Chinese diamond tool companies must read cross-border M&A and investment

Editor's Note: In the three executive directors (expansion) meeting of the 5th China Superhard Materials Association held in Wuhan on May 20th, Chairman of the Board of Directors of Wuhan Wanbang Laser Diamond Tools Co., Ltd., Ye Hongjun, “Thinking on the Survival and Development of Diamond Tools Enterprises” The report mentioned that "if Chinese diamond tool companies want to cultivate world brands, "overseas mergers and acquisitions" is a good and effective method." Today we continue this topic and continue to talk down.
The theme shared today is cross-border mergers and acquisitions. In fact, whether the investment is domestic or foreign, it is the stock market or equity investment, VC investment, the essence of which is unchanged - that is, three points, one is that the industry value is not worth investing, and the other is whether there is good reserve. The team, third, has not found a business model to solve the demand. No matter what investment, you have to ask yourself whether this industry is good or not. This enterprise is good or not, and there is no amplification effect required by investment.

1. PE investment is very difficult, mainly relying on three
Everyone can often hear PE investment (Private Equity), which is actually very difficult to do. What is the difference between PE investment and secondary market investment? The secondary market investment can be corrected at any time, but PE investment cannot be moved after five years of investment, so it is necessary to look at the situation of a company five years later.
In fact, it is very difficult to make such judgments. Even the executives of the company can hardly see the situation of the company five years later. PE investment is to do this, just want to know what will happen to this company in five years.
PE investment depends on three pieces:
1. Discover the value. This enterprise is already optimistic and accurate when people are not optimistic. Like Drip Dock, it can be seen when it is in the A round. In fact, it is the value of this platform.
2. Help after the vote. After the investment is completed, help it to upgrade or complement the original short board, enhance the value, or supplement the product line and other scales through mergers and acquisitions.
3. Magnify the value. In addition to listing, there are many ways to amplify the value, such as docking capital market, financial leverage, asset structure leverage, research advertising input leverage, etc., using different levers to amplify the value of this enterprise.

2. Judging whether it is worth investing in five aspects
We usually judge from five aspects that the industry or enterprise deserves to be worth investing.
1. This management team value is not worth your investment. Everyone said that investment is a investment, and we must constantly summarize the common characteristics of successful entrepreneurs and teams.
2. This industry deserves to be worth your investment. The industry is changing every day. To judge whether an industry is good or not, we must first analyze the structure of this industry.
3. How is the future growth of this industry? Because investment always has to invest in a growing company, failure to grow is a failure. Jingdong’s sales revenue of 150 billion yuan this year is still a loss, but it has been growing, and growth can solve a lot of aspects of corporate value.
4. What is the difference between this company's business model and its competitors, whether it is a homogenous business model or a personalized business model.
5. If this company is connected to the capital market, will there be any obvious obstacles. There are a lot of companies that are doing very big, but they can't enter the capital market, and they can't achieve the effect of amplification. So such a company is not the best investment target.

3. What kind of team is worth investing?
A team is good, how to judge?
Looking at what a company's chairman does every day, you can see how big the company can do. If the chairman is very careful, this company will definitely not do much. When Ma started his business in 1999, he did not do anything else. He wanted to update the business model every day and wanted to improve and improve every business area.
I believe that if a company has had subversive innovations and this disruptive innovation has helped the company to achieve leapfrog development, we can quietly wait for this company to have another opportunity for disruptive innovation in the future.
Secondly, it depends on whether the management platform is open or not, and the closed management platform can not give birth to large enterprises. In the past, a good business model could last for five or six years. Now, if it is not improved, it can only be maintained for one or two years.
Then look at whether the chairman has an open mind. I once invested in a business. This business owner is very young. He has already made the product the Chinese leader in the field. A German colleague had an intention to acquire them. He spent a lot of time to receive. I asked him if your company is going to go public and it is impossible to sell it. Why do you still have to pay such a large amount of time to receive it? He said, how can I conclude or sell without receiving a reception? I am at home, at least helpful to me. If you feel that you can talk after the talk, talk about cooperation. He always maintains a very open mind to treat.
Later, the German colleague did a due diligence survey for more than a week, and wrote a management proposal of six or seven pages, which digs into the depths of every flaw of the company. Finally, although the merger was not successful, the cooperation between the two companies has begun. On the day the company went public, the chairman told me that the reception of German companies had a great advantage for his competitiveness.
Also, cultivating people is very important, and the chairman must spend a lot of time managing the vice president. The more the chairman knows the deputy generals, the more they will exert their potential. Decentralization is the key to cultivating people. I have invested in a company and will be listed soon. His chairman was once the president of the China region of a Fortune 500 company, and brought a group of newly graduated college students to start a business. These students didn't have any experience at all, and he still dared to give them power, to praise them, and to make mistakes. Fifteen years have passed, and now the company has sales of 6.7 billion yuan. These deputy generals also have the characteristics of first-class entrepreneurs.

