Chapter 29 Chapter 6 Conquest: Notebook of Five Major Mergers and Acquisitions of Focus

TV media acquires print media, print media acquires online media, and online media in turn acquires TV media. This kind of story of a snake swallowing an elephant, or a big fish eating a small fish, happens almost every day in the commercial field.Whether it was AOL's acquisition of Time Warner back then, or Google's start to get involved in the print media business, in addition to long-term considerations in the capital market, media businessmen all want to add more auxiliary projects to their existing advertising business, so that customers Maximize advertising value.How could Jiang Nanchun and his focus be an exception?

Both Frame Media and Focus Media sell advertisements around the elevators of high-rise buildings. The difference is that Focus Media uses TVs to display advertisements in office buildings, while Frame Media uses flat maps to display advertisements in apartment buildings (in 2007, after Frame 2.0 went online, this media upgrade to digital flat form). On October 17, 2005, Focus Media announced that it has wholly acquired the largest elevator print media frame media in China. According to the acquisition agreement, Focus paid an initial payment of USD 39.6 million in cash and USD 55.4 million in Focus common stock.In addition, according to the performance of Frame Media in 2006, Focus will also pay no more than US$88.6 million for the second phase of acquisition.According to the current development speed of frame media, Focus may eventually need to pay a total price of about 183 million US dollars.This merger set a record for the highest media mergers and acquisitions in China in recent years.

This big deal made Jiang Nanchun feel his heart beating, so much so that when he talked about the capital trick with a reporter from the "Beijing Times" after a few months, he was still excited. Long before Focus went public, Jiang Nanchun had his eye on this little partner.According to the framework at that time, the annual profit was more than 10 million yuan, and Jiang Nanchun offered 65 million yuan, equivalent to 5 times the annual profit, which met the general standards of industry acquisitions, and both parties were also somewhat interested.However, just halfway through the negotiations, Focus was too busy to go public, and Jiang Nanchun felt that the size of the framework was too small to make a deal, so the deal fell through.

After finishing the listing, when Jiang Nanchun found the framework again with hundreds of millions of dollars, the situation had changed: with the strong support of many venture capitalists including IDG, the framework launched a round of almost crazy acquisitions, Mergers, alliances, and integration campaigns have occupied more than 90% of the elevator print media resources in major cities in China, and the advertisers include more than 300 well-known brands at home and abroad. The financial statements before Jiang Nanchun show that the annual profit of the new framework company has reached more than 10 million U.S. dollars, and, under the guidance of IDG, the acquisition pricing standard set out by the new framework is: 11 times the annual profit.

"It doesn't matter if you don't accept it, we will go to Nasdaq by ourselves." The framework is very calm. "What will it do when it gets the money when it goes on the market? The elevator space is so big, it must be against us. A typical potential competitor, simply accept it in advance, and expand our financial report for next year." The price rose in a blink of an eye. The price nearly doubled, but Jiang Nanchun gritted his teeth and still offered a sky-high price of 1 billion yuan, swallowing the frame in one go. In this era of old and new, countless companies and brands try to stand on the international stage every day.Focus Media’s merger and acquisition of framework media is the transmission of Jiang Nanchun’s ambition to build an advertising empire, and the acquisition itself has become an interesting process in the growth history of Focus Media.

In mid-October, Jiangnan Chunfei went to Beijing to formally sign a contract with Tan Zhi, chairman of Frame Media, the largest elevator print media in China. On October 15th, as a result of the signing, Focus Media announced that it would acquire 100% of the equity of Frame Media, the largest elevator print media advertising operator in China, at a price of US$183 million. All under its banner. The Focus M&A framework media caused a huge sensation in the national advertising industry at that time.When advertisers talk about this merger after dinner, they may not know that Focus Media and Frame Media are very familiar with each other.

When it comes to M&A Frame, the largest media M&A case in China, Jiang Nanchun recalled that as early as 2002 (at that time, he was still the general manager of Yongyi Media, before Focus was founded), Jiang Nanchun often represented Frame Media in the advertising business.Since then, Focus has also bought LCD screens with frame media.Before being acquired, Frame Media Advertisement divested all LCD TV business to Focus Media, and signed a contract with Focus Media that "Focus Media shall not enter the community elevator media field". On the other hand, because Focus is also very optimistic about the business of elevator posters, the community has always been its interest. Therefore, in August and September of 2005, the negotiating parties began to "close" contact. "Because everyone saw the significance brought by the leading brands of both parties in their own fields, they quickly established a cooperation intention." Jiang Nanchun revealed that the business negotiations were basically established within two or three meetings, and the brand awareness In terms of the degree of integration with the business, they almost finished it at one go, and did not have too many scruples on the technical and commercial levels.Therefore, this merger and acquisition really happened between two old friends who have known each other for a long time, so the negotiation went very smoothly.

