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Blue Whale Education November 28th: ​​Only when the tide is low, who knows who is swimming naked.
After two delays in replying to the inquiry of the Shanghai Stock Exchange, on November 25, San Aifu issued an announcement and delayed the reply date. In September this year, the old chemical state-owned enterprise San Aifu threw out a restructuring plan and acquired two educational targets. It is worth noting that the estimated value of the two underlying assets has increased by 1805.1% and 1274.9% respectively. One of the targets of Aowia, with a net profit of less than 35 million in 2014, its shareholders have promised to achieve a net profit of no less than 110 million yuan in the next three years.
With such a high performance commitment to the high premium acquisition program, the Shanghai Stock Exchange immediately asked the three Ai Fu to explain the achievability of the two target performance commitments and the reasons and rationality of the future earnings forecast.
Why does the regulatory level focus on the performance commitment of the education target in this merger and acquisition?
Since the successful acquisition of the new Nanyang M&A in 2013, the eyes of the capital market have begun to focus on the education industry. Through the development of the education industry, whether the listed companies need to speculate, or really expand their business, or the education companies take the initiative to "hold the thighs" eager to stand on the shoulders of listed companies to see the scenery, "capital + education" M&A restructuring is increasing.
However, according to the data of Guangzheng Hang Seng, in the 165 cases of gambling since 2015, the performance was gambling 102 times. If there is no result, the proportion of gambling failures is 52.5%. As a "new recruit" in the capital market, what is the performance of the education industry on gambling?
Crazy performance against gambling
When listed companies in the M&A education target, they will consider setting certain performance targets to motivate management and reduce their investment risks. The gambling agreement can be said to be a form of performance commitment when the target company attracts investors. However, in recent years, when listed companies acquired educational targets, there have been some jaw-dropping performances. The gap between the net profit and the promised performance of some educational targets was very different and very crazy.
In August 2014, Dalian Holdings announced the acquisition of a part of the equity of Jingliang Education. Jingliang Investment Company promised that the target company will achieve an average profit target of not less than 700 million yuan in the next three years, and the profit in 2014 is not less than 500 million yuan. To the surprise of the industry, when Dalian Holdings issued the announcement, the well-known Jingliang Education had just registered for 15 days. According to the performance of the gambling in the next three years, the average profit of not less than 700 million yuan, the value of this fledgling education company has reached 8.4 billion.
Just three months later, Dalian Holdings decided to terminate its investment in Jingliang Education. According to reports, Liao Lihui, chairman of Jingliang Education, once said that the termination of cooperation by Dalian Holdings was mainly due to delays in integration time, but this did not affect the future development of Jingliang Education. However, now searching for news about Jingliang Education, the time stayed in 2014.
In addition, Electro-optical Technology plans to acquire RMB128 million for the international education and training platform, Yali Technology, and even gambling the latter's 2016 net profit growth of 66 times! Yali Technology's 2015 net profit is less than 150,000, how to achieve no less than 10 million this year. Yuan's net profit?
Cool and frequent, the performance promise has become "mirror flower water month"
In recent years, listed companies have aggressively acquired emerging industries, such as Ai, Net, and Information, in order to boost share prices and create so-called market capitalization myths. The traditional industry is particularly evident, with companies such as Xiuqiang and Qinshang Optoelectronics acquiring the education industry.
Hong Tao, which is engaged in the decoration industry, acquired Scholson and Jin Yingjie in 2015. The original shareholders of Sylvester promised that Sylvester's annual net profit for the next three years should not be less than 25 million yuan, 40 million yuan and 60 million yuan respectively. However, Scholson's total profit in 2013-2015 was more than 10 million yuan. In addition to Sylson, Hong Tao's other acquisition target last year - Jin Yingjie's full-year profit in 2014 was only more than 500,000 yuan, but promised to reach 15 million yuan in 2015. In addition, after the education network was acquired by All-pass Education, it did not complete its 2015 performance commitment.
Why are there so many high-performance promises that cannot be fulfilled?
Oriental Securities analyst Zuo Jianming said, "Listing companies are willing to accept high performance commitments to bring high valuations, not to rule out to raise the stock price and profit from it."
The impact of listed companies on the secondary market after a high premium acquisition is obvious. Blue Whale Education found that Hong Tao's 2013-2015 first half annual report showed that its net profit was 278 million, 294 million, and 148 million, respectively, and the growth rate slowed down noticeably. However, after a week of acquisition of the cross-examination exam in 2014, its share price rose by 56.51%.
So, in the face of seemingly disparate performance promises, will listed companies help the education target to complete its performance? Guo Xifan, a partner of Tao Li Capital, believes that listed companies may provide resources to help, but the business level must rely on the education company itself; some acquisitions will first increase capital to the education company. In fact, the capital increase is to expand the business for the education company. .
In April this year, Li Sichen announced the acquisition of a century-old talent for the college entrance examination service. The announcement shows that the operating profit of the 100-year elite last year and January-August this year was -77 million yuan and 9,753,500 yuan respectively. According to the performance commitment, the net profit for the 100-year-old talents in 2016-2019 is not less than 15 million yuan, 21 million yuan, 29.4 million yuan, and 38.22 million yuan respectively. How does a startup that has just turned around a loss fulfill its performance commitment? Li Weichen, Internet Education CEO Huang Wei revealed to the Blue Whale Education that Li Sichen has been observing the centuries of talents for a long time. The 100-year college entrance examination service is just learning, filling up the existing education section of Li Sichen, and Hemin Shaoyang and others have very strong synergies. Huang Wei said that it is normal for a hundred years of talents to lose money. He has confidence in the 100-year-old talents and believes that he can not only fulfill his performance promises, but he can even over-complet.
