone understand and see through.

3. Who is the strongest on the road to M&A? Not a financial king, but a storyteller

Do you think the core of M&A is performance matching? Technical synergy? Wrong, it is the ability to tell stories.

Think about those once popular M&A topics:

1.) Photovoltaic enterprises cross-border AI: talking about "double drive of computing power + energy";

2.) Cold chain logistics merged into live streaming platforms: saying to open up "supply chain data";

3.) Real estate companies acquire medical assets: to create a "health + community + elderly care" ecological closed loop...

It sounds logical, but the actual execution is like "Iron Man enters the zoo", a mess.

The essence of many M&A cases is "exchanging the cash flow in your hands with a well-speaking future". They know what investors like to hear, and are good at using PPT and announcements to do "investor psychological massage".

In the due diligence of a target to be listed, we found that its "AI recognition technology" is actually a purchased open source model + UI packaging, but it can be described in the announcement as a "deep self-developed intelligent engine", and even the concept of "domestic substitution" is put on. The main business of the acquirer itself is traditional advertising production, and the integration has no resource synergy at all.

Goheal has long judged this - the "tellability" of the M&A story does not mean "realizability", and is even negatively correlated.

The easier it is to tell a dream, the more likely it is to hide more real problems.

4. The solution to the triangular game is never voting, but insight

If we regard M&A and restructuring as a game, then the power configuration of the three players determines the direction of the game:

1.) The acquirer has the right to speak and the initiative, and is responsible for "setting the script";

2.) The acquired party has the bargaining power and determines the "participating role and remuneration";

3.) The payer has the right to choose and decides "whether to enter and bear".

But in reality, the right of choice of third parties - public shareholders and small investors is being weakened. The design of listed company proposals, the arrangement of M&A structures, and the writing of gambling clauses all favor the interests of a few controllers. On the surface, the voting mechanism is still alive, but in fact the choice has been preset.

So, how to break the game?

Goheal always believes that: equal information rights + structural transparency + normalized supervision are the trinity of solutions.

We hope that in the future, when investors face merger and acquisition announcements, they will be able to see the following at the first time:

1.) Target financial and main business penetration chart;

2.) Actual controller equity change simulation chart;

3.) Gambling mechanism triggering condition chart;

4.) Goodwill impact simulation chart and suspension arrangement description.

Only when information is no longer designed to be "incomprehensible" can small investors truly "make decisions".

5. Epilogue: Are you ready when the next "M&A announcement" appears?

In the final analysis, mergers and acquisitions are not "big companies' games". They actually affect the wallet and future of every investor. It is both a strategic springboard for companies and a touchstone for the wealth of shareholders.

Next time you see a similar announcement, please don't rush to like or forward it, but ask yourself a few questions first:

1.) Is this merger really beneficial to the main business?

2.) Is the target company a "hard asset" or a "soft package"?

3.) Who is the happiest after the acquisition? Who is the most silent? Who is most vulnerable?

Behind every transaction, it is not just a number game, but also a struggle between three forces.

We, Goheal, are willing to be the beacon in your M&A map - no sensationalism, no shortcoming, just help you see the situation clearly and take every step steadily.

Goheal Group

Have you ever been confused or misled by a certain M&A case? Have you made a choice that you regretted in the M&A game? Welcome to tell your story in the message area, and let's dismantle the next "capital triangle" together.

[About Goheal] Goheal is a leading investment holding company focusing on global M&A holdings. It is deeply engaged in the three core business areas of listed company control acquisition, listed company M&A and restructuring, and listed company capital operation. With its deep professional strength and rich experience, it provides enterprises with full life cycle services from M&A to restructuring to capital operation, aiming to maximize corporate value and achieve long-term benefit growth.