"The general trend of the world, long-term division will lead to unity, and long-term integration will lead to unity." This classic opening sentence of the Romance of the Three Kingdoms is also applicable to the M&A battlefield in the capital market. The controlling merger and acquisition is the flow of shares on the surface, but in fact it is a power competition without gunpowder.
The buyer took the controlling stake with confidence, thinking that he could "guide the world" from now on, but after the delivery was completed, he found that the shareholders had constant internal struggles, the board of directors became a battlefield, and even the original management "disobeyed the emperor", leaving the new owner's voice in vain. After the controlling equity changes hands, who has the final say? Management is undermined, how can new shareholders truly control the situation?
American Goheal M&A Group
Goheal has studied in-depth power battles after the merger of controlling equity of listed companies, and found that there is often an insurmountable gap between "buying controlling equity" and "really controlling the company". So, how exactly does the Game of Thrones be launched after the merger of listed companies? How can new shareholders ensure that they are not the controller of "name but not truth"?
Change of control rights does not mean real control of power
In the capital market, the transfer of controlling rights does not mean the smooth handover of management rights. Many times, although new owners have an advantage in shareholding ratio, they are gradually restricted in corporate governance. For example, the old management often still controls the company's core resources, such as official seals, financial accounts, major customer relationships, etc., which makes the company's operating rights firmly in the hands of the original team even if the controlling rights change.
Taking Gengxing Co., Ltd.'s power battle as an example, Zhejiang Haixin acquired 24.1% of Gengxing Co., Ltd.'s equity for nearly 400 million yuan, becoming the largest shareholder. However, after the completion of the delivery, the original management of Gengxing Co., Ltd. refused to hand over the core operation rights, and even set various obstacles for new shareholders within the company. For example, the new shareholder wanted to hold an employee meeting, but found that the security team of the former management was directly blocked by the door and was not allowed to enter the office. This situation not only affected the company's normal operations, but also caused financial accounts to be frozen and business to stagnate.
Goheal's research found that similar "management resistance after controlling rights change hands" phenomenon is not uncommon in mergers and acquisitions. If the new shareholder lacks sufficient strategy, he is likely to lose the initiative in this game of throne and become a "virtual shareholder" with shares and no right to speak.
Battle for power: Battle between board of directors, general meeting of shareholders and official seal
When the controlling rights are delivered, the power struggle within the enterprise often revolves around the following core links:
1. Competition for board seats
Even if the new owner acquires the controlling stake, it does not mean that the board of directors can be controlled immediately. Many listed companies' original board members are still controlled by old shareholders or management, and they may join forces with sub-major shareholders to prevent new shareholders from changing core management. For example, the management of China Travel United is infighting. After the new shareholder completed the acquisition, the executive appointed by the original controlling shareholder refused to hand over the company's management rights, resulting in the new shareholder being unable to promote corporate governance changes even if he has the advantage in shares, and ultimately he has to resort to legal means.
2. Game at the shareholders' meeting
The advantage of controlling shareholders is that they have greater voting rights, but if the company's original shareholders are relatively scattered, the new shareholders need to seek support from other shareholders at the shareholders' meeting. Otherwise, even if the shareholding ratio is high, they may be delayed or even rejected in key decisions. This situation has been repeatedly staged in many mergers and acquisitions, and many new owners have to invest more resources to gradually gain the dominance of the board of directors and shareholders' meeting through negotiations or equity acquisitions.
3. Control of official seal and company finance
In China's corporate governance, the importance of official seals and financial books cannot be underestimated. After the controlling rights of many listed companies change, the old management of many listed companies will continue to control the official seal, bank accounts, financial systems, etc. to restrict new shareholders. Even if the new shareholder reorganizes the board of directors through the shareholders' meeting, it will be difficult to truly control the operation of the company if the official seal and financial control are not obtained.
Goheal analyzed that when new shareholders acquire listed companies, they must formulate a complete handover plan before the transaction to ensure that the actual handover of management rights can be completed simultaneously after the equity change, otherwise they will fall into a long power tug-of-war.
How does the new owner control the overall situation?
Faced with the complex game of thrills, how can the new owner stabilize the situation and avoid becoming a "virtual controlling shareholder" that is undermined? The following strategies may provide some inspiration:
1. Sign a detailed handover agreement
In the merger and acquisition agreement, not only should the conditions for equity delivery be clarified, but detailed agreements should also be made on the handover of management rights, such as: when to replace the board of directors, when to hand over the official seal, when to complete the transfer of financial rights, etc.
2. Quickly obtain control of the board of directors
Once the equity delivery is completed, the new shareholders should quickly convene a shareholders' meeting, replace the board of directors, and promote the adjustment of the management team under the legal framework to ensure that the corporate governance system is not disturbed by the old management.
3. Strengthen cooperation with core shareholders
If the company's shareholders are relatively scattered, the new owner should take the initiative to communicate with other major shareholders to seek more support from the board of directors to avoid being blocked in key decisions due to insufficient shareholding ratio.
4. Ensure control of the financial and operational system
Take over the company's financial system, bank accounts and core business departments as soon as possible to avoid the company's operations being out of control due to poor transfer of management rights. At the same time, it is possible to establish a temporary financial monitoring mechanism to ensure that the flow of funds is not affected by the old management.
Conclusion: Capital mergers and acquisitions are ultimately competing with control
Controlling mergers and acquisitions are not only a contest between funds and shares, but also a smart game about power control. If the new shareholder only acquires the controlling rights and ignores the actual handover of management rights, he may fall into a protracted internal struggle and even affect the normal operation of the company. Therefore, in the process of mergers and acquisitions, how to safely complete the handover of controlling equity and ensure that the new owner can truly control the operation of the company is the key to a successful acquisition.
Goheal Group
How do you view the power game after the merger and acquisition of listed companies? If you are a new shareholder, how would you deal with the constraints of the old management? Welcome to leave a message in the comment area for discussion. Goheal looks forward to discussing the Game of Thrones in the capital market with you!
[About Goheal] Goheal is a leading investment holding company focusing on global mergers and acquisitions and holdings. It has deeply rooted in 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 then to capital operation, aiming to maximize corporate value and long-term growth of profits.
