"A son of a rich family will not die in the market." We have seen too many big bosses who claim to be rational, but when faced with mergers and acquisitions and restructuring, they are as excited as gamblers entering a casino. They say "synergy" and "strategic layout", but in their hearts they are actually calculating "riding on the hot spots, hyping concepts, and telling stories". It's like wearing a vest of mergers and acquisitions and dancing a speculative dance.
Therefore, we have to admit a reality: you think you are talking about mergers and acquisitions, but you are actually talking about speculation. The real culprit behind this is not the unprofessional financial model or due diligence report, but the psychological error that each of us can hardly get rid of.
In Goheal's view, the moment many companies make merger and acquisition decisions, they have been manipulated by "capital illusion". Market value illusion, synergy illusion, scale myth, hindsight bias, these sound like psychological terms, but they are really hidden in seemingly reasonable investment and financing BPs.
American Goheal M&A Group
For example, the typical representative of "cognitive bias" - confirmation bias. Managers often only look for evidence that supports mergers and acquisitions, ignoring potential risks or opposing views. What they hope to hear is that this acquisition will bring synergies, business complementarity, and channel expansion; what they don't want to face is cultural conflicts, staff turnover, integration costs, and strategic direction conflicts.
We have personally experienced a case: an A-share listed company is preparing to cross-border acquire an Internet platform. From industry reports to brokerage research reports, all emphasize that "the trend of online and offline integration is irreversible", but no one asks a question - "How can this traditional manufacturing company operate an Internet company well?" Finally, half a year after the acquisition was completed, the platform's DAU was halved, and the original founding team left collectively. The management said regretfully: "We were deceived by the data, but in fact we deceived ourselves."
This is a typical manifestation of optimism bias. People always overestimate their ability to control risks and underestimate the possibility of systemic failure. In M&A projects, this optimism is particularly easy to be amplified - especially when the media is hyping, investors are urging, and stock prices are rising, who is willing to pour cold water?
During the due diligence process of mergers and acquisitions, Goheal often deliberately sets up "reverse assumptions": If this merger and acquisition fails, what are the three most likely reasons? If the market goes down, how to exit? We are not trying to pour cold water on companies, but trying to help companies find "blind spots" and break the illusion that "there is only a successful path".
Another psychological error that is often overlooked is the anchoring effect (Anchoring Bias). Once a target of acquisition quotes a price, all the management's thinking revolves around that number - instead of returning to the value itself. For example, a PE institution gives a valuation of "1 billion", and the buyer immediately starts to think "Can it be reduced to 900 million?", "Can an M&A loan be introduced?"... But very few people ask: "How is this 1 billion calculated? Which scenario in the future does it correspond to the return?" Anchoring the price may just be a "psychological trap" carefully designed by the other party.
It is for this reason that Goheal repeatedly reminds customers in every transaction negotiation: price is not the core of determining the success or failure of a transaction, but value is. We even suggest that you should temporarily "block out" the valuation proposed by the other party during due diligence, focus on its actual operating performance, own traffic, talent retention and organizational efficiency, and then reverse the price rationality.
The most dangerous psychological error is the herding effect. When a track is popular, a concept is hot, and a peer buys it, entrepreneurs will unconsciously develop a herd mentality - "others are buying, if I don't buy it, will I fall behind?" The result is not visible growth, but stepping on the same "capital mine".
For example, the new energy track. We have seen no less than ten manufacturing companies want to "take advantage" of this trend, but ended up buying a battery company that looks pretty good. There are no technical barriers, no downstream customers, and even the core technical team is in a wait-and-see period. But because "others are doing it", it must follow. This is not an investment decision, but a psychological adventure.
Within Goheal, we have a joke: "70% of M&A projects are actually the product of psychological games." What really determines the success or failure of an acquisition is not just a few numbers on the financial statements, but whether the company can overcome its own psychological errors.
Many bosses confidently say: "I am very rational, I only look at the data." But what we want to say is that even the choice of data often hides your psychological hints. The more you want this acquisition to succeed, the more "favorable" the data you see; the more you fear failure, the more likely you are to ignore negative evidence.
Of course, this does not mean that all mergers and acquisitions are speculation.
We have seen many successful merger and acquisition cases: clear strategic logic, reasonable price framework, sufficient integration plan, and stable financing structure. There is often a common point behind these cases: the management has maintained enough calmness, patience and self-reflection.
Capital operation is not wrong, but it is wrong to turn capital operation into a speculative tool that "makes a lot of money". And mergers and acquisitions should not be a "gamble" behavior, but a strategic long-term project.
We want to tell every entrepreneur who pays attention to mergers and acquisitions and experiences capital operations: Don't let the merger and acquisition stories you tell turn into speculative accidents in the end.
So, the question is:
In your corporate merger and acquisition practice, have you ever experienced some moments of "psychological error"? Were you blinded by high valuations, or did you make impulsive decisions under the "herd effect"? Have you ever discovered the "little gambler" in your heart on the road of mergers and acquisitions?
Goheal Group
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Goheal is willing to hear your voice and work with you to penetrate the fog of capital operation with a more rational perspective.
[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.
