Chain Shoe Enterprises Reshuffle Face Merger

"Did BELLE look for you?"

This sentence has become the commonly used phrase to greet the boss of Wenzhou shoe enterprises after the second half of 2007.

Behind a simple greeting is an upcoming merger and acquisition: Wenzhou, Kangnai, AOKANG and other famous brands have received the "merger order" of industrial giants and capital upscale BELLE, but they have refused.

In May 23, 2007, the BELLE shoe industry went public in Hongkong. When Deng Yao, chairman of BELLE shoe industry and the congratulating party from all sides, exchanged cups and chips, Wang Zhentao, President of AOKANG Footwear Group in Wenzhou, was hard to "sleep".

"I haven't had a stable sleep since BELLE shoes went public."

Wang Zhentao is aware of the impact of BELLE shoe listing on the industry: "after the listing of BELLE shoes in May 23rd, every shoe company in Wenzhou has touched a lot, because the shoe industry will be re shuffled, and we will face greater pressure."

He said the pressure and shuffle is obvious: from a single brand perspective, AOKANG shoes industry is still the leading industry, but now is not a single brand era.

Wang Zhentao, the boss of AOKANG, was worried about something soon.

After the listing of BELLE shoe industry, under the cooperation of capital, the shoe industry is constantly attacking the city.

What shocked Wang Zhentao most was that at the end of 11 in 2007, BELLE shoes bought the assets of the group under the price of 1 billion 600 million yuan. After the acquisition, the market value of BELLE shoes reached 103 billion yuan, becoming the leading industry in the industry.

Since the listing of BELLE shoes, more than 20 brands have been acquired. However, there are not more than 20 brands in AOKANG's base area so far in Wenzhou.

As a chain giant of shoe industry in China, BELLE shoes industry has nearly 3000 stores and more than 1000 sports shoes chain stores in more than 150 cities in the mainland, and there are ten production and sales enterprises in ten overseas stores. Originally, it did not have direct pressure on AOKANG shoe manufacturers such as AOKANG, because BELLE shoes were mainly women's shoes, and most of Wenzhou's shoemakers were men's shoes.

But this time, with the first tier cities as the main market, the BELLE shoe industry, which is mainly dominated by women's shoes, will acquire a strong influence on the competitive pattern of the shoe industry in China.

In recent years, BELLE shoe industry has penetrated its channel into two or three tier cities. Now it has made up for the weakness of BELLE's footwear industry, so that BELLE's footwear industry will use its own channels and industrial chains and coverage to rapidly improve its overall profits.

This plan, for Wenzhou and even domestic shoe traders, has actually opened the curtain of shoe industry shuffling.

The story of BELLE shoe industry will also take place in chain stores and manufacturing enterprises in other industries.

The circulation of many industries in China is a highly dispersed market. With the entry of capital and the improvement of market concentration, the industry will undergo drastic changes. The stronger Yu Qiang and the weaker the weaker will be the outcome and fate of the vast majority of domestic chain enterprises. If you don't grow bigger and stronger, you will buy others.

(table 11-1) a list of mergers and acquisitions in domestic chain enterprises. The word "mergers and acquisitions" of chain enterprises is derived from the English "M&A", that is, Merger and Acquisition.

Merger usually plates into annexation, which is the merger of our company law. It means that "two or more enterprises and companies are merged into one enterprise, usually one or more companies from a dominant company".

China's "company law" stipulates: "corporate merger can take two forms of merger and merger."

Absorption merger refers to a company A acquiring all the property rights of another company B, which is disbanded by the merger company, and its legal person qualification is lost, and the merger company still survives a merger form. The creditor's debt of the merged company is borne by the annexation company, which can be expressed by "A+B= A".

The new merger refers to the merger of two or more companies, A and B---, and the establishment of a new company C, the dissolution of the merged parties and the disappearance of the original legal person status. Subsequently, a new legal person is born, and the creditor's rights and debts of the merged parties are borne by the new legal person, which can be used in the case of "A+B+---=C".

It can be seen that no matter whether it is absorption merger or new merger, only one legal person exists after the merger.

Acquisition usually refers to acquisition, which refers to a company buying shares or assets of another company in cash, debt or stock on the stock market in order to gain control of the company.

Unlike the merger, acquired company (Target Corp) does not lose its corporate status after the successful takeover.

According to the different acquisition objects, it can be divided into equity acquisition and asset acquisition.

The acquisition of shares is usually carried out in two ways, namely, the acquisition of shares issued by Target Corp or the subscription of new shares issued by Target Corp.

When the shares acquired are enough to control the proportion of Target Corp, the right to acquire the Target Corp can be accepted by Target Corp. This is a controlled takeover. The acquisition of non controlling rights can be called investment, equity participation or partial acquisition.

Under such circumstances, the acquirer will only aim at the board of directors of the Target Corp, or may be based on the consideration of the ROI or to strengthen the cooperative relationship between the two sides.

The acquisition of assets refers to the acquisition of all or part of the assets of the Target Corp by the acquirer without the obligation of Target Corp (if the company sells all its assets, the company will be dissolved).

To sum up, there are essential similarities between mergers and acquisitions.

That is to say, both of them refer to the property rights pactions conducted by a company for the control of another company under the market mechanism. In order to facilitate the research and follow the international practice, we call them mergers and acquisitions.

The motivation of M & A of chain enterprises is that the rapid expansion of market share and the improvement of market power and the increase of market share will have a significant impact on the market dominance of the merged chain enterprises. Whether the improvement of market power depends on the scale of the M & A enterprises or the level of industrial competition is the same.

Market power, sometimes called monopoly power, is the ability to establish and maintain prices above competitive levels.

