This book stands from the standpoint of small and medium-sized entrepreneurs, from the innovative perspective of M&A exit, within the behavioral boundaries set by statutory rules for entrepreneurs, and with the help of natural law rules, habits and common practices in practice and other logical foundations, for the first time It has created a new theoretical and practical framework for M&A and exit of small and medium-sized entrepreneurs, which is an innovation in legal practice research under the traditional "judicial theory" method system.
Many people read the words "entrepreneurial exit" and don't quite understand it; modern society pays attention to moving forward courageously. Why does your research directly intervene in or focus on this topic of "entrepreneurial exit"? What's the purpose?
"Exit" is an eternal topic for entrepreneurs. There are many ways to exit, including active exit and passive exit. Active exit includes listing exit, M&A exit, dividend exit, etc.; passive exit includes common bankruptcy reorganization, bankruptcy liquidation, and other distress-relief exits; in addition, the end of life ("death") itself is also a kind of exit. The purpose of entrepreneurs' innovation and entrepreneurship is to actively exit.
I feel like my doubts have been solved. Is there such an entrepreneur whose business has been very successful and has never considered exiting from the time he started the business until the business has strong profitability and has even gone public? Regardless of the vicissitudes of life, the economic cycle will rotate, the industry structure will be adjusted, and the natural life will end? There are countless entrepreneurs like
. Failure to understand listing from the perspective of exit will be a life disaster for the actual controllers of listed companies; similarly, entrepreneurs who have no exit concept will always end in failure.
I understand that entrepreneurs always have a way back and a goal to start a business. For example, many entrepreneurs want to list their companies. For entrepreneurs, is going public the best way to exit?
Under the current circumstances, when companies are listed on A shares in mainland China, entrepreneurs (major shareholders) have the possibility of exiting from the secondary market, and entrepreneurs also have the possibility of success. The listing of
is a reward for entrepreneurs’ qualities such as forbearance, restraint, and persistence. The assessment of "forbearance" is compliance; the assessment of "restraint" is political consciousness, which is the primary awareness that entrepreneurs should have. This is the same as before and today, both at home and abroad; and the assessment of "persistence" is sustainability. Generally speaking, companies that have both compliance and sustainable profitability are likely to be successfully listed on mainland China's A-share market. As mentioned before, the actual controller of a listed company has the possibility of exiting from the secondary market.
We must also be soberly aware that there are nearly 40 million domestically registered business entities (excluding individual industrial and commercial households), of which only one ten thousandth has been listed, and only one thousandth will be listed in the future; most companies are too large due to their size. Small companies cannot go public. More than 90% of the companies at the base of the pyramid are actually substitutes for "fixed income" or "part-time work". They are micro-enterprises and have no possibility of going public now or in the future. According to experience, there are about 100 companies at the middle and upper end of the corporate pyramid. Up to 5% of companies do not meet the conditions for listing either due to insufficient compliance or insufficient sustainable profitability. The operating scale of these companies has met or even exceeded the requirements for listed financial indicators in some years, but their sustainability is insufficient; these companies have strong profitability but insufficient compliance. I call it the "small but weak" or "big but weak" type of business, and most companies fall into this category. Only one in a thousand companies can be listed, and they are "small but strong" and "big but strong"; "small but weak" companies will not become the mainstream of the capital market, but can only be auxiliary and supplementary to the capital market. These companies are Typical M&A targets must choose to exit through M&A; "big but weak" companies will not be acquired and cannot exit through M&A. They can only plan for passive exits such as bankruptcy and reorganization.
I feel enlightened by you! Many companies held high the banner of "going public" when they started their business, but they have not been successful in going public for decades. What should these companies do?
"Small and weak", "small" refers to small scale, with operating income ranging from tens to hundreds of millions of yuan (enterprises smaller than this size are called "micro", which is a substitute for "part-time job"); "Weak" mainly refers to weak compliance, sustainable profitability, strategic planning capabilities, etc. These companies have little chance of going public successfully. If you successfully break through the barrier, the highest probability is delisting. It is precisely because of its "weakness" that its living space is small and sustainable management cannot be the goal. Therefore, these companies will not be successful in listing, nor can they sit back and let them continue to shrink or expand in size ineffectively. It must exit through mergers and acquisitions at the right time. For more information, please refer to the author's book "Entrepreneurs' M&A Exit" recently published by Law Press.
In the last Q&A, you have clearly explained that no more than one thousandth of the large and medium-sized enterprises at the top of the enterprise pyramid can exit through listing, and no more than 5% of small and medium-sized enterprises have the opportunity to exit through mergers and acquisitions. The rest of the enterprises are The more than 30 million micro-enterprises in the middle and lower sections of the pyramid are only and most will always play the role of "fixed income" or "job" substitute. Among the millions of small and medium-sized enterprises located at the middle and upper end of the enterprise pyramid, the "small and weak" enterprises among them can exit through mergers and acquisitions. These enterprises cannot form the mainstream of the capital market, but can only be auxiliary and supplementary to the capital market. . If I am a small and medium-sized entrepreneur, and I do not have the compliance and sustainable profitability to go public, I must exit through mergers and acquisitions. However, I always feel that "exiting through mergers and acquisitions" is like "running away"? Is the exit of small and medium-sized entrepreneurs through mergers and acquisitions in line with social development trends?
Last time I discussed that the purpose of any entrepreneur starting a business must and can only be to actively exit, and there is no other rational purpose. Therefore, whether an entrepreneur exits through any compliance channel, it is reasonable, has no legal or moral flaws, and is beyond reproach. Regarding the positioning of entrepreneurs and why the purpose of starting a business must be to actively exit, I will have the opportunity to discuss it in detail.
is more than that. In the merger and acquisition exit, the interests of all parties are involved, among which the core stakeholders mainly include the acquirer, the government where the enterprise is located, the employees of the enterprise and the merger and acquisition exit party. The interests of any entity can basically achieve the optimal arrangement of "someone benefits and no one loses" in the merger and exit.
How are the interests of the acquirer reflected in the merger and acquisition exit?
Due to space limitations, I will give an example. The most typical open market merger and acquisition in mainland China is that a listed company acquires the equity of an unlisted enterprise through the issuance of additional shares, and the acquirer receives sufficient liquidity compensation. In this typical merger, the acquirer gains and does not lose.
Specifically, the net profit multiple of mainland China's A-share stock prices (generally expressed as "price-to-earnings ratio" or "PE"), Shanghai Science and Technology Innovation Board is as high as 90 times, and the main board is about 17 times; Shenzhen main board is nearly 30 times, GEM 0 times. When a listed company issues shares to purchase the equity of an unlisted company, the valuation standard given to the target company is roughly 15 times the expected net profit of the target company, with the lowest being less than 10 times and the highest generally not exceeding 20 times.
The difference between the net profit multiple of the listed company's own valuation and the net profit multiple of the target company's valuation is the liquidity compensation given by the shareholders of the target company (the exit party) to the listed company and its existing shareholders. After a listed company acquires the equity of an unlisted enterprise, it consolidates the net profits of the unlisted enterprise into its financial statements. If the valuation multiple of the listed company remains unchanged or does not change significantly, it will directly manifest itself as an excessive increase in the market value of the listed company (exceeding the merger consideration) and the original stock. Shareholders receive excess returns.
As we all know, A-share listed companies in mainland China generally use the future income method to value the target company. In other words, this may cause the target company's valuation to exceed its book net assets, and the excess will be recorded as "business" in the acquirer's books. "Goodwill impairment"; once the target company cannot fulfill the promised profits, the listed company will be under the pressure of "goodwill impairment". However, in almost all open market acquisitions, the "goodwill impairment" losses are transferred to the original shareholders of the target company; even if the performance commitment is successfully completed, there is an end-of-period "goodwill impairment" test in the transaction contract, and the test is All adverse results will be borne by the original shareholders of the target company.
I understand! As a typical M&A exit, that is, in a public market listed company's acquisition of the equity of an unlisted enterprise, the acquirer can obtain a larger amount of "liquidity compensation" in any case. The listed company will definitely benefit from the M&A exit, regardless of the situation. will be damaged. So, where are the interests of the government where the target enterprise is located, and can its interests be protected?
There are three core interests of the government where the target enterprise is located:
First, the exit of the merger and acquisition will not harm the overall social stability;
Second, the exit of the merger and acquisition will not detract from the " tax source ";
Third, whether the exit of the merger and acquisition will increase taxes.
Firstly, I personally attach great importance to the social stability issue in the merger and exit of the target company. In previous cases, the exiting party must report to the local government whether the merger and exit may harm the overall social stability. For example, in the merger and exit case of a project company with an area of more than 800,000 square meters the year before last, this project involved the relocation and resettlement of thousands of demolished people. When comparing and selecting the acquirer, the exiting party focused on its subsequent development capabilities. In the end, a local company Top developers were identified as acquirers. The actual operating conditions in the past two years have been good. This is the core interest of the government where the subject enterprise is located that we have to consider.
Secondly, before the merger and acquisition exits, the shareholders of the target company are usually large taxpayers in the local area. After the merger and acquisition exit, not only cannot the tax sources be reduced and the tax sources dry up, but they must also make the tax sources more abundant. For example, performance commitment actually locks in the tax amount during the performance commitment period, which includes not only turnover tax , but also income tax. That 800,000-square-meter large-scale merger and acquisition case, the project's expected sales revenue exceeds 10 billion, and the self-owned properties generate substantial tax contributions every year. There is no reason for local government agencies to be dissatisfied.
Thirdly, the exit of mergers and acquisitions will provide unexpected tax revenue to the government where the enterprise is located. The transaction amount of most public market mergers and acquisitions is hundreds of millions of yuan, and their value-added is also probably hundreds of millions of yuan. If the shareholders of the target company have not implemented tax-saving arrangements before, the taxes generated by this asset transfer will most likely remain with the government where the company is located. This was an unexpected surprise. This tax amount is insignificant for super cities such as Beijing, Shanghai and Guangzhou, but for most small and medium-sized cities, a personal income tax of tens or hundreds of millions of yuan is enough to surprise the local government.
To sum up, exit through mergers and acquisitions will not only cause no losses to the governments where the enterprises are located, but will also bring more abundant tax sources and even unexpected tax benefits.
Moderator: When you handle M&A and exit projects, you have such a deep understanding of the interests of the local government where the company is located!
Lawyer Wu Xibin: I do not recommend that in order to save some personal income tax, before the exit of the merger and acquisition, the layout of the shareholding platform in the so-called tax-saving place is not in line with the core interests of the government where the enterprise is located.
In the merger and acquisition exit, can the interests of employees be protected?
The reason why the target company can be acquired profitably is because the contribution of employees, especially core employees, is indispensable.According to Tullock's corporate hierarchy theory, although bigger is not always better for a company, most entrepreneurs who are able to exit through mergers and acquisitions have built a hierarchical system within the company, and this hierarchy still appears to be the same when exiting through mergers and acquisitions. efficient. Key employees who contribute to the entrepreneur's exit need to be motivated.
In my many years of business practice, I have also discovered an unspoken rule of natural law that has been hidden for thousands of years: if there is a performance commitment during the M&A exit, the entrepreneur must motivate the core employees. Otherwise, the entrepreneur will suffer as the M&A exit party. loss. (I will discuss this natural law rule in detail on other occasions later)
Therefore, in a typical M&A exit, the core employees of the target company will generally receive incentives.
also has some helpless situations. For example, during the merger and exit of a real estate project company, non-core employees temporarily recruited at the project location will generally not keep their jobs. Practical cases show that the exiting party will fully compensate these employees.
In the merger and acquisition exit, core employees may benefit and will not be harmed; if they are harmed, they will receive full compensation.
The last stakeholder is left, which is the exit party, which is our protagonist-the entrepreneur. Can their interests be adequately protected in an M&A exit?
Most people, including entrepreneurs themselves, understand it this way: in the merger and acquisition exit, the so-called "someone benefits" means that at least the entrepreneur himself benefits; the so-called "no one loses" means that other stakeholders other than entrepreneurs do not. damaged.
In other words, entrepreneurs will definitely benefit from the M&A exit, right?
mainly depends on the transaction structure. A good transaction structure is enough to cause entrepreneurs to benefit from M&A exit, while a bad transaction structure is enough to cause entrepreneurs to suffer losses from M&A exit.
In the merger and acquisition exit dispute cases that I personally handled, the entrepreneurs who exited from the merger and acquisition suffered huge losses due to poor transaction structures. The amount of compensation far exceeded the profits they received, and some even went bankrupt. There are many cases. These issues are too complex and will not be discussed here.
In the first two questions and answers, you proposed that "small and weak" companies (households) have the opportunity to implement mergers and acquisitions and exits. How do you understand this sentence?