After the completion of the merger, Frame Media will become a wholly-owned subsidiary of Focus Media, and Tan Zhi will continue to serve as the chairman and CEO of the company. At the same time, Tan Zhi will also serve as the senior vice president of Focus Media.Tan Zhi has served as the deputy general manager of Microsoft (China), the senior vice president of UT Starcom China, and the CEO of 8848.net.He holds the current position on behalf of the investors IDG and Hanergy Fund of Frame Media. IDG Corporation and Hanergy Fund joined the framework media in November 2004. "In Guangzhou, the elevator advertising market has always been highly competitive. In the past, due to the large number of companies involved, the prices of some buildings were doubled." Tan Zhi believes that without mergers, the market will disappear without protection. "This is actually protecting the interests of customers, consumers, and owners." Tan Zhi also said that the integration of frame media is carried out according to the three major regions of South China, North China and East China.At once? ?As far as the northern region is concerned, it is the northern part where Langmedia Media has merged with other companies.The situation in East China and South China is similar.

This merger between friends not only did not hurt the original harmony of the friends, but the alliance between the two strengthened the harmony of the king and domineering. Although Focus Media has begun to expand into the residential building advertising field, its main business area is still focused on the high-end market, selling advertisements in commercial buildings and office buildings.The business of Frame Media is aimed at mid-range and high-end residential buildings.Facing the reporter of "IT Times Weekly", the marketing director of Frame Media once proudly declared: "Frame Media has 80% of the national community advertising market share."

This is not just self-promotion and self-hype boasted by the framed media. In 2005, Frame Media launched a round of integration frenzy across the country, and dominated the world in the original layout of the elevator and print media market.Frame Media has successfully integrated 9 elevator print media companies with the strongest competitiveness in the industry, including Original Frame Media, Lang Media, Xincheng Universal, Leading Media, Tuojia Media, Sunshine Jiaxin, Shenghuo Media, Moment Media, and Xinghuo Media ; On the original basis, it has formed strategic alliances with more than 30 other major cities, with media networks all over the country, occupying an absolutely strong position in the field of elevator print media.At that time, the total media volume of Frame Media had reached 130,000 advertising boards in more than 20,000 buildings in 33 key cities, and the market coverage rate was as high as 90%.

