In January 2012, Sany Heavy Industry announced the acquisition of Putzmeister, a German veteran concrete machinery manufacturer with the nickname "Elephant", which took only one month from contact to acquisition. By the end of April 2012 when the approval was completed and consolidated, Elephant had already made a profit of 93 million yuan, which was four times that before the acquisition by Sany.
Putzmeister was initially preparing for public bidding, and at the same time issued an offer to five Chinese machinery companies. Why did they sign an exclusive agreement with Sany China within more than 20 days, and the premium was much lower than Sany Heavy Industry’s Expected?
The story inside is quite like a martial arts novel.
The spirit of contract is more important than "small road"
On January 20, 2011, Putzmeister issued a sale offer to five Chinese engineering companies, including Sany. On the 21st, after receiving the feedback letter of intent, it was necessary to sign on the 22nd. Agreements that include government authorities" and are confidential to all non-negotiating parties.
According to Sany’s top management, the day after receiving the offer, Sany discussed with Putzmeister whether it can be reported to the Chinese regulatory authorities. The answer was NO, and no action was taken. However, one company failed to abide by Putzmeister's regulations. The company submitted a document to the Hunan Provincial Development and Reform Commission on the third day of receiving the offer, and received the National Development and Reform Commission's acquisition of Putzmeiss on December 30. Special approval, the so-called "small road".
This company's behavior in the industry seems to be "robbed". Because overseas mergers and acquisitions are involved, the Chinese government does not want domestic companies to raise prices with each other, so approval is often given to only one company. However, the "small road strip" obtained in advance did not help him obtain the "elephant", on the contrary, he failed to comply with the contract and lost his eligibility for acquisition.
For international mergers and acquisitions, compliance with contract spirit and integrity is particularly important. Only by trusting each other can we understand each other and gain recognition. After meeting with Sany, Putzmeister CEO once said to the board that "Sany Heavy Industry is the best partner", which is built on mutual trust.
When dealing with foreign companies, Chinese companies must remember not to take it for granted, thinking that their own ideas are bound to be the ideas of the other party. In the foreigner's mindset, even a takeover offer made actively by "I" does not mean that the status of "you" in the negotiation is higher than that of me, and they are still equal to each other. According to the previous experience of overseas acquisitions by Chinese companies, the chivalry and tradition of foreign companies and operators are deeply entrenched, and the spirit of contract and integrity are more important issues than survival.
2.6 billion avoided blood flow into rivers
But at the early stage of the offer, it was learned that the above competitors had been approved, and Sany was quite shocked and decided to rush to Germany to discuss with Putzmeister.
Meeting with Putzmeister, Sany stated the situation and showed that Sany was reluctant to compete with other Chinese companies in price competition, and the Chinese government also stipulated that a Chinese company should form a contract for overseas acquisitions, and other companies could not come to bid.
Sany talked about that competitor has already acquired CIFA, another Italian company in the industry, and there may be some obstacles in antitrust review. At that time, Putzmeister was eager to sell, and it coincided with Sany in corporate culture, so he agreed to use Sany as an exclusive negotiation.
Before leaving, the board of directors discussed the floor price to be acquired. In Xiang Wenbo's words, I think Sany Heavy Industry has already ranked first in China's concrete machinery market, and 70% of its profits come from concrete machinery. If the elephant is acquired by another person, it will surely cause a "blood" war. Therefore, as a result of the negotiation, Liang Wengen and Xiang Wenbo who went to the negotiation can decide as long as it is less than 10 billion yuan.
Last year, Sany Heavy Industry's consolidated profit was only more than 6 billion. Xiang Wenbo said that enterprises with strategic value should be selected instead of financial value.
So when Putzmeister's stock price was 500 million euros for the first time. Liang Wengen and Xiang Wenbo said to discuss, in fact, drinking in the next room, it is estimated that the time is almost over, can you say it can be less? As a result, the elephant was eventually swallowed for 360 million euros (including Sany Heavy Industry's 324 million euros, equivalent to 2.654 billion yuan).
gave up due diligence and "robbed" the elephant
What makes competitors unimaginable is that Sany did not do detailed due diligence before signing the contract, nor did it invite a large number of intermediaries to evaluate.
Liang Wengen once asked Xiang Wenbo whether to do due diligence, and said to Wen Bo, "No, I personally pay for the problem." Even when the final signing, because the lawyer said there was a flaw in the assets, Liang Wengen and Xiang Wenbo had already given up signing . But at the return airport, Xiang Wenbo turned back and signed the contract.
The reason why Xiang Wenbo dared to do this is that Sany has been paying attention to Putzmeister for many years, and he also regards the other party as his financial benchmark and is very familiar with it. Second, the management trusts each other. He also believes that the EU The law and German style, the credit risk is relatively low; the third is to stipulate an additional clause, that is, how much error in the audit of the financial statements later, SANY reserves the right to repay the debt.
The risk is still quite large. Fortunately, the financial director made a "0" gesture to Liang Wengen and Xiang Wenbo, meaning that there were no errors in the financial statements. Xiang Wenbo said that confidentiality and speed were the most important at the time, so signed the contract without due diligence. Otherwise, I do not know what will happen again.
After the acquisition of Putzmeister by Sany, although there were strikes, there were no moral problems after all. This success is somewhat unreproducible, especially with regard to due diligence. How many Chinese companies, such as CITIC Pacific and China Metallurgical, finally found that the acquisition of the Western Australia mine was not cost-effective, and China Gold planned to acquire Barclays Gold, and finally gave up because of a number of risks after detailed investigation. But if the due diligence or time is too long, the situation will be reversed and missed opportunities, such as Chinalco's acquisition of Rio Tinto. In this regard, the flexibility of private enterprises is exerted to the fullest extent, and many state-owned enterprise leaders will often sigh when they talk about international mergers and acquisitions or business development.
However, for the case of mergers and acquisitions, this is still a trick. Due diligence is an indispensable part of an acquisition, and third-party institutions that conduct due diligence are generally more familiar and neutral than the parties to the transaction. As the saying goes, "the authorities are obsessed and bystanders are clear", but as an acquirer, it must first have the rationality of the choice of the acquisition target and the independence of judgment. It cannot neither blindly initiate the acquisition nor blindly follow due diligence without principle. After all, only the feet know the right shoes.