Economic theory divides the industries in the two extreme market patterns. One extreme is the perfectly competitive market, the other extreme is the monopolistic market, and horizontal integration develops from one side of competition to one end of monopoly.

Market power comes from three aspects: product differentiation, entry barriers and market share.

Through the horizontal integration, the enterprise can improve the market share.

However, even if market share has been greatly improved, companies may still be unable to set prices at a significantly higher level than marginal costs if there is a lack of obvious product differentiation or barriers to entry.

If an industry can not set up barriers to entry, setting prices above the marginal cost level will only attract new competitors to join, and ultimately reduce the price to the level of marginal cost.

To achieve synergy and improve profitability, the synergy effect in mergers and acquisitions is that the profitability of enterprises through mergers will be higher than the sum of the original enterprises.

The two main synergies are business synergy and financial synergy.

Business synergy includes two forms: income increase and cost reduction.

Income gains, efficiency gains or returns to scale operations can be achieved through horizontal or vertical mergers and acquisitions.

There are many potential sources of income growth, and there may be great differences between different sources.

Revenue may come from the opportunity of integrated marketing of products or services of both sides.

Because of the expansion of product lines, companies can sell more products and services to existing customers. Cross marketing makes every acquisition unit have the potential to increase revenue, so the revenues of each company will be improved rapidly.

M & A planners tend to use the synergy of cost reduction as the main source of business synergy.

The cost reduction may be due to the realization of the economies of scale, which has led to a decline in unit costs due to the expansion of business scale.

Financial synergy refers to the impact of mergers and acquisitions on the cost of capital of buyout companies or parties to mergers and acquisitions.

If there is financial synergy in mergers and acquisitions, the cost of capital should be reduced.

If the cash flow of two chain enterprises is not positively related, merging them can reduce risks.

If mergers and acquisitions reduce the volatility of cash flow, capital providers will think that corporate risk is low.

If the possibility of large fluctuations in cash flow after merger is less likely, the risk of bankruptcy will also decrease.

The types of mergers and acquisitions of chain enterprises are divided according to the relationship between industries. Mergers and acquisitions of chain enterprises can be divided into horizontal mergers, vertical mergers and mergers and acquisitions.

Horizontal Merger refers to mergers and acquisitions between the same industries that have the same competitive relationship and the same product in the same field of operation.

Vertical Merger refers to mergers and acquisitions between enterprises which are buyers and sellers in the continuous stage of production and sale, that is, mergers and acquisitions between enterprises which are upstream and downstream businesses in production and operation.

Conglomerate Merger refers to the merger and acquisition of horizontal mergers and vertical mergers.

There are many ways to classify M & A, such as: according to whether mergers and acquisitions are divided by intermediaries, mergers and acquisitions can be divided into direct takeover and indirect acquisition. According to whether the merger and acquisition can be obtained by Target Corp's consent and cooperation, merger and acquisition can be divided into bona fide acquisition and hostile takeover. According to the legal status of the two parties after merger and acquisition, merger and acquisition can be divided into absorption merger and new merger.

Horizontal mergers and acquisitions, vertical mergers and mergers and acquisitions, horizontal mergers and acquisitions. Because horizontal mergers and acquisitions are mergers and acquisitions between the chain enterprises with the same competition and the same production products in the same industry. The purpose of this acquisition is to expand the scale of operation and achieve economies of scale, reduce the competitors, improve the concentration of the industry, enhance the competitiveness of the products in the same industry, control or influence the market of similar products, eliminate duplicated facilities, provide a series of products, and effectively achieve savings.

The disadvantage of horizontal mergers and acquisitions is that it is easy to monopolize industries and restrict market competition.

Under certain technical conditions, according to the principle of profit maximization, all industrial departments have the optimal scale of production. Only by reaching or approaching the optimal production scale can enterprises maximize profits.

In China, horizontal mergers and acquisitions are the main form of M & A among chain enterprises.

Gome, Wumart and other chain enterprises often use horizontal mergers and acquisitions, of which Gome's horizontal merger is the most representative.

In the case of horizontal merger and acquisition, today's Gome Empire Empire today has become a super chain brand and a huge commercial empire: its sales scale exceeds 100 billion, and it has more than 1200 stores in hundreds of cities nationwide, almost all of which exist in addition to a few remote provinces.

After the acquisition of Yongle and Dazhong, Gome has boundless corporate boundaries.

At present, Gome has become an internationally competitive China's best retail chain brand, but this is not its ultimate goal.

Gome's vision was in 2015 to become the most respected world appliance retail company's first company.

In the domestic appliance retail market, "beauty" and "Su" (Gome and Suning) have been competing for hegemony for many years.

By 2008, the number of Suning Appliance stores after Gome was only slightly higher than that of Gome.

However, three years ago, the number of Suning Appliance stores was almost the same as that of Gome. By the end of 2004, the number of stores in Gome was 227, while Suning Appliance was 193.

We can see that in the three years from 2005 to 2007, the number of stores in Gome increased by 6 times, while that of Suning increased by only 3 times.

From 2005 to 2007, what has happened in the past three years?

Deep research shows that in the three years from 2005 to 2007, Gome and Suning adopted different development strategies respectively.

The difference between Suning Appliance and Gome is mainly in the aspect of merger and acquisition.

In the past three years, Gome has raised the banner of M & A, and has collected more than 10 home appliance chain enterprises.

It can be said that horizontal mergers and acquisitions have made today's empire of the United States.

Guo Mei has acquired many enterprises, and the most commonly used is horizontal mergers and acquisitions.

Why?

In the view of Zhao Jianhua, general manager of Gome, horizontal merger is obviously a very ingenious strategy.

By purchasing local mainstream appliances