The vicious competition in the industry has been eliminated, and the market environment outside the company has become clearer.The unified market and unified price avoid vicious bidding, so that customers can choose a large-scale network and high-quality services with more confidence, and do not need to spend a lot of time "shop around".This move not only brought about a sharp increase in profits, but also made more and more industry giants such as China Mobile, Nokia, Samsung, Bank of China, IBM, HP, FAW-Volkswagen become loyal customers of Frame Media. According to the survey data of the new-generation market monitoring agency on the elevator print media market, in Beijing's residential buildings, the frame elevator print media has a similar market share of 99%; the high-quality resources from Beijing, Shanghai, Guangzhou and Shenzhen have an average share In terms of value, the market share of the framework also accounts for 90%. Therefore, at the "China Advertising and Brand Conference" with the theme of "witnessing history and grasping the future", Frame Media stood out among many powerful media and won the "2005 China Advertising New Media Contribution Award - the most effective reach media". In fact, the reason why Jiang Nanchun chose the frame medium is that the understanding of the "waiting economy" model coincides with that of both parties. Due to the tense working rhythm of modern people, the middle and high-income groups especially bear more work pressure. They have little time to read newspapers carefully, and they only read newspapers in a hurry, and do not pay attention to advertising information at all; They hardly have time to watch TV, and they rarely have access to prime-time TV commercials; due to the high pressure of competition and many things to consider, they often keep thinking even on the road. All kinds of outdoor advertisements also lack deep memory. Frame media's elevator print advertisements just make up for these shortcomings. The high-end apartments where they live and the office buildings where they work are the places where middle and high-income groups go in and out most frequently.The non-interference and confined space of the elevator media can just facilitate people's visual needs. According to the survey data of AC Nielsen market monitoring agency on the audience habits of elevator media, each person takes the elevator about 5 times a day on average; every 10 times when taking the elevator, the average attention is 5.7 times to pay attention to the LCD advertisement of the elevator. In this way, each person pays attention to the elevator every month The number of LCD advertisements is: 5 times × 30 days × 5.7/10=85.5 times. On the other hand, the people targeted by the framework are mainly middle- and high-level white-collar workers, plus Chinese social celebrities, middle- and high-level government officials, and private business owners, which accurately cover almost all high-quality consumer groups in China. Focused audience groups are similar and fit precisely. It’s no wonder that Focus Media merged with frame media. In Jiang Nanchun’s own words: “Happiness is a little more than being listed, and only a little less than first love.” With a total purchase price of no more than 183 million US dollars, Focus is directly linked to the “group army” of building elevator print advertisements. , in Jiang Nanchun's opinion, money well spent. "The acquisition of Frame is a strategic creation." Jiang Jiang said in an interview with the reporter of "IT Times Weekly", "Next, we and Frame Media will focus on the integration of customer resources. The market also needs to be cross-covered and integrated into a whole." In fact, Jiang Nanchun's goal of establishing Focus Media Company is to build a Focus Media platform.This platform is like a network, covering many areas of people's lives: life stores, residential apartments, office buildings, and even airports and bars.He fantasizes that people can see it while waiting for the elevator, taking the elevator, going to the supermarket, maybe even on the road... In short, the digital screens of Focus Media are everywhere and all the time.Therefore, whenever talking about the prospect of Focus after the M&A framework, Jiang Nanchun always optimistically pointed out that Focus's own building business has grown very fast and there is still a lot of room for growth. According to statistics, there were more than 1,200 buildings in Shanghai at the end of 2004, and now the number has risen to more than 3,000.Jiang Nanchun further stated that Focus Club is committed to creating a more three-dimensional and focused platform. "We will focus on different characteristic audience groups in different locations, and impress all our consumer groups with the lowest cost. The 'joining' of frame media makes Focus even more powerful, and it is overwhelming." Mergers and acquisitions are overwhelming for several major competitors Jiang Nanchun was overwhelmed by the impact of the attack, "Actually, being able to acquire frame media would make anyone excited. What's more, it is a 70% + 90% business. And the integration of frame and focus is also in Juzhong's backyard. Burned fiercely." We must know that the apartment building part has always been a gap in Focus's outdoor market network, but it is the strength of Focus's old rival, gathering people.Jiang Nanchun's idea of ​​filling this gap has been around for a long time.Back in 2003, Jiang Nanchun had announced that he would enter the apartment building market, but eventually gave up.Facing the interviewed media at that time, Jiang Nanchun explained: "The entire apartment building market is not expressive enough for LCD screens. The flow of people in apartments and office buildings is 1:10, and LCD screen media is not very suitable for elevator entrances in apartment buildings." Having said that, in the eyes of Jiang Nanchun and his focus, the market potential of mid-range and high-end residential buildings is huge. What Focus lacks is a powerful and efficient means of entry, and a more accurate form of media is needed.This time, the elevator print media advertising concept advocated by Frame Media is just a good entry point, and at the same time, it is in line with Focus Media's new concept of creating a media group in the life circle.In the two months before 2006, people saw the video advertisement of Juzhong at the elevator entrance of the apartment, and then saw the print advertisement of Focus (frame) after entering the elevator. On the other hand, Focus's "presumptuousness" in the gathering place is also reflected in the origin of the frame media of Focus's mergers and acquisitions. As a pioneer and major supplier of social media in China, Frame Media installs and configures frames in elevators and public spaces in high-end residential areas, and sells frame space to advertisers.On the other hand, the advertising resources mastered by Frame Media before it was acquired also made the crowd "greedy".Before the acquisition, Frame Media Company has about 90,000 advertising frames in Beijing, Shanghai, Guangzhou, Shenzhen, Wuhan, Nanjing, Dongguan and other major cities in China, and has more than 300 well-known international and domestic customers, including Audi, Lenovo , Microsoft, Motorola, Omega, HP, Fuji, China Netcom, Samsung and Sony, etc. After the transaction is completed, Frame Media will become a new business unit of Focus Media.And through this transaction, Focus Media's ability to provide comprehensive media solutions to advertisers will be strengthened, and its leading position in China's outdoor advertising market will be further consolidated. One radish and one pit, China's buildings have become scarce resources.The move of Jiangnanchun's M&A framework is further occupying resources that are or have been scarce.Mergers and acquisitions enabled Focus to add high-end apartment media resources on the basis of the original network. The framed 100,000 elevator posters and 25 million daily average network coverage were re-integrated with Focus’s media, and Focus therefore entered the community life of Chinese urbanites In the field, its overall media contact probability has increased again. Domineering and proud of the Central Plains, the king raises his flames.Pull up the mountains and rivers and the sky, and the majesty will triumph.Jiang Nanchun boldly and directly took the initiative to burn the flames of war to the backyard where "enemies" gathered.When the "fire" became more and more intense, Juzhong's original advantages had to gradually disappear with this merger and acquisition. How could Juzhong be able to withstand the fierce offensive of Focus in the future and "escape from the tiger's mouth"?