This is a strategic thinking after fully measuring the listing conditions of A-share market in mainland China and fully considering the future of the capital market. This topic is not to demonstrate the exit of a company from listing, but it is related to the exit from listing. Specifically:
First of all, "small but strong" or "big and strong" companies can consider listing and exiting. For example, there is a physical education company. Although it is currently very small, with operating income of only tens of millions and net profit of only a few million yuan, it is a leader in the subdivided industry, which means that the current status of the industry is not concentrated and there is no room for growth. It can be expected that its compliance and sustainable profitability (core capabilities) have been fully identified. Over time, its net profit will most likely grow steadily or even explosively in a few years. For this kind of "small (micro) but strong" companies, the risks of industry peak and valley iterations are controllable, and they can practice quietly; the epidemic has led to the shrinkage of offline training courses, so there is no need to be afraid, because this is the case for all companies in the industry ; for this company, the main focus was on course research and development during the epidemic. Such companies can choose to exit by listing in mainland China after meeting the conditions.
Secondly, for another company that specializes in academic education, its lack of school qualifications is enough to position it as a "small and weak" company. This company has acceptable profits, but insufficient compliance. , "weakness" is reflected in its compliance.The founder of this company formulated a merger and acquisition exit plan after careful consideration, and immediately got the exit opportunity and completed the transaction.
Finally, I have seen some "small and weak" companies. These companies are mainly distributed in highly competitive industries. Not only do they have insufficient sustainable profitability, most of them also have compliance shortcomings. However, apart from listing, the boss has no Ideas for alternative ways to access capital markets.
In summary, most companies not only failed to go public successfully, but also lost many opportunities for mergers and acquisitions and exits. Due to the transformation of industry structure and changes in competitive logic, the opportunity for mergers and acquisitions to exit only comes once every few years for many companies, and it is unknown when the next opportunity will come.
Can it be understood that these "small and weak" companies that cannot exit through listing must use M&A exit as a strategy for corporate capital operation?
When the peak of the industry arrives, the profitability of these companies is no worse than that of high-quality listed companies, but the sustainability of their profits may be insufficient; especially their "weakness" is also reflected in insufficient compliance. There is a well-known company in the machinery sub-industry. The restructuring of its shareholding structure was questioned and the listing was unsuccessful. Over the years since then, the competition logic of the industry has undergone major changes, and its original leading ability has been lost. Today, its sustainable profitability is questionable. Although the compliance issues of the year have long been eliminated, its shortcomings in sustainable profitability have caused it to lose the possibility of listing, and it is no longer or no longer easy to find opportunities for mergers and acquisitions to exit.
Some "small and weak" companies are still small in scale and hope to wait until they are larger before formulating plans for M&A and exit. Do you think this is appropriate?
The expectation of scale expansion is good from an entrepreneurial perspective. It mainly depends on the overall situation of industry competition. For example, I found that for China's local upstream semiconductor process and equipment companies, in the past few years, due to the emergence of a general trend in the industry that is beneficial to China's domestic enterprises, this industry is likely to experience high overall growth. . SMEs in these industries can expect to be more profitable before selling. However, for industries where competition is or is expected to be fierce, if a company currently or is expected to have tens of millions or even hundreds of millions of yuan in operating income, and currently or is expected to have millions or even tens of millions of net profits, it should start planning mergers and acquisitions. Exit planning, otherwise, the good expectations for the future are most likely to be shattered by more intense competition. These industries are most likely not to see revenue growth, but to stagnate or shrink. For a "small and weak" enterprise, the reason for its "weakness" is internal; this weakness cannot be solved in the short term or even permanently. I am afraid that many entrepreneurs are not aware of this; the glory of the leading company in the machinery subdivision industry mentioned above has become history. To be cautious, I recently logged into the official website of this company and found that its glory has become history. "Company News" stopped being updated six years ago, and "News" became old news.
You said it very clearly, and it becomes clearer and clearer to me! "Small and weak" companies have no way to go public, and many entrepreneurs are still looking forward to listing and exiting, which is actually doing ineffective work; many "small and weak" companies have weak ability to continue operating, but entrepreneurs are still looking forward to it Expanding the scale before implementing mergers and acquisitions has led many companies to embark on a "dangerous path." These are all issues that arise from strategic planning and exit concepts. "Small and weak" companies have the opportunity to exit through mergers and acquisitions. How many entrepreneurs can finally achieve merger and acquisition exit?
The proportion of "small but weak" companies that can ultimately achieve M&A exit is very low. On the contrary, many "small but strong" companies have also squeezed into the M&A exit channel. This is related to the survival of the fittest among listed companies, raising compliance thresholds and strengthening supervision of listed companies. Many companies that originally wanted to go public were deterred and entered the merger and acquisition exit channel.In order to maintain the full price discovery function of the open market and the exit position of listing (allowing most listed companies to have a high turnover rate), the exchange maintains its competitiveness in the domestic and even global capital markets. The attitude of its trading regulatory agencies will certainly not allow the exchange to maintain its competitiveness in the domestic and global capital markets. All companies "do their best"; in a short period of time, a "barrier lake" phenomenon of queuing up for listing applications has formed. The long queuing time for listing is testing the patience of entrepreneurs. This has the same logic as queuing up at an "Internet celebrity restaurant". Not only does queuing up Enjoy the core benefits of listing (dining), "information disclosure" (leakage of makeup in public places), "high intermediary agency fees", etc. have made companies queuing up to be listed "tortured"; the number of companies submitting application materials will gradually increase. Reduced to the equilibrium point; whether the company will be listed in the future is very likely to be "either unable or unwilling". This is consistent with the empirical observation that Malthus mentioned in " Principles of Population " that predicting the inability to raise children reduces the desire to have children, leading to a slowdown in population growth.
Therefore, in the next ten years, according to the current pace, there is a high probability that the number of companies that can be listed on the A-share market in mainland China will not exceed 10,000, or it will be far less than 10,000, that is, less than 10,000. Three-thirds of companies may exit through listing in the next ten years; the pace of new listed companies in developed countries in Europe and the United States is slower than in mainland China, because the survival of the fittest among listed companies is also faster, and the compliance costs after listing are higher. Generally speaking, the future growth space of the capital market lies not only in IPO (referring to the initial public offering and listing of stocks), but also in mergers and acquisitions.
The proportion of investment banking IPO business based on the general Wall Street concept is very low. More investment banking business comes from mergers and acquisitions, and high-yield projects mainly come from consulting on equity sales of unlisted companies; the same is probably true for European and American law firms.
The annual M&A transaction volume in developed countries in European and American capital markets accounts for more than 10% of GDP. If China calculates based on 5%, the annual transaction volume will be approximately 5 trillion. The average transaction volume per company is 500 million yuan, and less than 10,000 companies exit through mergers and acquisitions every year (the data on mergers and acquisitions between unrelated parties is far smaller than the predicted number). In other words, only about one in 10,000 companies can exit through unrelated mergers and acquisitions every year, which means that thousands of small and medium-sized enterprises can successfully exit through mergers and acquisitions every year. For corporate equity sellers, M&A exit is actually a very crowded channel, and it takes fierce competition to finally achieve M&A exit.
As you said, many companies gave up and withdrew their listing applications due to the tightened review process after applying for listing. How do you comment?
I made a clear point. "Small and weak" companies are not the mainstream of the capital market, but cannot exit through direct listing. They are effective auxiliaries and supplements to the capital market, and they can only exit through mergers and acquisitions. Some entrepreneurs did not understand this logic and tried to break through. However, when regulatory agencies increased supervision and withdrew their listing applications, public opinion was in an uproar. This is a problem caused by poor planning of entrepreneurial capital exit strategies. I believe that as the concept of capital market exit is no longer a "wonder" among the entrepreneurial community, but becomes common sense, it is also an era when the entrepreneurial team becomes more mature.
I still have a big doubt, can the controlling shareholder of a company continue to hold equity? No matter the industry peaks and troughs change, the economic structure transforms?
This time I want to talk about this issue clearly. It has been emphasized many times before that a "small but weak" enterprise must exit through mergers and acquisitions in a timely manner. Otherwise, the "small but weak" enterprise may expand ineffectively and become a more terrifying "big but weak" enterprise, or it may continue to linger. , or gradually shrink and become a "part-time job" substitute. Controlling shareholders of "small but strong" and "big but strong" companies can continue to hold shares, but this is not a concept of permanent shareholding. "Strong" may become "weak", and nothing is static.Many "time-honored" brands in Beijing, once famous all over the world, now have only one store left, and have long been reduced to "part-time job" substitutes. Even young people are unwilling to take over from the previous generation.
What remains unchanged is the micro-enterprise that we frequently mention as a "fixed income" or "part-time job" substitute. The annual net income is the same as that of the owner who goes out to work. The so-called national innovation and mass entrepreneurship actually refer to these types of enterprises. For example, if a father and son working outside the countryside set up an individual business or sole proprietorship in order to save taxes, their monthly sales income of less than 30,000 yuan will not only be exempted from value-added tax, but personal income tax will also be levied at a rate of 0%. Community grocery stores, barber shops, massage parlors, etc. all belong to this business format. Their survival logic is different from that of small and medium-sized enterprises. They directly participate in external transactions and face the external market as workers themselves.
"SF Express ", the most competitive company in the express delivery industry, unexpectedly lost one billion in the first quarter of 2021. This shows that the leader in any industry may lose money in any quarter, let alone other companies that are lagging behind. However, smaller companies will survive forever because they are close to customers, have controllable costs, and have flexible strategies. As long as a company has built what Tullock calls a hierarchical system, that is, a company that has leveraged and , there is a risk of losses and shrinkage.
I still don’t understand. Are you saying that it is more difficult for enterprises to maintain a certain scale, such as small or medium scale, which means operating income of tens to hundreds of millions of yuan as you said, because this requires building what Tullock said? Hierarchical system, that is, increasing leverage, more specifically, it means that people must be hired and funds must be borrowed; however, it is easy for a company to become smaller and smaller, whether it is a mom-and-pop shop or a father-son shop, will it last longer?
The reason for the emergence of enterprises is that based on the resource integration ability of entrepreneurs, internal transactions of enterprises (that is, hiring workers and borrowing capital) replace workers' external transactions. The core principle is that the cost of internal transactions is lower than that of workers Costs of direct participation in external transactions. When the cost of internal transactions is equal to the cost of external transactions, the enterprise must stop expanding, and the entrepreneur's income is zero; when the cost of internal transactions is higher than the cost of external transactions, any expansion is ineffective, and the entrepreneur's income is burden. Business types such as mom-and-pop stores and father-son stores are what we call external transactions, and there is no entrepreneur to integrate resources; I believe that if a company gives a higher salary to a community grocery store couple, they will inevitably give up sole proprietorship. In other words, if entrepreneurs integrate resources more efficiently than mom-and-pop stores, mom-and-pop stores will be integrated. Unfortunately, most attempts to integrate these formats in recent years have failed. As long as we deal with people, they will be subject to human rationality. Entrepreneurs have limited capabilities and cannot give their employees a better future, so they will change jobs or set up mom-and-pop shops to replace part-time jobs. The survival gap for small and medium-sized entrepreneurs is smaller than that of migrant workers.
Why can’t entrepreneurs make their companies as big as possible, reduce fixed cost amortization, and increase profits?
Everyone wants to do this, use their own management capabilities, integrate as many resources as possible, expand the boundaries of enterprises , and obtain higher efficiency. However, few people can succeed. Don't expect an ordinary entrepreneur to make the business bigger. Operations and management are the core competencies of entrepreneurs. Operations are about finding market opportunities, and management is about implementing the found market opportunities. Enterprises either have operational problems, management problems, or both. There are limits to people's abilities, there are limits to entrepreneurs' abilities, and there are limits to the scale of enterprises. The success of a person's business means that he or she has used his or her abilities to the fullest, and cannot expect superpowers in return; almost all superpower expectations have failed. Failures come in many forms, ranging from corporate bankruptcies to compliance snags.
I started to understand a little bit about such a complicated problem. But how do entrepreneurs discover the boundaries of their capabilities? And then discover the boundaries of the enterprise?
When a person seeks non-compliance forces outside himself to expand the boundaries of the enterprise, I think this person has exceeded the limit of his ability. As you know, the legal industry does not judge based on the amount of business income; if the actions are deformed and there are problems with compliance, no matter how high the income is, it will be invalid and negatively correlated. No matter how exhausted and devoted an entrepreneur is, as long as they do not resort to non-compliant forces, it means that the enterprise still has room to expand; entrepreneur fatigue is touching the boundaries of capabilities, and the final result will definitely be improved capabilities and expanded boundaries; entrepreneurs Continued hard work and continuous improvement of abilities.
Entrepreneurs have different purposes for starting a business, some are grabbing wealth, some are passionate about honor, some are pursuing status, and some are greedy for pleasure. This involves whether the entrepreneurial purpose is realized and determines when the entrepreneur reaches the criteria for exiting the business. So, the question now is: What is the appropriate purpose for starting a business?
Entrepreneurs integrate labor and capital resources, pay fixed remuneration (wages and interest) to workers and capital parties, and obtain future uncertain returns, that is, profits. If the entrepreneur has a high ability to integrate resources, the enterprise will expand in size and make huge profits; if the entrepreneur has a weak ability to integrate resources, the enterprise will be small and unable to protect itself. Entrepreneurs come from many different origins, with different backgrounds, diverse values, and different understandings of the purpose of entrepreneurship. Any choice made by an entrepreneur regarding the purpose of starting a business is rational from the perspective of the entrepreneur himself and should be respected. As the scale of the enterprise expands, entrepreneurs generally gain freedom in wealth, improve their social status, improve their lives, and receive certain honors accordingly.
