Chapter 30 Mergers and Acquisitions: Brothers of Two Strong Rivals Consolidate
Just when Focus Media thought it was monopolizing the blue sea of buildings, Juzhong Media "falls from the sky". This company, which is almost as powerful as Focus Media, has put a lot of pressure on Focus Media from the very beginning.The well-matched business scale and almost identical business model brought an episode to the plan of Focusing on the King of the Mountain, so the two sides simultaneously started a plan to expand to the whole country, and launched thrilling battles at the stairways of major cities across the country. fierce competition.
Just as the two sides were confronting each other in the advertising market, Focus Media suddenly announced that it would acquire 100% of the equity of Juzhong Media at a price of US$325 million. This move caused an uproar in the industry.For a while, cheers and doubts erupted one after another.However, no matter what, the two companies gathered together, this time the two swords are perfect, the coverage of the new Focus Business building network has exceeded 100 million urban mainstream consumers, and the market share has jumped to 98%, almost completely dominating the building advertising market.
The name of Juzhong Media comes from "Sun Tzu's Art of War": "The method of using troops will be ordered by the emperor. Join the army and gather the crowd, and give up when they join. is weak.This is the general law by which all things work.The "gathering" of gathering the crowd gathers attention and gathers the audience; the "crowd" of gathering the crowd, only three people can become a crowd. "Juzhong" aims to gather three types of people: good customers, good investors, and good talents, and then use a good business model and a good corporate culture to closely combine these elements.
"Business people in office buildings spend 303 seconds waiting for the elevator every day. During these 303 seconds, people can't do their own things as they want, and they can't even talk loudly. People are often in an embarrassing?? Boring, no choice state , At this time, excellent and high-grade advertisements will attract people to take the initiative to appreciate them.” This is the result of careful investigation by Yu Feng, president of Juzhong Media, before the establishment of Juzhong. In 1999, Yu Feng saw an LCD monitor in an elevator in Chicago, and a creative spark arose.Like Focus, the birth of Juzhong also came from Yu Feng's "flash of inspiration" when he was riding the elevator.
In 2004, Juzhong set up branch companies and conducted direct sales to "distribute points in circles".In just one year, Juzhong claimed to have entered 30,000 commercial buildings in 50 cities across the country.In 2005, Juzhong entered the field of convenience stores and apartment buildings in one fell swoop, and even publicly claimed to have an 80% market share in apartment buildings.
In December 2005, Juzhong successively acquired building TV advertising companies in second-tier cities such as Shenyang, Wuhan, Changsha, Fuzhou, and Jinan in order to quickly dominate the local market in a short period of time.
"Adopting the acquisition strategy will help Juzhong quickly occupy the local market in a short period of time when it does not have an advantage in the local area." Kong Weiying, a spokesperson for Juzhong Media, said publicly, "The acquisitions are from Liaoning, Wuhan, and Fuzhou. Building TV advertising companies, the number of office buildings they cover occupies more than 70% of the local share.” After the acquisition, Juzhong will achieve absolute control in these companies.
At the same time, behind the acceleration of "staking the land", Juzhong is making the final sprint for the successful listing on NASDAQ in the United States.According to Yu Feng's previous plan of Juzhong Media, Juzhong will be listed at the end of 2005 or early 2006, and Morgan Stanley has been selected as the lead underwriter for the company's overseas listing. In August 2005, Juzhong submitted an application for listing new shares to the US Securities Regulatory Commission and entered a quiet period for listing.
Although some people in the industry believe that Juzhong is more likely to land in Nasdaq in the first quarter of 2006, Juzhong Media itself refuses to make any disclosure or comment on this.Kong Weiying only claimed that the recent acquisitions are to further establish its position in this market, and judging from the acquisition direction and acquisition strategy, Juzhong Media still focuses on high-end office buildings and other places frequented by "three high crowds" in second-tier cities The entry point, before expanding to auxiliary places.However, the gathering of people who once kept a low profile and was ready to go has become the biggest obstacle to the growth of Focus.
The emerging building advertising business is basically created by focusing and gathering people.In the building video market, Jiang Nanchun, Yu Feng and Focus Media and Juzhong Media led by them are undoubtedly a pair of outstanding opponents.The gathering of the two families is like coals of ice, and the situation is like fire and water. During the period of competition for the market, the two sides fought against each other and competed in the Central Plains.In these wars, there is no distinction between superiors and inferiors, or you compete against each other. In short, each opponent wins and loses. From the perspective of the industry, it is even more exciting.
World War II hero and former British Prime Minister Winston Churchill said: "There are no permanent enemies, only permanent interests." In the business world, friends and enemies are definitely a relative concept.Decentralization and mobilization began to use this concept and painted a wonderful future for it.The focus and gathering of the crowd, who have been fighting close to each other, finally "meet each other with a smile and forget all grievances", and gather together from division.
