Why do internet giants hit the money so frequently?

Buying and selling companies is becoming the "new normal" of the Internet.

March 17, the wisdom of 1.5 billion yuan to buy Zhongguancun, the market is easy to use cars and Uber merged with the news; before February 14, drop fast two big hit the enemy announced the merger. In the past 2014, a variety of mergers and acquisitions have been one after the other: Wanda Group to 315 million U.S. dollars to acquire a quick 68.7% stake, Tencent shares Sogou,

Buy a stake in Beijing east, a stake in the public comments, the acquisition of 58 shares in the city, Ali acquisition of UC, a stake in the Youku ...

Buyers want to exchange money for time, sellers want to use shares for the future.

"10 mergers and acquisitions seven failed. "Han can invest in the CEO Chen in the interview with NetEase Technology, said," The merger is to find death, not to buy and die. But the death may be successful, do not go to mergers and acquisitions may not be your business. "Han can capital is the 2014 Tencent shares Sogou, Tencent acquisition of Shanda Literature, Wanda shares of fast money, such as a number of acquisitions of financial advisers."

What kind of merger may fail? What kind of merger might be successful? What factors do buyers and sellers need to consider in the process of mergers and acquisitions? Chen's experience in the merger market has been interpreted for many years.

Why did the buyer buy it? Strategic layout vs Value-added defense

According to the Cvsource Data terminal, 2014 China mergers and acquisitions market announced the transaction case reached 6967, completed the number of transactions 2574, completed the transaction size of 189.8 billion U.S. dollars. This is boring data.

More vivid facts. Bat everywhere "pull younger brother", the second echelon of the Lei Department, 58 with the city (recently acquired a tenant) and so also frequently shot; many startups are considering how to line up.

So the question is, why did the internet giant hit the money so frequently?

Chen mentions several key words: genetics, strategic layout, value-added or defense.

Although several internet oligarchs may appear to be "powerful" in their respective territories, virtually every company has its own unique gene. Tencent is good at product genes, in the electrical business and operation of a little less than one domain, repeatedly in the electrical business, after trial and error unsuccessful, then choose a series of equity participation (such as investment 58 with the city, Beijing East, the public comments, etc.) to fill their strategic layout. Baidu wants to buy Sogou, is the defense acquisition (to prevent 360 after the threat of purchase), Tencent buy Sogou is value-added acquisition (Tencent own search can not do up, only to buy), 360 Sogou is the strategic value (if the Sogou down, 360 of the search market share is the number of geometric growth).

"The buyer must know what you are buying." The original media to buy the framework, Buy is the box, the greatest value on the frame. Many other Internet acquisitions are buying technology, buying people, and if they are empty shells. "Chen Analysis said.

Wanda acquisition of Fast money is also "money for Time" strategic layout of the alternative deduction. Quickly cut into new industries. To the traditional attribute stronger enterprise speaking, if oneself from 0 start to do 1, trial and error cost is big wait, better spend some money quickly cut into the industry, stable, accurate, efficient.

How to assess the value of money spent, not loss? Chen that we should not only look at the current value of the comprehensive evaluation. Baidu, for example, bought 91 wireless 1.9 billion dollars before, and many people think it is expensive. In fact, the acquisition of the market to the confidence of Baidu greatly increased, breaking the Baidu in the mobile internet layout of the sluggish impression, the market value has subsequently soared, adding more than 10 billion of dollars. "Like you're going to cross the river, is that a plank or a gold price?" ”

Why do sellers sell? Who do you want to sell?

Under what circumstances will the seller sell the shares?

Many mergers are created not by founders wanting to merge or sell their companies, but by the investors behind them. Typically potatoes are sold to Youku. Chen that the emergence of many mergers and acquisitions, investors, especially financial investors, the investment time is too long, the need for channel exit results. In order to be responsible to the early investors, entrepreneurs need to find a buyer to sell the stake. Who can buy it? Financial investor or strategic investor. How much do you sell? 100% or part of the sale? 100% of the reasons for the sale of most of the IPO is hopeless, do not go on, the founder completely withdrew;

In addition to investor withdrawal pressure, "hug thigh" to seek the integration of resources is the additional impetus that the acquisition produces.

Ali strategic investment and holding easy media is a case. Chen to NetEase technology analysis said, Easy Media founder that do internet advertising must have large data, but their own to save these data is too difficult, no way accurate. Internet advertising, especially DSP real-time bidding, requires large data analysis to know what to push ads today accurate. And Ali has such a large data resources and capabilities.

The mindset of the entrepreneur is different and open to the attitude of merger and acquisition. Some entrepreneurs want to go public, and some founders are "pigs". "If it's still a while from the market, sell it to bat, and the return on the listing is the same, WHY not?" "Chen said.

So what are the factors to consider for sellers? How to choose a buyer?

"If I represent the sellers, I will focus on a few points: is 100% or part of the acquisition?" If it is 100% acquisition, whether to integrate into the seller company or all exit? If part of the acquisition, the team is still, the team's strategic value-added how many? "Chen said.