Do you have any moral or correct judgments about entrepreneurial goals?
Entrepreneurial goals are rational and individual, and there is no moral or correct judgment. At the same time, entrepreneurial goals and life goals are not the same thing. Starting a business for wealth within a period of time cannot be regarded as the ultimate goal of life; for most people, wealth only has instrumental significance and does not have ultimate meaning.
Is there a limit to the entrepreneurial purpose of entrepreneurs?
Everything has a degree, and everything is acceptable within a reasonable range. For example, as a wealth goal for most entrepreneurial purposes, how much is too much? How much is too little? Everyone understands it differently. Some entrepreneurs already have financial freedom when they start a business, but more wealth will not bring happiness to the entrepreneur in proportion. At this time, his entrepreneurial goals may be mainly non-wealth in nature; some entrepreneurs are in financial distress when they start a business. Successful businesses can significantly improve their debt repayment capabilities. If there is a boundary, I think it is about finding your own balance point.
It is really not easy for you to find these two boundaries suitable for the advancement of life in the vast sea of human research results. In your book "Entrepreneurs M&A Exit", you have mentioned that the traditional "leisure culture" has a negative impact on all classes of society. Do you have any suggestions for this? Does "leisure culture" have any impact on the purpose boundaries of entrepreneurs?
For thousands of years, "leisure culture" has had a very significant impact on human behavior. It is specifically manifested in the pursuit of "explicit consumption without production" ("showing off"), and the vast majority of people are not aware of it. .In the era of the primary industry, the nobility was the warrior class. They lived by plundering and did not engage in production. The peasants were their vassals. In order to distinguish the classes, the aristocratic hierarchy came into being. Family emblems and the heads of the opposing leaders became prominent. A symbol of consumption; clothing has long occupied the primary position of explicit consumption; tall men's hats, neat and tight suits, high heels and women's hats of various shapes that fall off in the wind; later, golf, yachts, Luxury houses and luxury cars; modern people posting on social media after running marathons, etc. are all the influence of this bad culture. Although the " Veblen effect " is consistent with Heinrich's warning ("the decrease in happiness after repeated satisfaction of desires"), most people cannot escape its influence. I claim in my circle of friends that I have read a lot of books on humanities and history, which is also a negative influence of the "Veblen effect", implying that I am not burdened by mundane affairs and have a lot of time to read. In "Entrepreneurs M&A Exit", I did not regard the adverse effects of "leisure culture" as the boundary of entrepreneurs' entrepreneurship goals, because ordinary people cannot get rid of this influence, and most outstanding people cannot get rid of this influence. This influence has already It is deeply ingrained in human behavior and habits, and it is impossible to get rid of them.
Some people, especially ordinary entrepreneurs or core employees of companies, will talk about the fate of the company, social interests and even the interests of the country and the nation. For those who pursue greater interests besides themselves, especially entrepreneurs, is there any problem with this direction? ?
Some people’s interests are bread for the day, and they have no time to care about things other than bread; some people think about longer-term things that span years; some people think about collective things; some people link their own interests with the interests of the collective, society, the country, and even the nation. , these are all rational. If a person persists in pursuing higher and greater interests throughout his life, it is because he sees that the interests of the collective, the country, and even the nation are consistent with his own interests. Once the collective, the country, or even the nation gains honor, he himself will benefit. Entrepreneurs need strong support for their ideas of tying business development, community development, national and even national interests to their own interests. While doing your own thing well, striving for higher interests will bring no harm at all. The theoretical framework of entrepreneurial exit strongly advocates these directions of endeavor that are harmless to oneself and beneficial to society. In my book "Entrepreneurs M&A Exit", I regard this tendency as a development direction of the culture of small and medium-sized enterprises. After an entrepreneur exits, any public welfare behavior direction, including donations and active participation in other public welfare, will be positively related to the entrepreneur's life. This is not the limit of the purpose of starting a business. Entrepreneurs who move forward on this road of public welfare will eventually find a place full of flowers and find the greater meaning of life.
Entrepreneur Exit uses five questions and answers to comprehensively answer the conceptual issues of entrepreneur exit. Today, we enter a new issue: the identification of entrepreneurial identity, or what kind of person is an entrepreneur? What rights do they have and what is their transaction model? This is also an important section in your book "Entrepreneurs' M&A Exit". How is entrepreneurial identity recognized in its initial state?
Before the fifteenth century, Europe was in the era of primary industry, that is, the era of planting, breeding and extractive industries. The core assets and wealth came from the land. The plunder and protection of the land were the core means of competition in this era; warriors were the elite of society. Samurai with both thinking ability became great nobles, that is, great lords. In Europe before the fifteenth century, there was a feudal system in which big nobles entrusted land to knights (minor nobles), and the knights promised to accompany the big nobles on expeditions; other ordinary people, including scholars, were vassals of nobles or subordinates, and the relationship of personal dependence was Core social relationships.
As the economic structure upgraded and transformed into the secondary and tertiary industries, the feudal system gradually disintegrated in Europe, and personal attachment was gradually replaced by equal contractual relationships. As Tocqueville said, equality has become the main theme of society with an unstoppable trend. . Before large-scale industry in the 18th century, there was still the so-called small industry, that is, the era of handicraft industry. Merchants were the link between handicraft industry and the market. The concentration of production led to the emergence of an entrepreneurial class who began to hire workers and borrow funds. Knight, the great economist at the beginning of the 20th century, discovered that the entrepreneurial class that emerged in society paid fixed remuneration to workers and capital, and expected to obtain uncertain future benefits. With the beginning of the modernization transformation of major European countries, the entrepreneurial class that grabs future uncertain profits has gradually been identified.
What are uncertain future earnings?
Knight divides future estimates into three categories:
First, a priori, drawing conclusions without experience, similar to doctrine;
Second, risk, which is a risk that can be measured by big data, similar to insurance Actuarial calculation of rates;
Third, uncertainty. The "uncertainty" defined by Knight refers to the future that cannot be measured.
The uncertain returns of entrepreneurs are neither groundless priors nor measurable risks, but a future that cannot be predicted and measured. Whether each entrepreneur has the ability to integrate resources cannot be measured; entrepreneurs use innovative thinking and entrepreneurial actions to seize future uncertain returns.
There is always a probability of success in starting a business, right?
Many people think this way when they start a business, but this is not the case. Whether a business can be successful or not is a matter of failure or success for any entrepreneur. There is no probability issue. The success of any other entrepreneur does not mean that other entrepreneurs will also succeed; the failure of the previous venture does not necessarily mean the failure of the next venture. However, there is a "natural elimination period" for enterprises. This data measures whether an entrepreneur has entrepreneurial potential or is a risk-averse fixed-reward seeker; whether he has decided to travel far or is just dabbling in it. Most companies fail or shrink into fixed-remuneration substitutes in 3-5 years. This period is the natural elimination period of the company. The company passing through the natural elimination period roughly proves that the entrepreneur has certain entrepreneurial potential and determination.
Many people are afraid to start a business, are unwilling to start a business, and are afraid of risks.
Ordinary people see a future full of risks, while entrepreneurs see a future full of opportunities. This is the biggest difference between entrepreneurs and fixed compensation claimants. It is precisely because of the majority of risk-averse fixed-reward claimants that it is possible for entrepreneurs to integrate labor resources. Risk is a pessimistic expectation, while uncertainty is an optimistic expectation; ordinary people are pessimistic about the future and are looking for permanent jobs; entrepreneurs are optimistic about the future and resolutely resign.
Before the reform and opening up, everyone was a fixed-remuneration seeker. At that time, there were no entrepreneurs in China.
The innovative and entrepreneurial spirit of entrepreneurs comes from the subconscious. In the early days of reform and opening up, few people in China knew what an entrepreneur was. A wave of private innovation and entrepreneurship was discovered and guided by far-sighted leaders, and only then did the Chinese entrepreneurial class emerge. Appear.
Lawyers resign from the system. For example, you resigned from the university as a professor ten years ago. Are these people entrepreneurs?
Lawyers are professional workers and must personally handle core business, which no one can replace; entrepreneurs integrate resources and manage people’s expectations.Resigning from university to work as a lawyer only shows that these people have entrepreneurial spirit, but they are not entrepreneurs; although there is uncertainty in the income of these people, they do not mainly obtain income from integrating resources. A lawyer who resigns as a university faculty member is a "real offer" operation; in the ivory tower of a university, it is a "virtual offer" operation. There is a huge difference in work performance. The articles I wrote twenty years ago must be based on the diagram, using judicial theory to find basis from legal rules, and using legislative theory to find inspiration from other professors' articles. This is a "virtual offer"; I wrote "Entrepreneurs' M&A Exit" The book was written into the computer word by word. During the writing period, I never consulted or read any reference materials. It was all a summary of my ideas at the time of writing. The research methods used were mainly to summarize industry habits and explore potential natural methods. Rules, explicit rules become the boundary of thinking, this is the "firm offer". The research on "virtual disk" is based on many assumptions and eliminates social impurities. Entrepreneurs are completely solid, similar to lawyers; however, lawyers' income is more stable. Small and medium-sized entrepreneurs can realize their wealth through M&A and exit at one time. Lawyers do not have such an opportunity. Lawyers gradually realize the results of their work. In European and American countries, the income realized by professional workers in their lifetime is roughly the same as that of small and medium-sized entrepreneurs.
These words are very useful! You once pointed out that the humanities are the cognitive limit that humans can achieve. They are different from the natural sciences, which are rules and are easy to teach and learn. In any case, you also understand the core relationship between people from a scientific perspective and accurately position entrepreneurs, which is the basis for studying entrepreneurial transaction models.
Humanities are the limit of human cognition. This is what Mr. Pan Guangdan concluded in his book "Research on the Bloodline of Chinese Actors: Prominent Families in Jiaxing during the Ming and Qing Dynasties" (in fact, he is not the original author). Entrepreneurs integrate human resources and deal with people every day. A successful entrepreneur is actually a humanities master. Adam Smith was able to discuss compassion from a human perspective and explore the basic logic of human transactions. Although entrepreneurs do not have the research ability to summarize and refine this, they are giants in humanistic practice. In M&A exits, facilitating transactions and successfully completing transactions does not rely on legal provisions, nor can we provide M&A exit consulting just because we master the legal rules. Therefore, my research method is no longer legislative or judicial, but natural law rules. I hope to make some contribution in this blank field.
The attitude towards future expectations caused by risk preference leads to people with different risk preferences having different means of seizing the future. Are different choices superior or inferior?
To put it simply, some people rush to take exams at night, while others resign at dawn. Everyone has his own ambitions, which is understandable. To go deeper, most consensus believes that the pursuit of goals in life should be virtue and wisdom, and the habitual direction of action of ordinary people is wealth and status. Although wisdom and status sometimes go hand in hand, virtue and wealth always go hand in hand. The business is getting further and further away; whether this is a reason for the entrepreneurs' mental and physical exhaustion, it is impossible to verify. If we are talking about superiority or inferiority, there is no need to say more, it is self-explanatory. In recent months, I have had the sympathy of Mr. Ren Zhengfei who burst into tears when he watched girls from poor areas dancing happily. No matter where I go, I see restaurant waiters, delivery boys, taxi drivers and other hard-working people, and I always understand a hundred times. Full of recognition and great respect. Thousands of ordinary workers have contributed their own strength to this great era. Every one of them is worthy of admiration. They work happily and earn their own living. They are the cutest people in this era.
Today we are discussing a seemingly metaphysical issue. You have always emphasized that a mature person can live calmly in a complex society, and will not be stressed by tense social relations, nor will he touch the boundaries of behavior. And be punished.As an entrepreneur, facing more complex situations, does he have higher requirements?
Just as you mentioned, whether an ordinary person is mature or not, he only needs to pay attention to whether the interpersonal relationships are harmonious and have a sense of rules, so that he can move steadily in a complicated society. Small and medium-sized entrepreneurs are also ordinary people living in society. The first thing they care about is interpersonal relationships. Secondly, they also need to have a sense of rules. However, because the basic transaction results of an entrepreneur's livelihood come from inferior returns, and his returns are inferior to those of employees, creditors, tax payers, and preferred shareholders, he does not only need to filter or avoid like ordinary people. In order to avoid uncontrollable social relationships, he needs to build a trading system through contract transactions. The social relationships he faces are themselves very complex. He cannot hide from them and cannot avoid them unless he gives up starting a business. At the same time, he also Unlike ordinary people who only need to live according to their habits, legal rules mostly come from trading habits, such as not cheating, stealing, robbing, killing, and setting fires. The risk-averse nature also keeps ordinary people away from right and wrong. Daily social laws are enough for ordinary people to There is no danger of staying far away from the boundaries of the rules, but entrepreneurs' daily transactions are touching the boundaries, intersecting with the interests of employees, creditors, the country, partners, etc., and they need to be more careful to ensure that the boundaries are not touched.
Can you give an example?