At the end of 2005, Carlyle's suggestion made Yu Feng and Jiang Nanchun, two former opponents, finally sit at the negotiating table.Two weeks later, on January 7, 2006, the structure of the domestic building advertising market changed suddenly. NASDAQ's new darling, Focus Media, merged and acquired Juzhong, and acquired Juzhong Media, an old rival that had been following closely.Focus Media and Juzhong Media, which split the domestic building TV market, reached an agreement. According to the transaction terms of the two parties, Focus Media will acquire 100% of the equity of Juzhong Media at a total price of about 325 million US dollars in cash and stocks, and completely acquire Juzhong.Among them, 94 million US dollars will be paid in cash, and the remaining 231 million US dollars will be paid in the form of shares. Yu Feng, CEO of Juzhong Media, will also join the board of directors of Focus Media and serve as the co-chairman of the board of directors with Jiang Nanchun.
After the transaction was completed, the domestic media M&A scale record was once again refreshed by Focus Chairman Jiang Nanchun.There has been a two-year war of words, which was originally a needle-point confrontation, and even a few months ago, it was still an inconsistency between focusing on the crowd and gathering the crowd. In the blink of an eye, it became a sudden merger and acquisition of "relatives", which caused an uproar in the industry.
However, Focus executives said that the two parties only started to negotiate on the merger intention in mid-December 2005, and it took only 3 weeks to finally reach an agreement. effect".Wayne Tsou, managing director of Carlyle Group and director of Carlyle Asia Venture Capital and Growth Fund, said before: "Yu Feng said that he and Jiang Nanchun have fought for three years, and both sides know each other well, despite the differences in personality , have different ideas, but they can complement each other, and working together can prevent the other party from making mistakes.”
According to reports, before the merger, Yu Feng held 40% of the shares of Juzhong, and Carlyle invested a total of 20 million US dollars in Juzhong, holding about 25% of the shares, and the other 35% of the shares were held by minority shareholders.After the merger with Focus, some minority shareholders have cashed out, while Yu Feng and Carlyle still maintain their existing equity.
After the merger is completed, Focus Media will still retain Juzhong’s brand, but Juzhong’s existing building video advertising business will be merged into Focus Company. According to the strategic plan, Target Media (Juzhong’s English brand) may carry outdoor large screen and some segmented media advertising business .
Once the merger of Juzhong and Focus Media is completed, the new Focus Media has occupied 98% of the domestic building advertising market. The commercial building network will cover 75 cities in China, with more than 30,000 buildings and 60,000 display screens (35,000 for Focus, The gathering is 25,000).As soon as news of the acquisition came out, Focus Media's share price rose by $1 on Nasdaq to close at $37, an increase of 2.8%.
In this regard, Zou Weien did not hide his excitement at the time and said: "After the merger of the two companies, China's largest outdoor advertising platform will immediately surface. The Carlyle Group has always been committed to adding value to Juzhong Media, and Carlyle will continue to contribute to the merger. long-term support for new companies.”
The market is the first pair of powerful hands, and the common expectation and goal of a win-win situation urges Focus and Juzhong to abandon portal prejudice and come together.After the "unification of the rivers and lakes" in which Focus and Juzhong merged, various places under the previous "circle" of the two parties can form different networks.All of a sudden, the combination of the two powers into one, and the alliance of the strong have made the media market a powerful force that cannot be ignored.
Based on the nature of the buildings, the merged Focus Group further subdivided the commercial building network, gradually covering four categories: leaders, business and white-collar workers, business travel white-collar workers and fashionable people.On the other hand, the almost identical business model of Focus and Juzhong has established its unchallenged market position after the merger. There are basically no competitors in the industry, which can save operating costs to a large extent and eliminate price wars.
In addition, after the merger, the elites of the two companies can free up their energy to make outdoor video advertising bigger and stronger, devote themselves to the construction of industry standards and effect evaluation systems, and think about new development directions.A monopoly in building TV outdoor advertising market has been clearly outlined.Jiang Nanchun said meaningfully, "In the future, this industry will become more and more cooperative."When the most powerful opponents in the market become Focus's partners and jointly create a larger market, there will be no other opponents.
But monopoly is not the ultimate goal of Jiang Nanchun and Yu Feng's merger of Focus and Gathering. It is the foresight of these two business geniuses to actively integrate and resist foreign enemies.
After the merger of Focus and Juzhong, their commercial building network will cover more than 100 million urban mainstream consumers, and their market share will exceed 96.5%, fully qualified for monopoly.At the same time, building advertisements have clear goals and precise effects. Professor Huang Shengmin called building advertisements "snipers in the advertising field".