How to evaluate the purchase price? Who sold the high price? Specific to Wanda and the fast Money cooperation case, 315 million U.S. dollars accounted for 67.5%, compared with the current start-up companies on the billion-dollar financing, in the field of payment for years of fast money to sell about 500 million of the dollar's valuation is not low? Fast Money CEO Guoguang at that time said that he did not care about the valuation level, which is not the main reason for cooperation with Wanda.

"Quick money to choose Wanda, is actually in the choice of a big ' scene '." Chen to NetEase Technology said. If the fast money can be targeted by the customer data for its customers to provide loans, financial services and other business, will greatly enhance the future and Alipay and other competition for the C-end user's strength.

At that time, Baidu, Wanda has a number of sellers talk, the Last choice Wanda. Although Baidu's internet gene and fast money is closer, but Baidu hopes to be a hundred percent acquisition. Choose Wanda's risk is the enterprise cultural background is different, the advantage is that Wanda has to rely on the original team to do things, to the original management team has added space. and Wanda Executive force is too fast, Wang personally. It took only two months to start talking about the end of the deal, leaving no chance for other strategic investors. "Han can be the financial advisor to this merger case, Chen recalls the process of the negotiations."

"Certainty" is a factor that Chen Hongfan believes is very important in trading. In fact, even if a term sheet is signed before the deal is finalized, it may not be done. The "Escape list" is not uncommon at the negotiating table. For a seller, "certainty" is a prerequisite for a transaction to be achieved. In Wanda and the quick Money case, Wanda's efficient implementation of the expression of sincerity and the certainty of this transaction is also the reason for quick money to choose Wanda.

What is a successful merger? What is a failed merger?

10 mergers and acquisitions if seven fail, how can you ensure that your acquisition is a successful 30%?

What are the characteristics of successful mergers and unsuccessful mergers?

"There are two prerequisites for a successful merger: First, is the strategic value of the company and the matching of people complementary?" Cisco has the highest success rate in global mergers and acquisitions, which have made Cisco the company it buys to ensure its strategic value. The second is the quality of late integration. The culture of the buyer, the management style and the bosom of the leader are the determinants. Many small companies bought by big companies want to integrate brands, the smaller the difference between buyers and sellers, the better, or within a group. "Chen said.

Many of the world's most famous mergers and acquisitions, such as HP mergers Compaq, Oracle buy Sun, Facebook acquisition WhatApp, etc. Facebook's acquisition of WhatsApp is important. If WhatsApp is bought by Google or Tencent, Facebook is more passive in the social networking arena.

"Mergers and acquisitions for profit are often failures," he said. "There are many reasons for unsuccessful mergers and acquisitions, but it is often a failure to start with a combination of income and profits," Chen said.

If the industry boss and second mergers and acquisitions, mergers and acquisitions will inevitably result in a dominant position. The joint CEO, such as the setting, is generally a means of transition, all mergers and acquisitions must eventually have a side-dominated.

The role of financial advisor (FA): not the Lang match

As mentioned earlier, many mergers and acquisitions (such as Youku and potatoes) are often the dominant factor behind investor demand: when the company experiences a vicious cycle of late listing or "burning money", investors are hoping that the money will be withdrawn, and then there is demand for a stake. Many mergers and acquisitions are the result of investors, especially financial investors, after long enough to invest.

At this point, the entrepreneur or investor will find a third party intermediary-financial advisers (FA) to handle the strings, and to bring the best choice for both sides, this choice includes the choice of financial investors or strategic investors, a merger or partial mergers and acquisitions and so on. In another case, the financial adviser (FA) will voluntarily advise the enterprise to buy or sell the company.

FA Negotiation is an art that integrates ' matchmaker ', financial advisor and ' shrink '. "Like many people in the industry, Chen thinks so. Want to be happy to achieve a merger deal, not only the FA has sufficient quality network resources, good offices in the downstream communication art, but also need to understand the relevant industry knowledge.

FA Negotiation is a comprehensive communication game. The transaction structure design needs to be optimized to deal with, so that everyone can see their own points of interest. After all, the factors that buyers and sellers consider are different. Mergers and acquisitions are both sides, the buyer needs to be willing to integrate, the seller team also want to know with whom the most appropriate cooperation. From this point of view, to correctly grasp the needs of buyers and sellers, know the "pain point" where, and can not reluctantly "pull Lang match."

But Chen also admits that there are many uncertainties affecting mergers and acquisitions. For example, efforts to persuade a company to acquire B team, and the logic of the model, but ultimately achieved a company to acquire the C team. "There's going to be something that takes a long time to do, but it's a dramatic change at the end. Chen said that 100% of the acquisition is relatively good to do, if the partial acquisition, in addition to buying a house seller, but also with the buyer of the company's internal other business units of the team to mediate, multi-party negotiations.