During the development period of small and medium-sized enterprises, the salary packages of small and medium-sized entrepreneurs are usually relatively low, corporate profits are very small, and entrepreneurs usually do not pay dividends. In order to improve family life, children's education expenses, personal daily expenses, housing loans and other fields are mixed with enterprises. In most cases, it will not explode, and the contradiction will be resolved over time (increased corporate profits can be offset by dividends); however, in Before these contradictions are resolved, they may break out due to internal conflicts, audits by tax authorities, etc. The essence is that entrepreneurs' sense of rules is different from the requirements of ordinary people. There is a natural conflict between the inferiority of entrepreneurs’ rights and interests and the priority of any rights subject’s rights. If you are not careful, you may be accused of official embezzlement, non-state personnel accepting bribes, etc.
Are the social relationships faced by entrepreneurs more complicated than those of ordinary people?
The social relationships faced by entrepreneurs include not only the usual social relationships of any ordinary person, but also employees, governments, creditors, competitors and their partners, which are more complex. It can be imagined that entrepreneurs face so many counterparties, each of which has its own transaction logic. If you are not careful, you will be in trouble.
What is the transaction logic of entrepreneurs facing their employees?
Entrepreneurs As entrepreneurs, we should be grateful that ordinary people in society are risk-averse and pursue fixed income. When you realize that the monthly income of an ordinary employee may not be as much as the cost of a business dinner, you should understand that these lovely employees are actually practitioners of a diligent and frugal culture. They are willing to obtain low income through part-time work and curb their desires. , enter the hierarchical system established by entrepreneurs, and contribute to the dreams of entrepreneurs. Civil servants make up for the income gap through secular job honors, state-owned enterprise employees are motivated through job honors and income, large private enterprise employees are satisfied through high income, lawyers feel at ease through income and free disposal of time, while small and medium-sized enterprise employees are not substantially motivated before , is in a state of being motivated but not motivated, and will leave at any time, full of expectations for high income. Small and medium-sized entrepreneurs should be full of gratitude and a sense of guilt when facing employees who persist. Once they have the opportunity, they need to fully compensate for their shortcomings; otherwise, it will be difficult for entrepreneurs to make their companies stronger, let alone bigger. The transaction logic between entrepreneurs and employees lies in "reciprocity and altruism." Entrepreneurs rely on the expectation that employees will be motivated when the enterprise becomes stronger, so that employees can contribute in the present.
Haven’t entrepreneurs already signed labor contracts with their employees to agree on their wages?
The treatment in the labor contract is only the critical point of the transaction, which is the minimum price that employees can accept. You also know that jobs are always scarce for workers, and their demand for work is probably at a disadvantage. Adam Smith discovered this logic in "The Wealth of Nations" more than 200 years ago. The seller of goods or services usually has a disadvantage, while the buyer usually has a trading advantage. The labor contracts of small and medium-sized enterprises are probably like this. The lowest price acceptable to workers is reflected in the labor contract.
What is the transaction logic between entrepreneurs and the government?
In any society and in any era, there is a problem of social hierarchy. The government, as a manager, is always at the top of this hierarchy. Management methods (laws) and attitudes (legislative principles) vary depending on the social system. However, regardless of any system, the relationship between entrepreneurs and the government is, in form, a relationship of management and being managed; in other words, it is a relationship of leadership and the led. In essence, it is a political relationship. Therefore, the basic transaction logic between entrepreneurs and the government is politics.
Although this is very complicated, I still want to ask, how does a mature entrepreneur need to talk about politics?
must be ideologically consistent with national decision-makers and leaders, must abide by all explicit legal rules in action, must remain restrained and low-key in life, must be consciously self-controlled in desires, and must be self-controlled in terms of development goals. It must be limited to wealth and economic goals, and life goals must also be consistent with social and national goals. This is especially true in China. The above-mentioned awareness can ensure that entrepreneurs can stand up, act steadily, and hold on.
What is the transaction logic between entrepreneurs and creditors?
There is a company that has completed bankruptcy and reorganization. Although it is a state-owned enterprise, its actual controller was an individual for a period of time. This person's catchphrase is: "Financing means profit, repaying money means loss." This is not ridiculous, but makes people think deeply.
As mentioned above, Adam Smith discovered the transaction law of seller disadvantage. Fund providers should have competed for borrowers' borrowing intentions by lowering interest rates. In Western developed countries, faced with high-quality borrowers, the result of competition among numerous banks is Yes, borrowing interest rates have been kept very low. The situation in China is different. This is because the lending market is managed by licenses, and fund providers have advantages; deposit-taking and lending without licenses are punished by criminal law. Small and medium-sized enterprises have to borrow high-interest funds from the society, and trusts and pawn shops have produced puzzling "flowers of sin."
A mature small and medium-sized entrepreneur must maintain a clear understanding when facing this strange lending capital market. The environment for entrepreneurs to integrate financial resources has been alienated in mainland China. You cannot borrow high-interest debt at will, and you cannot provide personal guarantees at will. Otherwise, your future will be put on the line. Companies would rather hesitate to move forward than borrow funds arbitrarily and against the rules to expand their scale.
That’s it! The seemingly normal loan capital market actually sets a higher threshold for small and medium-sized entrepreneurs to integrate financial resources, but many small and medium-sized entrepreneurs are not aware of it.
The maturity of small and medium-sized entrepreneurs is a necessary condition for the maturity of enterprises.For example, if you see the heartfelt joy of employees of a small and medium-sized private enterprise, you will definitely guess that the owner of this enterprise has understood the logic of transactions with employees, which is a necessary condition for a "strong" private enterprise; also, if a medium-sized private enterprise The office building of a small and medium-sized private enterprise in the city is the most luxurious in the area, the signboard is the most conspicuous, and the boss is a household name. The boss hangs out with friends in the five-star hotel he controls. Don’t be surprised that the company collapsed a few years later and the boss was jailed. This is related to consciousness. In the same way, if you see a boss struggling in court, being restricted from spending too much, having secured loans enforced, and having his villa auctioned off, you will understand that he is still far from maturely handling the relationship with his creditors. .
Lawyers provide legal services in merger and acquisition exit. What specific projects are included?
Lawyer M&A services are first divided into licensed business and non-licensed business.
The content of licensed business is mainly compliance review. A typical licensed business is to issue legal opinions to customers to demonstrate the compliance of mergers and acquisitions or equity sales. This is the traditional business of lawyers and has existed since the establishment of the lawyer system. For example, in the mid-16th century, Henry VIII planned to divorce the Spanish princess Catherine, the widow of Henry VIII's brother (who died young), before marrying Anne Boleyn. We know that Boleyn and Henry VIII later had two daughters, one was called Bloody Mary, and the other was Elizabeth I who led England to achieve maritime supremacy. Although Henry VIII was a recognized autocratic dictator, he was still a reasonable man. He hired several professors of law (including religious law) at famous universities in Europe to provide them with professional advice in an attempt to further influence the Holy See. Henry VIII's practice of seeking advice from law professors is analogous to today's practice of licensing lawyers.
non-licensed business is to use the work experience of lawyers to serve customers. On Wall Street, around the time of J.P. Morgan, that is, around the beginning of the 20th century, it became normal for lawyers to cooperate with investment banking institutions to engage in merger and acquisition consulting business, but they did not issue legal opinions.
Relatively speaking, licensed business is mainly based on the lawyer's practice license; the core of unlicensed business is mainly based on the lawyer's work experience. Lawyers without work experience can do licensed business, but they have no chance of taking on unlicensed business.
What services do lawyers provide in M&A exit business?
During the M&A planning period, lawyers provide M&A planning consulting and employee incentive plan consulting; during the M&A implementation stage, lawyers provide M&A exit consulting; after the closing, lawyers provide M&A exit management services, with the core business being the management of performance commitment matters; on both sides of the M&A After a dispute arises, lawyers serve as agents or legal advisors to participate in the resolution of merger and acquisition disputes. The core business is M&A exit consulting and M&A dispute resolution.
A merger and acquisition exit project will last a long time; even if it is a stage of merger and acquisition exit, some times are uncontrollable. For example, in 2016, I accepted a dispute agency case entrusted by a merger exit party. The plaintiff was a listed company as the acquirer, and the subject of the dispute was hundreds of millions of yuan. To this day, the first-instance judgment has not yet been issued; however, some things are also It may be relatively fast, for example, a merger and acquisition exit consulting matter. Although the matter is very important and complex, there is almost no way out, and there is no way to retreat. The exit was completed three months after signing the service contract, and the merger and acquisition parties signed an equity transfer contract.
What is the core logic of M&A exit?
M&A exit is a transaction matter. The counterparties of some transactions are uncertain, while the counterparties or potential counterparties of some transactions are certain. Generally speaking, different people have different understandings of the same asset. Some people want to sell it, and some people want to buy it. When the seller and buyer reach an agreement, the transaction is successful. This book stands from the standpoint of small and medium-sized entrepreneurs, from the innovative perspective of M&A exit, within the behavioral boundaries set by statutory rules for entrepreneurs, and with the help of natural law rules, habits and common practices in practice and other logical foundations, for the first time It has created a new theoretical and practical framework for M&A and exit of small and medium-sized entrepreneurs, which is an innovation in legal practice research under the traditional "judicial theory" method system. Many people read the words "entrepreneurial exit" and don't quite understand it; modern society pays attention to moving forward courageously. Why does your research directly intervene in or focus on this topic of "entrepreneurial exit"? What's the purpose? "Exit" is an eternal topic for entrepreneurs. There are many ways to exit, including active exit and passive exit. Active exit includes listing exit, M&A exit, dividend exit, etc.; passive exit includes common bankruptcy reorganization, bankruptcy liquidation, and other distress-relief exits; in addition, the end of life ("death") itself is also a kind of exit. The purpose of entrepreneurs' innovation and entrepreneurship is to actively exit. I feel like my doubts have been solved. Is there such an entrepreneur whose business has been very successful and has never considered exiting from the time he started the business until the business has strong profitability and has even gone public? Regardless of the vicissitudes of life, the economic cycle will rotate, the industry structure will be adjusted, and the natural life will end? There are countless entrepreneurs like . Failure to understand listing from the perspective of exit will be a life disaster for the actual controllers of listed companies; similarly, entrepreneurs who have no exit concept will always end in failure. I understand that entrepreneurs always have a way back and a goal to start a business. For example, many entrepreneurs want to list their companies. For entrepreneurs, is going public the best way to exit? Under the current circumstances, when companies are listed on A shares in mainland China, entrepreneurs (major shareholders) have the possibility of exiting from the secondary market, and entrepreneurs also have the possibility of success. The listing of is a reward for entrepreneurs’ qualities such as forbearance, restraint, and persistence. The assessment of "forbearance" is compliance; the assessment of "restraint" is political consciousness, which is the primary awareness that entrepreneurs should have. This is the same as before and today, both at home and abroad; and the assessment of "persistence" is sustainability. Generally speaking, companies that have both compliance and sustainable profitability are likely to be successfully listed on mainland China's A-share market. As mentioned before, the actual controller of a listed company has the possibility of exiting from the secondary market. We must also be soberly aware that there are nearly 40 million domestically registered business entities (excluding individual industrial and commercial households), of which only one ten thousandth has been listed, and only one thousandth will be listed in the future; most companies are too large due to their size. Small companies cannot go public. More than 90% of the companies at the base of the pyramid are actually substitutes for "fixed income" or "part-time work". They are micro-enterprises and have no possibility of going public now or in the future. According to experience, there are about 100 companies at the middle and upper end of the corporate pyramid. Up to 5% of companies do not meet the conditions for listing either due to insufficient compliance or insufficient sustainable profitability. The operating scale of these companies has met or even exceeded the requirements for listed financial indicators in some years, but their sustainability is insufficient; these companies have strong profitability but insufficient compliance. I call it the "small but weak" or "big but weak" type of business, and most companies fall into this category. Only one in a thousand companies can be listed, and they are "small but strong" and "big but strong"; "small but weak" companies will not become the mainstream of the capital market, but can only be auxiliary and supplementary to the capital market. These companies are Typical M&A targets must choose to exit through M&A; "big but weak" companies will not be acquired and cannot exit through M&A. They can only plan for passive exits such as bankruptcy and reorganization. I feel enlightened by you! Many companies held high the banner of "going public" when they started their business, but they have not been successful in going public for decades. What should these companies do? "Small and weak", "small" refers to small scale, with operating income ranging from tens to hundreds of millions of yuan (enterprises smaller than this size are called "micro", which is a substitute for "part-time job"); "Weak" mainly refers to weak compliance, sustainable profitability, strategic planning capabilities, etc. These companies have little chance of going public successfully. If you successfully break through the barrier, the highest probability is delisting. It is precisely because of its "weakness" that its living space is small and sustainable management cannot be the goal. Therefore, these companies will not be successful in listing, nor can they sit back and let them continue to shrink or expand in size ineffectively. It must exit through mergers and acquisitions at the right time. For more information, please refer to the author's book "Entrepreneurs' M&A Exit" recently published by Law Press. In the last Q&A, you have clearly explained that no more than one thousandth of the large and medium-sized enterprises at the top of the enterprise pyramid can exit through listing, and no more than 5% of small and medium-sized enterprises have the opportunity to exit through mergers and acquisitions. The rest of the enterprises