However, building advertisements also have limitations such as no original content, monotonous form, relatively narrow coverage, and lack of interactivity, and the places worthy of placement have almost been placed. I don’t know how long the rapid growth can last, but other new media are emerging in an endless stream. .Concentrating on consuming each other has already threatened the subsequent development of the two companies.
Therefore, even if the domestic advertising companies have not threatened the survival and development of Focus and Juzhong, let alone the new Focus after the merger.However, the staring eyes of foreign capital really made Jiang Nanchun and Yu Feng not dare to take it lightly.Yu Feng said on many other occasions: "Another purpose of the merger is to make Focus Media the leader of China's outdoor advertising industry and avoid being eaten by foreign capital. From past experience, including automobiles, mobile phones, home appliances and other industries, In the initial stage of market development, due to the vicious competition among major enterprises, it was almost lost, and finally became the pocket of foreign capital.”
"Now, many foreign capital giants value China's outdoor advertising market. In 2005, JCDecaux, the world's second largest outdoor advertising group and Europe's largest outdoor advertising group, only spent more than 100 million U.S. dollars to eat up two outdoor advertising companies in Hong Kong. The listed outdoor advertising companies Media Century and Media Bole. For us, this is a signal worthy of attention.” Yu Feng admitted the hidden worry of foreign capital encroaching on the Chinese market.
Talking about Yu Feng's merger concept of "resisting foreign capital from encroaching on China's outdoor market", Professor Huang Shengmin once again expressed his approval: "Jiangnan Chun and Yu Feng are both founders of Focus and Juzhong. Their contribution to the outdoor advertising market I have a deep understanding and understanding, and I have considered a lot. The merger is based on my own ideal layout. Maybe there may be greater capital to acquire Focus in the future, and then it will not be a matter of personal emotion.”
Jiang Nanchun believes that "the profit margin of the media comes from imagination", because China is currently the fourth largest media market in the world, but it is predicted that by 2008, China's ranking will rise to the second in the world.Therefore, if the media can be restructured, it will bring huge business opportunities.And "the cooperation between Focus and Juzhong is the first step for Chinese advertisers to look for business opportunities across the country and even the world, and it is also a 'dismissal' for foreign media giants who want to attack the Chinese advertising market."
Compared with Focus Media, mergers and acquisitions are the best way to eliminate competitors.Focus’s business model has precedents in overseas markets. For Focus, it is better to emphasize its “leading” position in China than to make itself unique.The acquisition of frame media has established Focus Media's unshakable "big boss" position in the field of building TV advertising.By integrating and gathering people, the market share of Focus Group’s buildings reached 98%, which ended the “building circle movement” and enabled Focus Group to have a huge advantage in the inevitable market share competition, which is also conducive to the formation of reasonable prices for building advertisements.
Acquisition completed? ?Afterwards, Wall Street expressed great approval for this, and the stock price of Focus Media skyrocketed, and its market value surpassed Baidu all the way.Moreover, in 2005 alone, the operating income of Focus reached 600 million yuan (before the merger with Juzhong), equivalent to the business scale of Hunan Satellite TV, the largest provincial satellite TV in China.
No matter what the original intention of the merger of Focus and Juzhong is, after the acquisition is completed, all advertisers who have begun to trust "building advertisements" must face a new environment.In the past, they could compare and choose the buildings and prices of Focus and Juzhong, but now they have to face more powerful advertising channels.Since then, building TV advertising has become the dominant player, and the pattern of outdoor advertising has been formally finalized.
The future of New Focus, which is aggressively attacking, is bound to be infinitely exciting.
Whether it is an acquisition or being acquired, it is conducive to the integration and development of the industry.For Juzhong's second largest shareholder, Carlyle, the biggest wish is to cash out.Softbank invested US$40 million in Focus, while Carlyle favored Juzhong. In 2004, it invested US$15 million in Juzhong, and in 2005 it invested an additional US$20 million.Juzhong is now sold for $325 million, which is the best choice for Juzhong and Carlyle.
The merger that shocked the industry this time triggered various opinions. Although the opinions were different, they unanimously emphasized the significance of mergers and acquisitions for both parties.
Ji Hairong, vice president of Focus Media, said: "After the merger of Focus Media and Juzhong, we will be able to concentrate more energy and financial resources, accelerate the pace of expansion in more fields across the country, establish a larger advertising platform, and realize the original intention of a win-win merger. "Analysys International's Yu Yang believes: "There is a problem with the potential of the building advertising market. The Chinese market simply cannot accommodate more than two large companies. The long-term existence of focus and gathering is a potential 'bomb' for the development of building TV advertising in China."
