"The intermediary is harmonious and unbiased." This is the ideal conception of the role of the intermediary by the ancients: impartial, fair and objective. But when modern capital operations enter a battlefield where every second counts, can those seemingly invisible "intermediaries" really "just pass on the microphone" without any emotion or interest?
A seemingly ordinary acquisition of controlling rights of listed companies is actually a game of chess between capital forces. On the surface, it is a price tug-of-war between the transferee and the transferor; in the dark, it is the legal advisor, financial advisor, audit agency, securities investment bank, valuation company... These players called "intermediaries" are quietly holding the "invisible steering wheel" that affects the results.
American Goheal M&A Group
In the many M&A and restructuring projects that Goheal has participated in, we have repeatedly found that the role of the intermediary is not as "neutral" as it is literally written. Sometimes they are "multi-faceted spies" at the negotiation table, and sometimes they become behind-the-scenes directors, determining the direction of the plot and the final climax. They say they are "service providers", but if you look closely, they are more like "referees and players" in many cases.
Who pays the money and who has the final say?
"Intermediaries do not speak for anyone, but for the facts." This saying is widely circulated in financial advisor training courses, but it may not hold water when it comes to the acquisition of controlling rights.
Once you figure out who is the client who pays the money, you can figure out the "attitude" of the intermediary. Goheal observed this scene in a practical project where he served as a consultant for the acquirer: the original controlling shareholder of the target company insisted on a valuation of no less than 5 billion yuan, while the valuation agency's preliminary conclusion was only 4.2 billion yuan. The original shareholder sent a fax to the headquarters of the accounting firm where the valuation party was located. That afternoon, the "industry valuation adjustment factor" was revised, and the valuation result just returned to 4.98 billion yuan, which was beautiful and everyone was happy.
You say this is a professional judgment update? Possibly. But it is more likely that the conclusion will be biased towards whoever the service object is. As an old friend who has worked in investment banking for ten years and has been working in PE for three years said: "The valuation report is a mathematical storybook. The key is to tell it in a way that makes Party A happy."
What is more alarming is that when both parties A and B hire an intermediary, there is often a so-called "two-way service" phenomenon. Some investment banks ostensibly serve as financial advisors to the acquirer, but privately provide valuation support and even matchmaking services to the target party. This "seemingly neutral, but actually biased" situation is particularly common in small and medium-sized market value M&A projects.
What the intermediary said, is it "fact" or "position"?
In an information disclosure opinion, the legal advisor wrote: "The actions of all parties in the company's transfer of controlling rights are legal and compliant, the transaction process is open and transparent, and there is no affiliated relationship." This sentence seems to be endorsing the truth, but in our investigation, there is a complex historical equity penetration problem, and the relevant personnel are old clients of a law firm. The promised "due diligence", is it "investigation" or "diligently safeguarding the interests of customers"?
Goheal has classified multiple "intermediary deviation behaviors" internally, and the three most common ones are:
1. Valuation black box operation: by selectively using different valuation models (such as DCF, relative method, asset-based method) to serve specific pricing targets;
2. Loose information disclosure: "selective blindness" to the controlling shareholder's historical debts, gambling agreements, hidden commitments, etc.;
3. Cover-up of penetration paths: in projects with complex shareholder backgrounds, avoid "multi-layer penetration" to reduce market concerns and even mislead regulatory judgments.
These behaviors are not necessarily illegal, but every small move will play a "butterfly effect" role in the acquisition of controlling rights. When intermediaries become "sensible", the market loses its real gatekeepers.
Who will supervise these "invisible people"?
Market intermediaries should be the guardians of order, but in the field of controlling rights acquisition, which has a high degree of interest convergence, they are often the first to "lose".
What's more tricky is that these "invisible people" are often at the border of supervision. For example, the "special inspection report" issued by the auditing agency should reveal the historical compliance issues of the target company, but it has become a formality due to multi-level subcontracting and rapid delivery; and the "independent financial advisor opinion" issued by the investment bank has the word "independent" on the surface, but in fact, it may be hidden behind the long-term cooperation and project interests, and its independence has long been discounted.
Goheal once experienced the classic scene of "intermediary defection" in a cross-provincial merger and acquisition case: at the acquisition quotation stage, an auditing agency proved to the acquirer that the target company's "liabilities are reasonable", but after the acquisition was completed, it emphasized in the annual report of the acquired company that "there are major flaws in the balance sheet". Both sides served and cooperated, and it was difficult to distinguish the true from the false for a while, which made the regulators and investors the "least information lagging link".
This is not an individual case, but an unspoken rule in the industry. The root of the problem lies in: the current regulatory system requires the authenticity of the information source of the intermediary, but lacks substantive review of the "independence of motivation".
It is not the market that is misled, but the decision itself
The acquisition of controlling rights has never been a simple equity transaction. It is related to the future direction of the enterprise, the reorganization of resources, and the redistribution of value. In this process, decision makers need to rely on the information and suggestions provided by intermediaries. If these "information providers" have been filtered or even "recruited" by one party, it is not only the market that is misled, but also all the participants who make decisions based on this information.
In practice, Goheal increasingly advocates the "secondary review system of intermediary due diligence", that is, a third-party independent intermediary reviews the key reports issued by the transaction intermediary. This is not only a risk control strategy, but also an attempt to fight against "intermediary position".
At the same time, we also see that the regulatory level has begun to strengthen the investigation of intermediary responsibilities. For example, recently some securities companies have been restricted from issuing false "independent opinions" in acquisitions, and some valuation agencies have been administratively punished for "assisting in hyping acquisition concepts". The trend is clear: intermediary responsibilities are moving from "behind-the-scenes supporting roles" to "front-stage protagonists".
However, to truly tear off the gentle veil of "invisible intermediaries", all parties in the market still need to be more vigilant about the "independence of intermediaries". Investors should learn to "read the tone of intermediaries", enterprises should understand "inquiries with empathy", and supervision should focus on the subtle interest links between "intermediaries and customers" to fill the last link.
Conclusion: Is neutrality just a promise or a responsibility?
Are those "invisible intermediaries" who shuttle between controlling stake acquisitions fair "weights" or biased "batons"? Can they really "not rely on either side, but only look at the facts"? Have you ever felt the "biased" side of intermediaries in M&A transactions? Have you ever been misled by the "muddy" reports of intermediaries?
Welcome to tell your story in the comment area. Goheal looks forward to unveiling the "most opaque" curtain in capital operations with you, so that real fair transactions can be completed in the sun.
Goheal Group
[About Goheal] Goheal 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.