are The more than 30 million micro-enterprises in the middle and lower sections of the pyramid are only and most will always play the role of "fixed income" or "job" substitute. Among the millions of small and medium-sized enterprises located at the middle and upper end of the enterprise pyramid, the "small and weak" enterprises among them can exit through mergers and acquisitions. These enterprises cannot form the mainstream of the capital market, but can only be auxiliary and supplementary to the capital market. . If I am a small and medium-sized entrepreneur, and I do not have the compliance and sustainable profitability to go public, I must exit through mergers and acquisitions. However, I always feel that "exiting through mergers and acquisitions" is like "running away"? Is the exit of small and medium-sized entrepreneurs through mergers and acquisitions in line with social development trends? Last time I discussed that the purpose of any entrepreneur starting a business must and can only be to actively exit, and there is no other rational purpose. Therefore, whether an entrepreneur exits through any compliance channel, it is reasonable, has no legal or moral flaws, and is beyond reproach. Regarding the positioning of entrepreneurs and why the purpose of starting a business must be to actively exit, I will have the opportunity to discuss it in detail. is more than that. In the merger and acquisition exit, the interests of all parties are involved, among which the core stakeholders mainly include the acquirer, the government where the enterprise is located, the employees of the enterprise and the merger and acquisition exit party. The interests of any entity can basically achieve the optimal arrangement of "someone benefits and no one loses" in the merger and exit. How are the interests of the acquirer reflected in the merger and acquisition exit? Due to space limitations, I will give an example. The most typical open market merger and acquisition in mainland China is that a listed company acquires the equity of an unlisted enterprise through the issuance of additional shares, and the acquirer receives sufficient liquidity compensation. In this typical merger, the acquirer gains and does not lose. Specifically, the net profit multiple of mainland China's A-share stock prices (generally expressed as "price-to-earnings ratio" or "PE"), Shanghai Science and Technology Innovation Board is as high as 90 times, and the main board is about 17 times; Shenzhen main board is nearly 30 times, GEM The difference between the net profit multiple of the listed company's own valuation and the net profit multiple of the target company's valuation is the liquidity compensation given by the shareholders of the target company (the exit party) to the listed company and its existing shareholders. After a listed company acquires the equity of an unlisted enterprise, it consolidates the net profits of the unlisted enterprise into its financial statements. If the valuation multiple of the listed company remains unchanged or does not change significantly, it will directly manifest itself as an excessive increase in the market value of the listed company (exceeding the merger consideration) and the original stock. Shareholders receive excess returns. As we all know, A-share listed companies in mainland China generally use the future income method to value the target company. In other words, this may cause the target company's valuation to exceed its book net assets, and the excess will be recorded as "business" in the acquirer's books. "Goodwill impairment"; once the target company cannot fulfill the promised profits, the listed company will be under the pressure of "goodwill impairment". However, in almost all open market acquisitions, the "goodwill impairment" losses are transferred to the original shareholders of the target company; even if the performance commitment is successfully completed, there is an end-of-period "goodwill impairment" test in the transaction contract, and the test is All adverse results will be borne by the original shareholders of the target company. I understand! As a typical M&A exit, that is, in a public market listed company's acquisition of the equity of an unlisted enterprise, the acquirer can obtain a larger amount of "liquidity compensation" in any case. The listed company will definitely benefit from the M&A exit, regardless of the situation. will be damaged. So, where are the interests of the government where the target enterprise is located, and can its interests be protected? There are three core interests of the government where the target enterprise is located: First, the exit of the merger and acquisition will not harm the overall social stability; Second, the exit of the merger and acquisition will not detract from the " tax source "; Third, whether the exit of the merger and acquisition will increase taxes. Firstly, I personally attach great importance to the social stability issue in the merger and exit of the target company. In previous cases, the exiting party must report to the local government whether the merger and exit may harm the overall social stability. For example, in the merger and exit case of a project company with an area of more than 800,000 square meters the year before last, this project involved the relocation and resettlement of thousands of demolished people. When comparing and selecting the acquirer, the exiting party focused on its subsequent development capabilities. In the end, a local company Top developers were identified as acquirers. The actual operating conditions in the past two years have been good. This is the core interest of the government where the subject enterprise is located that we have to consider. Secondly, before the merger and acquisition exits, the shareholders of the target company are usually large taxpayers in the local area. After the merger and acquisition exit, not only cannot the tax sources be reduced and the tax sources dry up, but they must also make the tax sources more abundant. For example, performance commitment actually locks in the tax amount during the performance commitment period, which includes not only turnover tax , but also income tax. That 800,000-square-meter large-scale merger and acquisition case, the project's expected sales revenue exceeds 10 billion, and the self-owned properties generate substantial tax contributions every year. There is no reason for local government agencies to be dissatisfied. Thirdly, the exit of mergers and acquisitions will provide unexpected tax revenue to the government where the enterprise is located. The transaction amount of most public market mergers and acquisitions is hundreds of millions of yuan, and their value-added is also probably hundreds of millions of yuan. If the shareholders of the target company have not implemented tax-saving arrangements before, the taxes generated by this asset transfer will most likely remain with the government where the company is located. This was an unexpected surprise. This tax amount is insignificant for super cities such as Beijing, Shanghai and Guangzhou, but for most small and medium-sized cities, a personal income tax of tens or hundreds of millions of yuan is enough to surprise the local government. To sum up, exit through mergers and acquisitions will not only cause no losses to the governments where the enterprises are located, but will also bring more abundant tax sources and even unexpected tax benefits. Moderator: When you handle M&A and exit projects, you have such a deep understanding of the interests of the local government where the company is located! Lawyer Wu Xibin: I do not recommend that in order to save some personal income tax, before the exit of the merger and acquisition, the layout of the shareholding platform in the so-called tax-saving place is not in line with the core interests of the government where the enterprise is located. In the merger and acquisition exit, can the interests of employees be protected? The reason why the target company can be acquired profitably is because the contribution of employees, especially core employees, is indispensable.According to Tullock's corporate hierarchy theory, although bigger is not always better for a company, most entrepreneurs who are able to exit through mergers and acquisitions have built a hierarchical system within the company, and this hierarchy still appears to be the same when exiting through mergers and acquisitions. efficient. Key employees who contribute to the entrepreneur's exit need to be motivated. In my many years of business practice, I have also discovered an unspoken rule of natural law that has been hidden for thousands of years: if there is a performance commitment during the M&A exit, the entrepreneur must motivate the core employees. Otherwise, the entrepreneur will suffer as the M&A exit party. loss. (I will discuss this natural law rule in detail on other occasions later) Therefore, in a typical M&A exit, the core employees of the target company will generally receive incentives. also has some helpless situations. For example, during the merger and exit of a real estate project company, non-core employees temporarily recruited at the project location will generally not keep their jobs. Practical cases show that the exiting party will fully compensate these employees. In the merger and acquisition exit, core employees may benefit and will not be harmed; if they are harmed, they will receive full compensation. The last stakeholder is left, which is the exit party, which is our protagonist-the entrepreneur. Can their interests be adequately protected in an M&A exit? Most people, including entrepreneurs themselves, understand it this way: in the merger and acquisition exit, the so-called "someone benefits" means that at least the entrepreneur himself benefits; the so-called "no one loses" means that other stakeholders other than entrepreneurs do not. damaged. In other words, entrepreneurs will definitely benefit from the M&A exit, right? mainly depends on the transaction structure. A good transaction structure is enough to cause entrepreneurs to benefit from M&A exit, while a bad transaction structure is enough to cause entrepreneurs to suffer losses from M&A exit. In the merger and acquisition exit dispute cases that I personally handled, the entrepreneurs who exited from the merger and acquisition suffered huge losses due to poor transaction structures. The amount of compensation far exceeded the profits they received, and some even went bankrupt. There are many cases. These issues are too complex and will not be discussed here. In the first two questions and answers, you proposed that "small and weak" companies (households) have the opportunity to implement mergers and acquisitions and exits. How do you understand this sentence? This is a strategic thinking after fully measuring the listing conditions of A-share market in mainland China and fully considering the future of the capital market. This topic is not to demonstrate the exit of a company from listing, but it is related to the exit from listing. Specifically: First of all, "small but strong" or "big and strong" companies can consider listing and exiting. For example, there is a physical education company. Although it is currently very small, with operating income of only tens of millions and net profit of only a few million yuan, it is a leader in the subdivided industry, which means that the current status of the industry is not concentrated and there is no room for growth. It can be expected that its compliance and sustainable profitability (core capabilities) have been fully identified. Over time, its net profit will most likely grow steadily or even explosively in a few years. For this kind of "small (micro) but strong" companies, the risks of industry peak and valley iterations are controllable, and they can practice quietly; the epidemic has led to the shrinkage of offline training courses, so there is no need to be afraid, because this is the case for all companies in the industry ; for this company, the main focus was on course research and development during the epidemic. Such companies can choose to exit by listing in mainland China after meeting the conditions. Secondly, for another company that specializes in academic education, its lack of school qualifications is enough to position it as a "small and weak" company. This company has acceptable profits, but insufficient compliance. , "weakness" is reflected in its compliance.The founder of this company formulated a merger and acquisition exit plan after careful consideration, and immediately got the exit opportunity and completed the transaction. Finally, I have seen some "small and weak" companies. These companies are mainly distributed in highly competitive industries. Not only do they have insufficient sustainable profitability, most of them also have compliance shortcomings. However, apart from listing, the boss has no Ideas for alternative ways to access capital markets. In summary, most companies not only failed to go public successfully, but also lost many opportunities for mergers and acquisitions and exits. Due to the transformation of industry structure and changes in competitive logic, the opportunity for mergers and acquisitions to exit only comes once every few years for many companies, and it is unknown when the next opportunity will come. Can it be understood that these "small and weak" companies that cannot exit through listing must use M&A exit as a strategy for corporate capital operation? When the peak of the industry arrives, the profitability of these companies is no worse than that of high-quality listed companies, but the sustainability of their profits may be insufficient; especially their "weakness" is also reflected in insufficient compliance. There is a well-known company in the machinery sub-industry. The restructuring of its shareholding structure was questioned and the listing was unsuccessful. Over the years since then, the competition logic of the industry has undergone major changes, and its original leading ability has been lost. Today, its sustainable profitability is questionable. Although the compliance issues of the year have long been eliminated, its shortcomings in sustainable profitability have caused it to lose the possibility of listing, and it is no longer or no longer easy to find opportunities for mergers and acquisitions to exit. Some "small and weak" companies are still small in scale and hope to wait until they are larger before formulating plans for M&A and exit. Do you think this is appropriate? The expectation of scale expansion is good from an entrepreneurial perspective. It mainly depends on the overall situation of industry competition. For example, I found that for China's local upstream semiconductor process and equipment companies, in the past few years, due to the emergence of a general trend in the industry that is beneficial to China's domestic enterprises, this industry is likely to experience high overall growth. . SMEs in these industries can expect to be more profitable before selling. However, for industries where competition is or is expected to be fierce, if a company currently or is expected to have tens of millions or even hundreds of millions of yuan in operating income, and currently or is expected to have millions or even tens of millions of net profits, it should start planning mergers and acquisitions. Exit planning, otherwise, the good expectations for the future are most likely to be shattered by more intense competition. These industries are most likely not to see revenue growth, but to stagnate or shrink. For a "small and weak" enterprise, the reason for its "weakness" is internal; this weakness cannot be solved in the short term or even permanently. I am afraid that many entrepreneurs are not aware of this; the glory of the leading company in the machinery subdivision industry mentioned above has become history. To be cautious, I recently logged into the official website of this company and found that its glory has become history. "Company News" stopped being updated six years ago, and "News" became old news. You said it very clearly, and it becomes clearer and clearer to me! "Small and weak" companies have no way to go public, and many entrepreneurs are still looking forward to listing and exiting, which is actually doing ineffective work; many "small and weak" companies have weak ability to continue operating, but entrepreneurs are still looking forward to it Expanding the scale before implementing mergers and acquisitions has led many companies to embark on a "dangerous path." These are all issues that arise from strategic planning and exit concepts. "Small and weak" companies have the opportunity to exit through mergers and acquisitions. How many entrepreneurs can finally achieve merger and acquisition exit? The proportion of "small but weak" companies that can ultimately achieve M&A exit is very low. On the contrary, many "small but strong" companies have also squeezed into the M&A exit channel. This is related to the survival of the fittest among listed companies, raising compliance thresholds and strengthening supervision of listed companies. Many companies that originally wanted to go public were deterred and entered the merger and acquisition exit channel.In order to maintain the full price discovery function of the open market and the exit position of listing (allowing most listed companies to have a high turnover rate), the exchange maintains its competitiveness in the domestic and even global capital markets. The attitude of its trading regulatory agencies will certainly not allow the exchange to maintain its competitiveness in the domestic and global capital markets. All companies "do their best"; in a short period of