4. What kind of industry is worth investing?
Let me talk about what kind of industry is a good industry.
Everyone has thought about this problem. The most shallow industry analysis is the analysis of industry supply and demand, such as overcapacity. The middle level industry analysis is the analysis of industry factors, and the deep industry analysis is the industry structure analysis.
I think that some industries will never be able to make big companies. I call this industry a fragmented industry. For example, snack foods are not very big, because different regions have different preferences for snack foods. To judge the degree of differentiation in this industry, how many times the highest value and the lowest value differ, the greater the difference, the competitive factor is performance, it depends on brand competition. For example, express delivery, SF's price is 3-5 times that of other express delivery, this can also give birth to large enterprises, this time is to rely on service and speed to win. But coke, there is almost no difference in price, this product can only win by cost and scale.
To analyze an industry, it is necessary to summarize the most important competitive factors in this industry. If in an industry, the fifth is better than the boss in all the competitive factors, but the scale is only one-fourth of the boss, I am sure to vote for the fifth, because it has the potential to catch up.
What kind of industry is a good industry? The main thing is to look at two aspects, one is the industry structure, and the second is the industry competition factor. What is the competitive landscape of the industry? There is a saying that is determined by the relationship between the top five companies in the industry. The relationship between the top five companies determines whether the industry will fight price wars.

5. What kind of company is worth investing?
Investment is definitely a growth in investment. It is useless for this company to grow in the future. But how do you judge whether this company will grow? To analyze what is the reason why this company has grown fast in the past, what is the driving force, what the industry brings, or what the company brings. If it is brought by the industry, it will be saturated one day sooner or later. If it is brought by the company, it is relatively safe.
The growth brought by the increase in market share is the most quality growth. The term "market share" is very useful in a fully competitive industry. The market share is a cake that has been grabbed from competitors. It really depends on strength. I have invested in a car parts project. In the six or seven years, the market share has doubled, which is much faster than the industry. This shows that this company is promising and the product is good. Product performance improvement, production cost reduction, and new product development speed guarantee are the internal factors of enterprise development. Therefore, I like to see companies with strong self-improvement ability. Self-improvement ability determines the growth speed and growth boundary of the company.
In addition to find some outlets, the industry will develop rapidly in the upstream and downstream, such as the logistics industry. This is the highly flexible industry, that is, the industry itself is growing faster than the downstream industry.
There is an industry that is an industry that relies on platforms. To judge whether such a company can grow bigger, it is necessary to judge that the speed of this platform traffic is not fast enough. Human resources is also a platform. For example, if you want to see if the fifth deputy general recruiter can help the previous vice presidents, it is actually a platform cumulative effect. Growing with the platform, it depends on whether the platform is fissionable.
What do companies do when they have bigger bottlenecks? Those who make investments should also look for the characteristics of these companies, and constantly think about where the ceiling of the company is. For example, the trap of cash flow, the trap of organizational degradation, the trap of core management ability, we must be able to see what is going backwards and what is going forward.
To sum up, how to judge the growth of a company? The positive aspect depends on what its growth motivation is. On the negative side, it is necessary to sum up the ceiling of the enterprise, that is, where the pitfalls and bottlenecks of its growth are.

6. Unique business model and IPO feasibility are also important
The future competition must be competition in the business model. The so-called business model is the operating mode. To put it bluntly, it is the profit model. Different companies in the same industry have their unique business models, and the world can't find two companies that are exactly the same.
What kind of business model is a good business model? You look for a unique business model and you can create an industry. If your industry model is unique, you can avoid fierce competition and bring a relatively relaxed environment to your development.
In addition, an IPO feasibility analysis is required. If this enterprise is doing a lot, it can't get on the market, and it lacks a set of tools to finally dock the capital market. This is a pity. If you are thinking about the feasibility of this enterprise IPO in the investment analysis system, the feasibility of listing will be more perfect in the future.
So whether you are doing domestic projects or doing foreign projects, you should think about these five aspects: how about the team, how the industry is, how the business grows, how the business model is, and how feasible it is to dock the capital market.

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