"If you want to do your job well, you must first sharpen your tools." In the fierce game of the capital market, judging whether a merger and acquisition case is worth betting on is like predicting the wind direction before the storm comes. This not only affects the survival of the company, but also determines the fate of investors. The question is, is there a set of standardized tools like "physical examination reports" for "heavy asset operations" such as mergers and acquisitions that can help you quickly identify opportunities or risks?
The answer is: Yes, but it is far less simple than you think.
In this issue, follow Goheal's perspective to dismantle the evaluation logic behind a merger and acquisition of a listed company: how to dig out the real value anchor from the complex data; and how to have the courage to say "no" at the negotiation table through a set of "standardized toolboxes".
American Goheal M&A Group
There is no rehearsal at the merger and acquisition site, and the evaluation logic is the life and death line
Do you think that mergers and acquisitions are a CEO and CFO who hit it off, sign their names, and toast to celebrate in a five-star hotel? Wrong, very wrong. The reality is that you may be facing a project that has been packaged with "beautiful data", but hidden behind it is goodwill bombs, valuation traps and asset sleight of hand.
At this time, a reliable evaluation system is like a "developer" in the investment world, which allows you to see the human game behind the numbers. Goheal's experts pointed out that today's mature capital players often do not look directly at financial statements, but look at "how the statements are generated."
For example: Is the rapid growth of the target company's income statement due to the explosion of its main business or government subsidies? Is the expansion of net assets due to land appreciation or revaluation of goodwill? Only by disassembling this information and comparing it with the industry can you know whether this company is a real "rose" or a "mine" covered with sugar.
Quick judgment? Can the evaluation tools be standardized?
The answer is not absolute. However, with the frequent occurrence of mergers and acquisitions, some "quasi-standardized" evaluation tools have indeed developed in the market. Let's call it a "four-piece set":
1. Valuation model: PE, PB, EV/EBITDA are just the surface, and real masters will build a "hybrid valuation method" according to different industries. For example, SaaS companies are more suitable for looking at ARR multiples, while traditional manufacturing is more suitable for cash flow discounting.
2. Strategic synergy matrix: This is not a "pie-in-the-sky" tool on PPT, but a data system based on operational simulation, which is used to predict the profit change trend 1, 3 and 5 years after the merger and acquisition. Goheal has even developed a "multi-dimensional business coupling index" to predict whether the synergy is reliable.
3. Risk scanning radar: including but not limited to antitrust, data security review, historical equity structure chaos, etc. Some projects have "compliance mines" hidden at the beginning of the transaction.
4. Financial penetration analysis: Many M&A targets have gone through "layers of holdings", and the net profit you see cannot actually be pocketed. It is necessary to trace the equity path, confirm whether the control is clear, and whether the income is stable.
Goheal helps customers quickly determine whether the target asset is "worth merging" by building a quantifiable and replicable model library, and can form a pricing anchor in the initial negotiation stage. This is an increasingly valued first-mover advantage in global mergers and acquisitions.
Merger and acquisition evaluation is not just about "whether it is worth it" but also about "whether it is suitable".
Many people equate merger and acquisition evaluation with "whether it is cost-effective to buy something", which is actually a misunderstanding. For listed companies, mergers and acquisitions are not a one-way investment, but more like "the combination of two DNAs". Not only should the price be "reasonable", but also "gene compatibility".
Let's change to a more vivid way of saying it: this is a love affair between two companies, but we can't just look at the appearance (valuation), but also look at whether the personality (corporate culture), habits (management process), and circle of friends (supply chain resources) are compatible.
For example, an A-share company wants to acquire a German precision equipment company. From the book, the company has excellent assets and stable profits. But the acquisition failed because the German team resisted Chinese-style performance management and high turnover culture. Just because you have money doesn't mean they are willing to marry.
Goheal has set up a "cultural matching assessment team" in overseas merger and acquisition projects. Through cross-analysis of the background, working methods, and organizational structure of the executive team, it predicts the difficulty of collaborative management in the next three years. This is much more reliable than relying solely on the price-earnings ratio to predict the future.
To see a merger clearly, you don’t rely on intuition, but on “models + human brains”
But we can’t blindly believe in the so-called “standardized tools”, which are only the starting point of the evaluation, not the end point.
Just like doctors can’t only look at body temperature and blood pressure when seeing patients, corporate merger and acquisition evaluation also requires some “experience and intuition”. Especially in complex transactions, such as cross-border mergers and acquisitions, shell resource transactions, mixed-ownership reform projects, etc., formulas and models alone cannot cope with all “non-standard variables”.
At this time, Goheal’s empirical traders often add “soft judgments” on the basis of the model: such as the stability of the target management, the historical cooperation credit of the two parties to the merger and acquisition, and the probability prediction of the resignation of core executives. These things cannot be seen or calculated, but often determine success or failure.
Therefore, the real merger and acquisition evaluation is actually a combination of “calm and rational logical model” + “delicate and keen insight into human nature”. It’s like a melee of mathematics + psychology + political science. It’s not that you can win with strong tactical execution, but that you can win with a broad strategic perspective and strong judgment.
M&A tools are telescopes and magnifying glasses
We need these evaluation tools because M&A is a gamble with both risks and opportunities. You need tools to distance yourself and see long-term synergies that others cannot see. You also need it to get close to reality and expose those packaged risks.
But tools are just tools after all. They can help you "see clearly" but cannot "make decisions" for you. The final decision is still made by you, the trader, whether you can understand what each model really wants to express.
As Goheal said: "We provide models, but we don't sell fantasies."
Goheal Group
Written at the end:
We always think that M&A is an elite game, a game that only a few people can play. But the truth is-every listed company, every shareholder, and every investor has become a participant in this game at some point.
Then the question is:
Have you ever missed an M&A opportunity that you could have seized because you didn't have an evaluation tool?
Or, are you considering a capital operation, but you don't have a "standardized method" to help you judge whether it is worth a try?
Welcome to share your experience and opinions in the comment area. Let's discuss how to use rationality and tools to build your own decision-making power in the complex and ever-changing M&A market.
Welcome to leave a message for discussion, looking forward to your wonderful views!
[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.