time, a "barrier lake" phenomenon of queuing up for listing applications has formed. The long queuing time for listing is testing the patience of entrepreneurs. This has the same logic as queuing up at an "Internet celebrity restaurant". Not only does queuing up Enjoy the core benefits of listing (dining), "information disclosure" (leakage of makeup in public places), "high intermediary agency fees", etc. have made companies queuing up to be listed "tortured"; the number of companies submitting application materials will gradually increase. Reduced to the equilibrium point; whether the company will be listed in the future is very likely to be "either unable or unwilling". This is consistent with the empirical observation that Malthus mentioned in " Principles of Population " that predicting the inability to raise children reduces the desire to have children, leading to a slowdown in population growth. Therefore, in the next ten years, according to the current pace, there is a high probability that the number of companies that can be listed on the A-share market in mainland China will not exceed 10,000, or it will be far less than 10,000, that is, less than 10,000. Three-thirds of companies may exit through listing in the next ten years; the pace of new listed companies in developed countries in Europe and the United States is slower than in mainland China, because the survival of the fittest among listed companies is also faster, and the compliance costs after listing are higher. Generally speaking, the future growth space of the capital market lies not only in IPO (referring to the initial public offering and listing of stocks), but also in mergers and acquisitions. The proportion of investment banking IPO business based on the general Wall Street concept is very low. More investment banking business comes from mergers and acquisitions, and high-yield projects mainly come from consulting on equity sales of unlisted companies; the same is probably true for European and American law firms. The annual M&A transaction volume in developed countries in European and American capital markets accounts for more than 10% of GDP. If China calculates based on 5%, the annual transaction volume will be approximately 5 trillion. The average transaction volume per company is 500 million yuan, and less than 10,000 companies exit through mergers and acquisitions every year (the data on mergers and acquisitions between unrelated parties is far smaller than the predicted number). In other words, only about one in 10,000 companies can exit through unrelated mergers and acquisitions every year, which means that thousands of small and medium-sized enterprises can successfully exit through mergers and acquisitions every year. For corporate equity sellers, M&A exit is actually a very crowded channel, and it takes fierce competition to finally achieve M&A exit. As you said, many companies gave up and withdrew their listing applications due to the tightened review process after applying for listing. How do you comment? I made a clear point. "Small and weak" companies are not the mainstream of the capital market, but cannot exit through direct listing. They are effective auxiliaries and supplements to the capital market, and they can only exit through mergers and acquisitions. Some entrepreneurs did not understand this logic and tried to break through. However, when regulatory agencies increased supervision and withdrew their listing applications, public opinion was in an uproar. This is a problem caused by poor planning of entrepreneurial capital exit strategies. I believe that as the concept of capital market exit is no longer a "wonder" among the entrepreneurial community, but becomes common sense, it is also an era when the entrepreneurial team becomes more mature. I still have a big doubt, can the controlling shareholder of a company continue to hold equity? No matter the industry peaks and troughs change, the economic structure transforms? This time I want to talk about this issue clearly. It has been emphasized many times before that a "small but weak" enterprise must exit through mergers and acquisitions in a timely manner. Otherwise, the "small but weak" enterprise may expand ineffectively and become a more terrifying "big but weak" enterprise, or it may continue to linger. , or gradually shrink and become a "part-time job" substitute. Controlling shareholders of "small but strong" and "big but strong" companies can continue to hold shares, but this is not a concept of permanent shareholding. "Strong" may become "weak", and nothing is static.Many "time-honored" brands in Beijing, once famous all over the world, now have only one store left, and have long been reduced to "part-time job" substitutes. Even young people are unwilling to take over from the previous generation. What remains unchanged is the micro-enterprise that we frequently mention as a "fixed income" or "part-time job" substitute. The annual net income is the same as that of the owner who goes out to work. The so-called national innovation and mass entrepreneurship actually refer to these types of enterprises. For example, if a father and son working outside the countryside set up an individual business or sole proprietorship in order to save taxes, their monthly sales income of less than 30,000 yuan will not only be exempted from value-added tax, but personal income tax will also be levied at a rate of 0%. Community grocery stores, barber shops, massage parlors, etc. all belong to this business format. Their survival logic is different from that of small and medium-sized enterprises. They directly participate in external transactions and face the external market as workers themselves. "SF Express ", the most competitive company in the express delivery industry, unexpectedly lost one billion in the first quarter of 2021. This shows that the leader in any industry may lose money in any quarter, let alone other companies that are lagging behind. However, smaller companies will survive forever because they are close to customers, have controllable costs, and have flexible strategies. As long as a company has built what Tullock calls a hierarchical system, that is, a company that has leveraged and , there is a risk of losses and shrinkage. I still don’t understand. Are you saying that it is more difficult for enterprises to maintain a certain scale, such as small or medium scale, which means operating income of tens to hundreds of millions of yuan as you said, because this requires building what Tullock said? Hierarchical system, that is, increasing leverage, more specifically, it means that people must be hired and funds must be borrowed; however, it is easy for a company to become smaller and smaller, whether it is a mom-and-pop shop or a father-son shop, will it last longer? The reason for the emergence of enterprises is that based on the resource integration ability of entrepreneurs, internal transactions of enterprises (that is, hiring workers and borrowing capital) replace workers' external transactions. The core principle is that the cost of internal transactions is lower than that of workers Costs of direct participation in external transactions. When the cost of internal transactions is equal to the cost of external transactions, the enterprise must stop expanding, and the entrepreneur's income is zero; when the cost of internal transactions is higher than the cost of external transactions, any expansion is ineffective, and the entrepreneur's income is burden. Business types such as mom-and-pop stores and father-son stores are what we call external transactions, and there is no entrepreneur to integrate resources; I believe that if a company gives a higher salary to a community grocery store couple, they will inevitably give up sole proprietorship. In other words, if entrepreneurs integrate resources more efficiently than mom-and-pop stores, mom-and-pop stores will be integrated. Unfortunately, most attempts to integrate these formats in recent years have failed. As long as we deal with people, they will be subject to human rationality. Entrepreneurs have limited capabilities and cannot give their employees a better future, so they will change jobs or set up mom-and-pop shops to replace part-time jobs. The survival gap for small and medium-sized entrepreneurs is smaller than that of migrant workers. Why can’t entrepreneurs make their companies as big as possible, reduce fixed cost amortization, and increase profits? Everyone wants to do this, use their own management capabilities, integrate as many resources as possible, expand the boundaries of enterprises , and obtain higher efficiency. However, few people can succeed. Don't expect an ordinary entrepreneur to make the business bigger. Operations and management are the core competencies of entrepreneurs. Operations are about finding market opportunities, and management is about implementing the found market opportunities. Enterprises either have operational problems, management problems, or both. There are limits to people's abilities, there are limits to entrepreneurs' abilities, and there are limits to the scale of enterprises. The success of a person's business means that he or she has used his or her abilities to the fullest, and cannot expect superpowers in return; almost all superpower expectations have failed. Failures come in many forms, ranging from corporate bankruptcies to compliance snags. I started to understand a little bit about such a complicated problem. But how do entrepreneurs discover the boundaries of their capabilities? And then discover the boundaries of the enterprise? When a person seeks non-compliance forces outside himself to expand the boundaries of the enterprise, I think this person has exceeded the limit of his ability. As you know, the legal industry does not judge based on the amount of business income; if the actions are deformed and there are problems with compliance, no matter how high the income is, it will be invalid and negatively correlated. No matter how exhausted and devoted an entrepreneur is, as long as they do not resort to non-compliant forces, it means that the enterprise still has room to expand; entrepreneur fatigue is touching the boundaries of capabilities, and the final result will definitely be improved capabilities and expanded boundaries; entrepreneurs Continued hard work and continuous improvement of abilities. Entrepreneurs have different purposes for starting a business, some are grabbing wealth, some are passionate about honor, some are pursuing status, and some are greedy for pleasure. This involves whether the entrepreneurial purpose is realized and determines when the entrepreneur reaches the criteria for exiting the business. So, the question now is: What is the appropriate purpose for starting a business? Entrepreneurs integrate labor and capital resources, pay fixed remuneration (wages and interest) to workers and capital parties, and obtain future uncertain returns, that is, profits. If the entrepreneur has a high ability to integrate resources, the enterprise will expand in size and make huge profits; if the entrepreneur has a weak ability to integrate resources, the enterprise will be small and unable to protect itself. Entrepreneurs come from many different origins, with different backgrounds, diverse values, and different understandings of the purpose of entrepreneurship. Any choice made by an entrepreneur regarding the purpose of starting a business is rational from the perspective of the entrepreneur himself and should be respected. As the scale of the enterprise expands, entrepreneurs generally gain freedom in wealth, improve their social status, improve their lives, and receive certain honors accordingly. Do you have any moral or correct judgments about entrepreneurial goals? Entrepreneurial goals are rational and individual, and there is no moral or correct judgment. At the same time, entrepreneurial goals and life goals are not the same thing. Starting a business for wealth within a period of time cannot be regarded as the ultimate goal of life; for most people, wealth only has instrumental significance and does not have ultimate meaning. Is there a limit to the entrepreneurial purpose of entrepreneurs? Everything has a degree, and everything is acceptable within a reasonable range. For example, as a wealth goal for most entrepreneurial purposes, how much is too much? How much is too little? Everyone understands it differently. Some entrepreneurs already have financial freedom when they start a business, but more wealth will not bring happiness to the entrepreneur in proportion. At this time, his entrepreneurial goals may be mainly non-wealth in nature; some entrepreneurs are in financial distress when they start a business. Successful businesses can significantly improve their debt repayment capabilities. If there is a boundary, I think it is about finding your own balance point. It is really not easy for you to find these two boundaries suitable for the advancement of life in the vast sea of human research results. In your book "Entrepreneurs M&A Exit", you have mentioned that the traditional "leisure culture" has a negative impact on all classes of society. Do you have any suggestions for this? Does "leisure culture" have any impact on the purpose boundaries of entrepreneurs? For thousands of years, "leisure culture" has had a very significant impact on human behavior. It is specifically manifested in the pursuit of "explicit consumption without production" ("showing off"), and the vast majority of people are not aware of it. .In the era of the primary industry, the nobility was the warrior class. They lived by plundering and did not engage in production. The peasants were their vassals. In order to distinguish the classes, the aristocratic hierarchy came into being. Family emblems and the heads of the opposing leaders became prominent. A symbol of consumption; clothing has long occupied the primary position of explicit consumption; tall men's hats, neat and tight suits, high heels and women's hats of various shapes that fall off in the wind; later, golf, yachts, Luxury houses and luxury cars; modern people posting on social media after running marathons, etc. are all the influence of this bad culture. Although the " Veblen effect " is consistent with Heinrich's warning ("the decrease in happiness after repeated satisfaction of desires"), most people cannot escape its influence. I claim in my circle of friends that I have read a lot of books on humanities and history, which is also a negative influence of the "Veblen effect", implying that I am not burdened by mundane affairs and have a lot of time to read. In "Entrepreneurs M&A Exit", I did not regard the adverse effects of "leisure culture" as the boundary of entrepreneurs' entrepreneurship goals, because ordinary people cannot get rid of this influence, and most outstanding people cannot get rid of this influence. This influence has already It is deeply ingrained in human behavior and habits, and it is impossible to get rid of them. Some people, especially ordinary entrepreneurs or core employees of companies, will talk about the fate of the company, social interests and even the interests of the country and the nation. For those who pursue greater interests besides themselves, especially entrepreneurs, is there any problem with this direction? ? Some people’s interests are bread for the day, and they have no time to care about things other than bread; some people think about longer-term things that span years; some people think about collective things; some people link their own interests with the interests of the collective, society, the country, and even the nation. , these are all rational. If a person persists in pursuing higher and greater interests throughout his life, it is because he sees that the interests of the collective, the country, and even the nation are consistent with his own interests. Once the collective, the country, or even the nation gains honor, he himself will benefit. Entrepreneurs need strong support for their ideas of tying business development, community development, national and even national interests to their own interests. While doing your own thing well, striving for higher interests will bring no harm at all. The theoretical framework of entrepreneurial exit strongly advocates these directions of endeavor that are harmless to oneself and beneficial to society. In my book "Entrepreneurs M&A Exit", I regard this tendency as a development direction of the culture of small and medium-sized enterprises. After an entrepreneur exits, any public welfare behavior direction, including donations and active participation in other public welfare, will be positively related to the entrepreneur's life. This is not the limit of the purpose of starting a business. Entrepreneurs who move forward on this road of public welfare will eventually find a place full of flowers and find the greater meaning of life. Entrepreneur Exit uses five questions and answers to comprehensively answer the conceptual issues of entrepreneur exit. Today, we enter a new issue: the identification of entrepreneurial identity, or what kind of person is an entrepreneur? What rights do they have and what is their transaction model? This is also an important section in your book "Entrepreneurs' M&A Exit". How is entrepreneurial identity recognized in its initial state? Before the fifteenth century, Europe was in the era of primary industry, that is, the era of planting, breeding and extractive industries. The core assets and wealth came from the land. The plunder and protection of the land were the core means of competition in this era; warriors were the elite of society. Samurai with both thinking ability became great nobles, that is, great lords. In Europe before the fifteenth