There is a saying that it is better to rely on a big tree to enjoy the shade. For LED display companies, merging into the "big tree" of a listed company has become the most advantageous shortcut for many companies to achieve rapid expansion and seek greater development space. As a way of integrating resources, mergers and acquisitions can play a role in financing enterprises and enable small and medium-sized enterprises to develop rapidly.
Advantages of mergers and acquisitions
Direct access to financial support
In the context of the current lack of money in the LED display industry, being able to find a satisfactory and suitable listed company as a backer is undoubtedly a good way for small and medium-sized enterprises to obtain financing. Obtaining financial support has become the most direct interest appeal of the acquired company. In mergers and acquisitions, large companies will inject capital into small companies for development in the form of stock or contract investments.
In 2013, Furi Electronics acquiredMarian Optoelectronics. At that time, Marian was due to expand its production and operation scale and invest in the construction of its subsidiary Huizhou Marui Optoelectronics Co., Ltd., and there would be a large demand for funds in the next three years. According to the content of the agreement, after the merger, Furi Electronics will provide Marian with the financial support it needs in the next three years. Furi Electronics has the advantages of a complete LED industry chain from upstream chips to downstream applications, and has strong strength in terms of capital and scale. For Marui Optoelectronics, on the one hand, it can use the capital market to obtain certain funds, and secondly, it can also use Furi Electronics' government background to win more orders. On the other hand, it is also a good way for Marui to replenish capital flow in the current environment where the industry is generally short of money and financing is not smooth.
Sharing resources and reducing production costs
Vertical integration is very common in the LED industry. Upstream companies merge with downstream companies, or downstream companies merge with upstream companies. Regardless of the merger method, the purpose is to maximize shared resources, reduce production costs, and maximize profits. After mergers and acquisitions, companies can share production resources, such as technology research and development results and industrial chains, which canIt saves a lot of research and development and equipment purchase costs, thereby reducing production costs and gaining price advantages.
In 2010, Dehao Runda acquired Ruituo Display for RMB 120 million. Dehao Runda provided Ruituo with strong technology research and development capabilities and competitive advantages in integrating the industrial chain. In terms of long-term development, it will bring greater opportunities to Ruituo. Backed by this resource platform, Ruituo integrates the upstream and downstream industry chains from LED chips, control system SMD packaging, LED lamps to LED devices, displays, and lighting products.
Sharing customers and broadening sales channels
In horizontal mergers and acquisitions, the acquirer and the acquired party can integrate customer resources and channels to quickly expand market share and enhance the company's competitiveness in the market. In November 2013, Leyard acquired 100% equity of Beijing Internet Yida Technology Co., Ltd. Internet Yida has a good cooperative relationship with major TV stations, and Leyard's high-density and small-pitch LED products occupy a leading position in the market. After the merger, Internet Yida's good customer resources accelerated Leyard's large-size and small-pitch LED products.The products are penetrating into studios and studio systems in the field of radio and television. At the same time, Internet Yida has also deepened its product channels.
Sharing brands to maximize profits
Some small and medium-sized enterprises may have good products before mergers and acquisitions, but they lack a popular brand, resulting in low sales and tight funds. After being merged into a listed company, the product can obtain the right to use its brand, which solves this problem to a certain extent. In the face of fierce market competition and the ever-changing market, it is uneconomical to invest in brands and channels for too long. Achieving this goal through mergers and acquisitions can save a lot of investment and reduce expenses in the marketing process. For example, Ruituo relied on Dehao Runda to obtain LED display projects for Hangmei Airport and more than 130 Wanda five-star hotels. Brand sharing enables these small and medium-sized enterprises to have more and larger capital and markets.
It is indeed a good thing that the LED industry continues to acquire and merge and mature, but after acquisitions and mergers, how to carry out internal integration and make the best use of various resources is what enterprises really face.The tests and challenges are also the ultimate criteria for testing the success of acquisitions.
M&A Risks
First of all, if the acquiring party lacks start-up capital and adjustment funds after the merger, the acquired party will not be able to get on track for a long time, the market for the original products will not be consolidated, and the development and launch of new products will be restricted for a long time.
Secondly, in terms of corporate culture, due to the differences in culture, social background, and market environment between the two parties, if these differences cannot be eliminated as soon as possible after the merger and acquisition, the original conflicts will not be resolved, and new problems and frictions will continue to arise. The evolution of this contradiction will not only cause some companies to be unable to obtain good financing platforms and financial support after mergers and acquisitions, but will also cause idleness and waste of resources in all aspects of the company.
Thirdly, from an environmental perspective, if both parties to the merger and acquisition are in the same industrial environment and some of the products and resources of the acquired company are still in development, then both companies will be able to retain and develop these products and resources. On the contrary, the acquired party's original market channels and production and operation pattern may be affected., the advantages of the company's original products and resources may be greatly weakened, and capital operations will also become difficult.
In short, what the LED companies being acquired in the merger and acquisition activities hope to obtain is the financial support and resource platform provided by the acquiring party. It is best to use it and make it cost-effective for the development of the acquired company. Before the merger and acquisition, you must understand what your purpose is. Mergers and acquisitions are also conditional for the acquired party. Enterprises that choose to merge into listed companies as a financing channel must figure out how much benefit they can get from the merger and acquisition, and whether they can withstand various pressures after the merger and acquisition.
The financing leverage of LED companies cannot be obtained by moving closer to listed companies. It is best if they have their own unique advantages in products, channels or technology, and innovation capabilities, and can complement the acquirer or reach a strong alliance and reach a consensus. Only such mergers and acquisitions can give themselves greater room for development.
ANNA