In the form of gambling, there is also a form of request for listing. Tianzhou Culture has invested in the deciding network. The latter promised to do its utmost to urge the stocks of the company to be listed or listed on the New Stock Exchange or other stock exchanges agreed by the investors within two years. When Fuxin Media invested in Shanghai, there were similar commitments. In addition, the Changfang Group acquired Terai New Education, and in addition to its net profit, it also made a commitment to the number of directly operated stores.
Performance compensation? Each routine
Performance compensation refers to the forecast of the operating results of the listed company during the merger and acquisition process of the listed company, and promises that if the actual assets of the target assets cannot meet the forecast target after the commitment period expires, the promised shareholders will be compensated. responsibility. The former shareholders of Sylvester, Jin Yingjie and Jiu Education Network mentioned above need to compensate the listed company for failing to fulfill the promised performance.
Well-known economist Song Qinghui believes that there are many companies that cannot fulfill their performance commitments every year. Apart from being affected by the company's business strategy, some industries have a greater impact on external macro-respect, and the difficulty of achieving promised performance during the economic downturn naturally increases, such as steel. Traditional industries such as coal, chemicals, and building materials.
According to the spirit of the minimum contract, most performance commitment entities will choose to compensate according to the contract. However, there are also some target companies that cannot complete their performance, and they need to help the listed companies to get through the "difficulties." Blue Whale Education has selected two common ways to provide reference for the upcoming education companies.
1. Change compensation method
Common performance commitment compensation methods include cash compensation or compensation for repurchase shares. Although listed companies will specify compensation methods in the M&A announcement, late changes are also inevitable. PalmTech acquired 70% of the upstream information, and the compensation method for the merger was “to offset the cash considerations that have not been paid in this transaction. The shortfall is based on their respective transactions but not yet sold. Compensation for the consideration shares is still insufficiently compensated by cash.†After the upstream information failed to fulfill the performance commitment, the appreciation announced that the compensation method was changed to “all cash compensation, because the cash compensation operation is simple and easy to implement.â€
2. Change "year by year" to "cumulative"
In addition to changing the compensation method, the listed company will also help the target company in the details. Taking construction machinery as an example, when it acquired Tiancheng Machinery, it signed a performance commitment and compensation agreement. However, the latter failed to fulfill its 2015 performance commitments. The acquirer Construction Machinery announced that it will change the annual measurement and compensation for each year of the performance commitment period to one-time measurement and compensation at the end of the three years, and the total performance commitment will remain unchanged. In addition, the construction machinery “intimately†said that if the original shareholder of the acquired party, Wang Zhirong, continues to perform, it will cause a greater psychological burden on it, affecting its enthusiasm for production and operation, and easily lead Wang Zhirong to sacrifice the long-term development of Tiancheng Machinery. Pursue short-term interests.
The above two are listed companies to help the target companies to fulfill their performance commitments, but the purchaser and the acquired party are not in the minority. Jiaozuo Wanfang acquired the Wanji Energy under the name of Tibet's Gioco Investment. If the performance becomes unfulfilled, Jiaozuo Wanfang will repurchase the shares held by Gioco at a price of 1 yuan. however. Wanji Energy did not generate any revenue in the first nine months of 2015. In November 2015, Jiaozuo Wanfang and Gioco went to court, and even appeared, Jiaozuo Wanfang sold a farce of Gioco's shares in a shopping platform.
Why do some performance commitment entities risk the impairment of goodwill and try to avoid compensation? The aforementioned industry insiders told Blue Whale Education that the cost of default was too low and the supervision was not in place. The investors who finally paid for these risks were small and medium investors.
Performance commitment, key supervision
Signing performance commitments, if the compensation is not completed, seems to be reasonable, which implies problems that cannot be ignored. When Palmtech threw out a plan to acquire crab technology and upstream information, its share price rose more than 35% in a week. For listed companies, the purpose of boosting the stock price has been achieved. However, for small and medium-sized investors who have initially promised high performance, they may face an embarrassing situation that their performance commitments cannot be realized after two or three years.
Many high-performance promises that have not been honored and the omnipotent avoidance of compensation incidents have attracted the attention of the regulatory authorities. According to a report issued by the Shenzhen Stock Exchange, the risk of mergers and acquisitions of a small number of companies began to appear, and some companies failed to fulfill their performance commitments. Some companies even evaded their responsibilities by changing their commitments, which resulted in the integrity of the capital market and the legitimate rights and interests of investors. Negative Effects.
Zhang Xiaojun, spokesperson of the China Securities Regulatory Commission, once said, "In the next step, the CSRC will continue to strengthen the information disclosure supervision of the performance commitments of mergers and acquisitions, find out the illegal and illegal matters together, investigate and deal with them, effectively safeguard the market order and protect the legitimate rights and interests of investors."
2016 is near the end of the year, and it is getting closer and closer to this year's performance redemption period. This year's capital market education listed companies, the performance of the acquired education targets, will soon be known.
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