century, there was a feudal system in which big nobles entrusted land to knights (minor nobles), and the knights promised to accompany the big nobles on expeditions; other ordinary people, including scholars, were vassals of nobles or subordinates, and the relationship of personal dependence was Core social relationships. As the economic structure upgraded and transformed into the secondary and tertiary industries, the feudal system gradually disintegrated in Europe, and personal attachment was gradually replaced by equal contractual relationships. As Tocqueville said, equality has become the main theme of society with an unstoppable trend. . Before large-scale industry in the 18th century, there was still the so-called small industry, that is, the era of handicraft industry. Merchants were the link between handicraft industry and the market. The concentration of production led to the emergence of an entrepreneurial class who began to hire workers and borrow funds. Knight, the great economist at the beginning of the 20th century, discovered that the entrepreneurial class that emerged in society paid fixed remuneration to workers and capital, and expected to obtain uncertain future benefits. With the beginning of the modernization transformation of major European countries, the entrepreneurial class that grabs future uncertain profits has gradually been identified. What are uncertain future earnings? Knight divides future estimates into three categories: First, a priori, drawing conclusions without experience, similar to doctrine; Second, risk, which is a risk that can be measured by big data, similar to insurance Actuarial calculation of rates; Third, uncertainty. The "uncertainty" defined by Knight refers to the future that cannot be measured. The uncertain returns of entrepreneurs are neither groundless priors nor measurable risks, but a future that cannot be predicted and measured. Whether each entrepreneur has the ability to integrate resources cannot be measured; entrepreneurs use innovative thinking and entrepreneurial actions to seize future uncertain returns. There is always a probability of success in starting a business, right? Many people think this way when they start a business, but this is not the case. Whether a business can be successful or not is a matter of failure or success for any entrepreneur. There is no probability issue. The success of any other entrepreneur does not mean that other entrepreneurs will also succeed; the failure of the previous venture does not necessarily mean the failure of the next venture. However, there is a "natural elimination period" for enterprises. This data measures whether an entrepreneur has entrepreneurial potential or is a risk-averse fixed-reward seeker; whether he has decided to travel far or is just dabbling in it. Most companies fail or shrink into fixed-remuneration substitutes in 3-5 years. This period is the natural elimination period of the company. The company passing through the natural elimination period roughly proves that the entrepreneur has certain entrepreneurial potential and determination. Many people are afraid to start a business, are unwilling to start a business, and are afraid of risks. Ordinary people see a future full of risks, while entrepreneurs see a future full of opportunities. This is the biggest difference between entrepreneurs and fixed compensation claimants. It is precisely because of the majority of risk-averse fixed-reward claimants that it is possible for entrepreneurs to integrate labor resources. Risk is a pessimistic expectation, while uncertainty is an optimistic expectation; ordinary people are pessimistic about the future and are looking for permanent jobs; entrepreneurs are optimistic about the future and resolutely resign. Before the reform and opening up, everyone was a fixed-remuneration seeker. At that time, there were no entrepreneurs in China. The innovative and entrepreneurial spirit of entrepreneurs comes from the subconscious. In the early days of reform and opening up, few people in China knew what an entrepreneur was. A wave of private innovation and entrepreneurship was discovered and guided by far-sighted leaders, and only then did the Chinese entrepreneurial class emerge. Appear. Lawyers resign from the system. For example, you resigned from the university as a professor ten years ago. Are these people entrepreneurs? Lawyers are professional workers and must personally handle core business, which no one can replace; entrepreneurs integrate resources and manage people’s expectations.Resigning from university to work as a lawyer only shows that these people have entrepreneurial spirit, but they are not entrepreneurs; although there is uncertainty in the income of these people, they do not mainly obtain income from integrating resources. A lawyer who resigns as a university faculty member is a "real offer" operation; in the ivory tower of a university, it is a "virtual offer" operation. There is a huge difference in work performance. The articles I wrote twenty years ago must be based on the diagram, using judicial theory to find basis from legal rules, and using legislative theory to find inspiration from other professors' articles. This is a "virtual offer"; I wrote "Entrepreneurs' M&A Exit" The book was written into the computer word by word. During the writing period, I never consulted or read any reference materials. It was all a summary of my ideas at the time of writing. The research methods used were mainly to summarize industry habits and explore potential natural methods. Rules, explicit rules become the boundary of thinking, this is the "firm offer". The research on "virtual disk" is based on many assumptions and eliminates social impurities. Entrepreneurs are completely solid, similar to lawyers; however, lawyers' income is more stable. Small and medium-sized entrepreneurs can realize their wealth through M&A and exit at one time. Lawyers do not have such an opportunity. Lawyers gradually realize the results of their work. In European and American countries, the income realized by professional workers in their lifetime is roughly the same as that of small and medium-sized entrepreneurs. These words are very useful! You once pointed out that the humanities are the cognitive limit that humans can achieve. They are different from the natural sciences, which are rules and are easy to teach and learn. In any case, you also understand the core relationship between people from a scientific perspective and accurately position entrepreneurs, which is the basis for studying entrepreneurial transaction models. Humanities are the limit of human cognition. This is what Mr. Pan Guangdan concluded in his book "Research on the Bloodline of Chinese Actors: Prominent Families in Jiaxing during the Ming and Qing Dynasties" (in fact, he is not the original author). Entrepreneurs integrate human resources and deal with people every day. A successful entrepreneur is actually a humanities master. Adam Smith was able to discuss compassion from a human perspective and explore the basic logic of human transactions. Although entrepreneurs do not have the research ability to summarize and refine this, they are giants in humanistic practice. In M&A exits, facilitating transactions and successfully completing transactions does not rely on legal provisions, nor can we provide M&A exit consulting just because we master the legal rules. Therefore, my research method is no longer legislative or judicial, but natural law rules. I hope to make some contribution in this blank field. The attitude towards future expectations caused by risk preference leads to people with different risk preferences having different means of seizing the future. Are different choices superior or inferior? To put it simply, some people rush to take exams at night, while others resign at dawn. Everyone has his own ambitions, which is understandable. To go deeper, most consensus believes that the pursuit of goals in life should be virtue and wisdom, and the habitual direction of action of ordinary people is wealth and status. Although wisdom and status sometimes go hand in hand, virtue and wealth always go hand in hand. The business is getting further and further away; whether this is a reason for the entrepreneurs' mental and physical exhaustion, it is impossible to verify. If we are talking about superiority or inferiority, there is no need to say more, it is self-explanatory. In recent months, I have had the sympathy of Mr. Ren Zhengfei who burst into tears when he watched girls from poor areas dancing happily. No matter where I go, I see restaurant waiters, delivery boys, taxi drivers and other hard-working people, and I always understand a hundred times. Full of recognition and great respect. Thousands of ordinary workers have contributed their own strength to this great era. Every one of them is worthy of admiration. They work happily and earn their own living. They are the cutest people in this era. Today we are discussing a seemingly metaphysical issue. You have always emphasized that a mature person can live calmly in a complex society, and will not be stressed by tense social relations, nor will he touch the boundaries of behavior. And be punished.As an entrepreneur, facing more complex situations, does he have higher requirements? Just as you mentioned, whether an ordinary person is mature or not, he only needs to pay attention to whether the interpersonal relationships are harmonious and have a sense of rules, so that he can move steadily in a complicated society. Small and medium-sized entrepreneurs are also ordinary people living in society. The first thing they care about is interpersonal relationships. Secondly, they also need to have a sense of rules. However, because the basic transaction results of an entrepreneur's livelihood come from inferior returns, and his returns are inferior to those of employees, creditors, tax payers, and preferred shareholders, he does not only need to filter or avoid like ordinary people. In order to avoid uncontrollable social relationships, he needs to build a trading system through contract transactions. The social relationships he faces are themselves very complex. He cannot hide from them and cannot avoid them unless he gives up starting a business. At the same time, he also Unlike ordinary people who only need to live according to their habits, legal rules mostly come from trading habits, such as not cheating, stealing, robbing, killing, and setting fires. The risk-averse nature also keeps ordinary people away from right and wrong. Daily social laws are enough for ordinary people to There is no danger of staying far away from the boundaries of the rules, but entrepreneurs' daily transactions are touching the boundaries, intersecting with the interests of employees, creditors, the country, partners, etc., and they need to be more careful to ensure that the boundaries are not touched. Can you give an example? During the development period of small and medium-sized enterprises, the salary packages of small and medium-sized entrepreneurs are usually relatively low, corporate profits are very small, and entrepreneurs usually do not pay dividends. In order to improve family life, children's education expenses, personal daily expenses, housing loans and other fields are mixed with enterprises. In most cases, it will not explode, and the contradiction will be resolved over time (increased corporate profits can be offset by dividends); however, in Before these contradictions are resolved, they may break out due to internal conflicts, audits by tax authorities, etc. The essence is that entrepreneurs' sense of rules is different from the requirements of ordinary people. There is a natural conflict between the inferiority of entrepreneurs’ rights and interests and the priority of any rights subject’s rights. If you are not careful, you may be accused of official embezzlement, non-state personnel accepting bribes, etc. Are the social relationships faced by entrepreneurs more complicated than those of ordinary people? The social relationships faced by entrepreneurs include not only the usual social relationships of any ordinary person, but also employees, governments, creditors, competitors and their partners, which are more complex. It can be imagined that entrepreneurs face so many counterparties, each of which has its own transaction logic. If you are not careful, you will be in trouble. What is the transaction logic of entrepreneurs facing their employees? Entrepreneurs As entrepreneurs, we should be grateful that ordinary people in society are risk-averse and pursue fixed income. When you realize that the monthly income of an ordinary employee may not be as much as the cost of a business dinner, you should understand that these lovely employees are actually practitioners of a diligent and frugal culture. They are willing to obtain low income through part-time work and curb their desires. , enter the hierarchical system established by entrepreneurs, and contribute to the dreams of entrepreneurs. Civil servants make up for the income gap through secular job honors, state-owned enterprise employees are motivated through job honors and income, large private enterprise employees are satisfied through high income, lawyers feel at ease through income and free disposal of time, while small and medium-sized enterprise employees are not substantially motivated before , is in a state of being motivated but not motivated, and will leave at any time, full of expectations for high income. Small and medium-sized entrepreneurs should be full of gratitude and a sense of guilt when facing employees who persist. Once they have the opportunity, they need to fully compensate for their shortcomings; otherwise, it will be difficult for entrepreneurs to make their companies stronger, let alone bigger. The transaction logic between entrepreneurs and employees lies in "reciprocity and altruism." Entrepreneurs rely on the expectation that employees will be motivated when the enterprise becomes stronger, so that employees can contribute in the present. Haven’t entrepreneurs already signed labor contracts with their employees to agree on their wages? The treatment in the labor contract is only the critical point of the transaction, which is the minimum price that employees can accept. You also know that jobs are always scarce for workers, and their demand for work is probably at a disadvantage. Adam Smith discovered this logic in "The Wealth of Nations" more than 200 years ago. The seller of goods or services usually has a disadvantage, while the buyer usually has a trading advantage. The labor contracts of small and medium-sized enterprises are probably like this. The lowest price acceptable to workers is reflected in the labor contract. What is the transaction logic between entrepreneurs and the government? In any society and in any era, there is a problem of social hierarchy. The government, as a manager, is always at the top of this hierarchy. Management methods (laws) and attitudes (legislative principles) vary depending on the social system. However, regardless of any system, the relationship between entrepreneurs and the government is, in form, a relationship of management and being managed; in other words, it is a relationship of leadership and the led. In essence, it is a political relationship. Therefore, the basic transaction logic between entrepreneurs and the government is politics. Although this is very complicated, I still want to ask, how does a mature entrepreneur need to talk about politics? must be ideologically consistent with national decision-makers and leaders, must abide by all explicit legal rules in action, must remain restrained and low-key in life, must be consciously self-controlled in desires, and must be self-controlled in terms of development goals. It must be limited to wealth and economic goals, and life goals must also be consistent with social and national goals. This is especially true in China. The above-mentioned awareness can ensure that entrepreneurs can stand up, act steadily, and hold on. What is the transaction logic between entrepreneurs and creditors? There is a company that has completed bankruptcy and reorganization. Although it is a state-owned enterprise, its actual controller was an individual for a period of time. This person's catchphrase is: "Financing means profit, repaying money means loss." This is not ridiculous, but makes people think deeply. As mentioned above, Adam Smith discovered the transaction law of seller disadvantage. Fund providers should have competed for borrowers' borrowing intentions by lowering interest rates. In Western developed countries, faced with high-quality borrowers, the result of competition among numerous banks is Yes, borrowing interest rates have been kept very low. The situation in China is different. This is because the lending market is managed by licenses, and fund providers have advantages; deposit-taking and lending without licenses are punished by criminal law. Small and medium-sized enterprises have to borrow high-interest funds from the society, and trusts and pawn shops have produced puzzling "flowers of sin." A mature small and medium-sized entrepreneur must maintain a clear understanding when facing this strange lending capital market. The environment for entrepreneurs to integrate financial resources has been alienated in mainland China. You cannot borrow high-interest debt at will, and you cannot provide personal guarantees at will. Otherwise, your future will be put on the line. Companies would rather hesitate to move forward than borrow funds arbitrarily and against the rules to expand their scale. That’s it! The seemingly normal loan capital market actually sets a higher threshold for small and medium-sized