"Focus and Juzhong are expected, otherwise vicious competition will not end well." As a competitor in the same industry, Yang Bin, the founder of Shanghai Quzhong, affirms the correct choice made by Yu Feng and Jiang Nanchun. Happy to see it happen.Yang Bin also believes: "Although mergers and acquisitions may become a way for Focus to take advantage of the rapid expansion of the capital market, the industry will not be hostile to market integration, including Quzhong. Vicious competition." Yang Bin said that there are so many advertising companies in the market that they live in peace, which shows that the cake is huge, but there has never been such a big fight between Focus and Juzhong. Now the merger of the two parties can avoid viciousness in the entire industry. compete.
"There is currently no absolute leader in China's outdoor advertising market, and giants are needed." After hearing the news of the merger of Focus and Juzhong, Professor Huang Shengmin also expressed his attitude.
Huang Shengmin said: "I view this merger positively. After the merger of the two companies, the concentration of their respective advantages is of great significance to the cultivation of the outdoor advertising market itself. At present, the prospect of China's outdoor advertising market is good, but the plate is small. From the perspective of the total amount of advertising, It is about 12 billion yuan. In the total market of 12 billion yuan, the share of Focus is about 600 million to 700 million yuan, and the share of Juzhong is about 300 million yuan. The two together are about 1 billion yuan. That is to say , the new Focus Media has a market share of only about 10%. It is developing rapidly, but there are no giants. This is a problem facing the outdoor advertising market. If the merged Focus Media can achieve a revenue of 2 billion yuan, they will invest more More funds to cultivate this market is ideal for the stability and sustainable development of the industry. Therefore, after the merger of Focus and Juzhong, it is very beneficial to maximize the interests of the outdoor advertising industry. The future performance of Focus is worth looking forward to. "
Professor Huang Shengmin did not deny that he agrees with Yu Feng's point of view: "I agree with Yu Feng's opinion. If there is no merger, the competition between Focus and Juzhong will be very fierce. To do outdoor advertising, you need to constantly lay out outlets and seize the market. The investment is huge. Once there is vicious competition, it is not beneficial to anyone. Under the current situation, the merger is a relatively good time for operators and investors.”
There is no way out if you follow suit.Regarding this merger and acquisition, the two parties involved, both Jiang Nanchun and Yu Feng, also shouted the slogan "win-win, not lose-lose".
Jiang Nanchun believes: "No matter from the perspective of market structure or cost and price control, the strategic value of this transaction is huge. No matter how the stock price moves, I think Focus will enter a new upward channel." In fact, M&A The market share of the new Focus Group in building advertising will far exceed the market share of CCTV in the traditional TV market, and it will become the one with the least competitors among all known overseas Chinese listed companies.
Yu Feng told the "Shanghai Securities News" reporter: "In short, the reason for the merger is to prevent fierce competition between the two parties, to achieve a win-win situation through cooperation, and to avoid losses for both parties. Juzhong completed its listing in 2006, so there must be no problem. But there is a problem. , should we continue to go public, get money from the capital market and start a fiercer competition with Focus, or move towards alliances and become bigger and stronger? President Jiang of Focus is very clear about our listing progress, and at the same time, he has an opinion on the future market development pattern Clear judgment. Therefore, in 2005, we conducted in-depth communication on this issue. The result of the communication was that the two parties merged to expand their leading advantages in the industry. Therefore, the merger is to avoid lose-lose.”
Talking about the development idea of Focus after the merger, Jiang Nanchun and Yu Feng coincided.
Merger will inevitably face integration, and Jiang Nanchun launched the expectation and conclusion that "the effect of integration is far greater than the effect of competition".He said: "We will continue to retain the original team of Juzhong. Focus will make maximum use of Juzhong's original resources such as advertising, funds, personnel and markets on the basis of personnel adjustments. We will strive to return Focus by maximizing benefits after the merger. Every shareholder and supporter of Focus.” Yu Feng said: “After our strong alliance, Mr. Jiang and I will serve as the co-chairmen of Focus. This kind of management design is also common in listed companies in the United States. In terms of business, Continue to retain the two brands of Focus and Juzhong. We will use the respective advantages of these two brands to carry out business integration. We will spin off what is suitable for Focus from Juzhong; spin off what is suitable for Juzhong from Focus. In this way, we Complementary advantages, maximize strengths and avoid weaknesses, and avoid vicious competition that may arise from non-merger.”
According to public data, as of the end of September 2005, Focus's commercial building network had covered 54 cities across the country, with a total of 35,000 display screens, while Juzhong had covered 43 cities across the country, with more than 25,000 display screens.After integration, the network covers 75 cities across the country, with a total of more than 60,000 display screens. In most cities with a population of one million in China, almost all mainstream consumer groups are under its influence.
"Advertisers have a variety of choices, such as newspapers, magazines, the Internet, and television. But when they consider building advertisements, they basically only have one choice, Focus." Professor Huang Shengmin said.
Taking advantage of the momentum, the new Focus Media after the merger has swept the entire Chinese building advertising market, and increased the voice of Focus Media in the entire Chinese advertising market.