entrepreneurs to integrate financial resources, but many small and medium-sized entrepreneurs are not aware of it. The maturity of small and medium-sized entrepreneurs is a necessary condition for the maturity of enterprises.For example, if you see the heartfelt joy of employees of a small and medium-sized private enterprise, you will definitely guess that the owner of this enterprise has understood the logic of transactions with employees, which is a necessary condition for a "strong" private enterprise; also, if a medium-sized private enterprise The office building of a small and medium-sized private enterprise in the city is the most luxurious in the area, the signboard is the most conspicuous, and the boss is a household name. The boss hangs out with friends in the five-star hotel he controls. Don’t be surprised that the company collapsed a few years later and the boss was jailed. This is related to consciousness. In the same way, if you see a boss struggling in court, being restricted from spending too much, having secured loans enforced, and having his villa auctioned off, you will understand that he is still far from maturely handling the relationship with his creditors. . Lawyers provide legal services in merger and acquisition exit. What specific projects are included? Lawyer M&A services are first divided into licensed business and non-licensed business. The content of licensed business is mainly compliance review. A typical licensed business is to issue legal opinions to customers to demonstrate the compliance of mergers and acquisitions or equity sales. This is the traditional business of lawyers and has existed since the establishment of the lawyer system. For example, in the mid-16th century, Henry VIII planned to divorce the Spanish princess Catherine, the widow of Henry VIII's brother (who died young), before marrying Anne Boleyn. We know that Boleyn and Henry VIII later had two daughters, one was called Bloody Mary, and the other was Elizabeth I who led England to achieve maritime supremacy. Although Henry VIII was a recognized autocratic dictator, he was still a reasonable man. He hired several professors of law (including religious law) at famous universities in Europe to provide them with professional advice in an attempt to further influence the Holy See. Henry VIII's practice of seeking advice from law professors is analogous to today's practice of licensing lawyers. non-licensed business is to use the work experience of lawyers to serve customers. On Wall Street, around the time of J.P. Morgan, that is, around the beginning of the 20th century, it became normal for lawyers to cooperate with investment banking institutions to engage in merger and acquisition consulting business, but they did not issue legal opinions. Relatively speaking, licensed business is mainly based on the lawyer's practice license; the core of unlicensed business is mainly based on the lawyer's work experience. Lawyers without work experience can do licensed business, but they have no chance of taking on unlicensed business. What services do lawyers provide in M&A exit business? During the M&A planning period, lawyers provide M&A planning consulting and employee incentive plan consulting; during the M&A implementation stage, lawyers provide M&A exit consulting; after the closing, lawyers provide M&A exit management services, with the core business being the management of performance commitment matters; on both sides of the M&A After a dispute arises, lawyers serve as agents or legal advisors to participate in the resolution of merger and acquisition disputes. The core business is M&A exit consulting and M&A dispute resolution. A merger and acquisition exit project will last a long time; even if it is a stage of merger and acquisition exit, some times are uncontrollable. For example, in 2016, I accepted a dispute agency case entrusted by a merger exit party. The plaintiff was a listed company as the acquirer, and the subject of the dispute was hundreds of millions of yuan. To this day, the first-instance judgment has not yet been issued; however, some things are also It may be relatively fast, for example, a merger and acquisition exit consulting matter. Although the matter is very important and complex, there is almost no way out, and there is no way to retreat. The exit was completed three months after signing the service contract, and the merger and acquisition parties signed an equity transfer contract. What is the core logic of M&A exit? M&A exit is a transaction matter. The counterparties of some transactions are uncertain, while the counterparties or potential counterparties of some transactions are certain. Generally speaking, different people have different understandings of the same asset. Some people want to sell it, and some people want to buy it. When the seller and buyer reach an agreement, the transaction is successful.In most transactions, the seller is usually at a disadvantage and the buyer is strong, and M&A exits are no exception. Specifically, the seller accepts the buyer's bid, including the stock price adjustment mechanism (performance commitment); however, the buyer should not be complacent. If the buyer's bid is lower than the lowest price the seller can bear, the transaction will not succeed. In M&A exit transactions, the core logic is to achieve a win-win situation for all parties to facilitate the transaction. Can you give an example of "win-win transactions for all parties"? There is such a project. The shareholding ratio of small shareholders is very low (no veto rights). The project is controlled by the large shareholders, and the representatives of the small shareholders do not participate in the management. The project is not profitable yet. However, for the project's billions of loans, the minority shareholders and their actual controllers have provided joint liability guarantees. Small shareholders worry that if they do not control the situation, the project will suffer losses in the future. Not only will they not be able to make money, but they will also be liable for guarantees, and they want to quit. The shareholding ratios of major shareholders and small shareholders are several times different, but they bear the same responsibilities. This state has not achieved a win-win effect and is unfair to small shareholders. At present, small shareholders have proposed to exit at a reasonable price. For both large and small shareholders, they need to put themselves in perspective. In order to make the project progress smoothly and avoid conflicts between shareholders, for example, if the small shareholders refuse to provide guarantees for new loans for the project (new loans are necessary), the project ecology will be affected. The environment will undergo serious adverse changes, and the project may fail as a result; letting small shareholders exit becomes a matter of benefit to all parties (the exit form can be extremely flexible). As long as the exit price is fair and reasonable, a win-win effect can be achieved for all parties. If life were just like the first meeting, I believe there would be no conflicts between large and small shareholders. That is a realm that can only be met but cannot be sought. Contradictions exist at any time, but they do not exist when conflicts do not occur. Sometimes major shareholders will sincerely rejoice that conflicts have arisen because cooperation is unsustainable, and breaking up or not cooperating may be beneficial to major shareholders. Although the rights and obligations of the counterparty are exactly the opposite, and the rights of the exiting party are exactly the obligations of the acquirer, the relationship between the two parties is not a life-or-death relationship, but a symbiotic, cooperative, and win-win relationship. You can think about it. The most important job in a state of peace at home and abroad in ancient and modern times is to facilitate transactions, which is a persuasive job. Lawyers engage in persuasion. The same was true in the war years. In the early Middle Ages, the plunder and protection of land became the core means of competition, and warriors became the social elite. Aren’t these elites brokering deals? It’s just that the specific methods are more characteristic of the times. Modern society uses brains, while medieval society used swords. The elites of both eras need courage. What are the difficulties for lawyers in M&A and exit business? The core work of lawyers in M&A exit consulting is to remove transaction obstacles. The identification of transaction obstacles is the first step, the elimination plan is the second step, and the last step is the implementation link. The most difficult part is the implementation. When formulating a plan to eliminate transaction obstacles, lawyers cannot just talk about it on paper. They must also be able to implement the plan with their own hands. Otherwise, it will be a false offer; only when it is implemented, it is a real offer. After removing transaction obstacles, if there is no buyer, you still need to find a buyer. If there are buyers or potential buyers, you need to communicate with the buyers or potential buyers. Some communications are long and some are short. There was a large-scale merger and acquisition exit project. The buyer decided to buy within 30 minutes. It was already 3:30 in the afternoon. The large-amount remittance channel was closed at 4:00 in the afternoon, and a deposit of hundreds of millions was required. I read dozens of them in ten minutes. The contract of pages is really a headache. I know that lawyers are not responsible for finding buyers, that is the job of financial advisors, but how should lawyers negotiate when they need to communicate with buyers or potential buyers in M&A consultation? Yes.After the transaction obstacles are removed, the buyer does not need to find a lawyer. Although lawyers do not do the work of finding buyers, they need to communicate and negotiate with buyers or potential buyers, communicate on transaction arrangements, and try to persuade all parties to reach a fair deal. This requires cultivating ideas. Buyers cannot think that sellers will lower their conditions excessively, be arbitrary in terms of transaction prices, payment terms, etc., and make excessive demands; many transactions hesitate at these links, and some even fail. At the critical point when a deal falls apart, the seller needs to make concessions if he or she is serious about selling. The seller's standard for measuring the price of an M&A exit transaction is whether there will be other trading opportunities if this trading opportunity is lost. If there are no other trading opportunities, how much he will ultimately lose due to losing this trading opportunity. The payment period and means are the second issue. From the perspective of facilitating transactions, if there is interest and guarantee in the case of deferred payment, it can be recognized; other assets that can be quickly realized, such as stocks of high-quality listed companies or real estate in first-tier cities, can be used as means of payment. How do transaction barriers arise? Transaction obstacles mainly come from the historical transactions of the M&A exit parties and their actual controllers. The practice of consulting services in recent years shows that most of the transaction obstacles come from historical transactions. Some of these historical transactions are relatively standardized, but most of them are irregular and a mess. Without exception, the M&A exit parties are tightened and tightened, and in the end they are almost unable to move. trembling. To be honest, some transaction obstacles cannot be eliminated at all in the end; although some obstacles can be eliminated, the cost is very high. Many people think of lawyers when they are restrained and unable to move forward. If by chance, these obstacles may be eliminated; in many cases, lawyers are powerless. Lawyers are the think tank for entrepreneurs’ M&A and exit, not the force that decides everything to turn things around. In individual cases, you may see changes that turn things around due to the intervention of a specific team of lawyers. The role of lawyers is only to discover the logic that drives these changes. If such things happen frequently to a team of lawyers, it can be said that the team is more dedicated; but it cannot be said that the lawyers have the power to turn things around. What rules apply to remove transaction barriers? has explicit rules, but they are more natural law rules. For example, in a small shareholder exit case, the biggest obstacle is the inability to reach a consensus on the equity price. For such matters, explicit rules are useless and we have to rely on human feelings. Basic human feelings or natural law rules are to reach a consensus by not doing to others what you do not want others to do to you. There is another successful case of using explicit rules. In a merger and acquisition exit case, I accurately applied the contract law to fulfill the right of defense first, and believed that the project transferor had committed a breach of contract. The project land was successfully saved, the wind-stained project regained its vitality, and finally successfully exited. This case has been studied by other lawyers, but they all thought there was no way out, and they failed to find this key point that could lead to a turnaround. Interviewee: Wu Xibin, senior partner of Beijing Huacheng Law Firm Source: "Entrepreneurs' M&A Exit" Q&A The copyright of this article belongs to the original author and is for learning reference only. It does not represent the views of Fatou Suoji or Position, commercial use is prohibited. If there are any issues related to work content, copyright and other issues, please contact us within 30 days. 0 times. When a listed company issues shares to purchase the equity of an unlisted company, the valuation standard given to the target company is roughly 15 times the expected net profit of the target company, with the lowest being less than 10 times and the highest generally not exceeding 20 times.
This requires cultivating ideas. Buyers cannot think that sellers will lower their conditions excessively, be arbitrary in terms of transaction prices, payment terms, etc., and make excessive demands; many transactions hesitate at these links, and some even fail. At the critical point when a deal falls apart, the seller needs to make concessions if he or she is serious about selling. The seller's standard for measuring the price of an M&A exit transaction is whether there will be other trading opportunities if this trading opportunity is lost. If there are no other trading opportunities, how much he will ultimately lose due to losing this trading opportunity.
The payment period and means are the second issue. From the perspective of facilitating transactions, if there is interest and guarantee in the case of deferred payment, it can be recognized; other assets that can be quickly realized, such as stocks of high-quality listed companies or real estate in first-tier cities, can be used as means of payment.
How do transaction barriers arise?
Transaction obstacles mainly come from the historical transactions of the M&A exit parties and their actual controllers. The practice of consulting services in recent years shows that most of the transaction obstacles come from historical transactions. Some of these historical transactions are relatively standardized, but most of them are irregular and a mess. Without exception, the M&A exit parties are tightened and tightened, and in the end they are almost unable to move. trembling. To be honest, some transaction obstacles cannot be eliminated at all in the end; although some obstacles can be eliminated, the cost is very high.
Many people think of lawyers when they are restrained and unable to move forward. If by chance, these obstacles may be eliminated; in many cases, lawyers are powerless. Lawyers are the think tank for entrepreneurs’ M&A and exit, not the force that decides everything to turn things around. In individual cases, you may see changes that turn things around due to the intervention of a specific team of lawyers. The role of lawyers is only to discover the logic that drives these changes. If such things happen frequently to a team of lawyers, it can be said that the team is more dedicated; but it cannot be said that the lawyers have the power to turn things around.
What rules apply to remove transaction barriers?
has explicit rules, but they are more natural law rules. For example, in a small shareholder exit case, the biggest obstacle is the inability to reach a consensus on the equity price. For such matters, explicit rules are useless and we have to rely on human feelings. Basic human feelings or natural law rules are to reach a consensus by not doing to others what you do not want others to do to you.
There is another successful case of using explicit rules. In a merger and acquisition exit case, I accurately applied the contract law to fulfill the right of defense first, and believed that the project transferor had committed a breach of contract. The project land was successfully saved, the wind-stained project regained its vitality, and finally successfully exited. This case has been studied by other lawyers, but they all thought there was no way out, and they failed to find this key point that could lead to a turnaround.
Interviewee: Wu Xibin, senior partner of Beijing Huacheng Law Firm
Source: "Entrepreneurs' M&A Exit" Q&A
The copyright of this article belongs to the original author and is for learning reference only. It does not represent the views of Fatou Suoji or Position, commercial use is prohibited. If there are any issues related to work content, copyright and other issues, please contact us within 30 days.
