Chapter 12 11. Behind the withdrawal of Suning

These three days in December 2007 may become an important historical node that people chew on repeatedly in a few years. At 3:00 p.m. on December 12, when Suning Chairman Zhang Jindong delivered a speech "The World is Made in China, China Made for the World" in Hong Kong as the CCTV Economic Figure of the Year, he was accompanied by dozens of home appliances. corporate giants. After pointing out the country in high spirits, Suning issued an announcement that night, announcing its withdrawal from large and medium-sized mergers and acquisitions. The next day, Gome couldn't wait to announce its participation in the acquisition of Dazhong.Another day later, at 10:58 pm on December 14, Gome issued an announcement announcing the acquisition of Dazhong with the help of a third-party curve, and allocated 3.6 billion yuan on the same day.

In just three days, Gome replaced Suning and won Dazhong, once again demonstrating its efficient and ruthless means of capital operation.When it competed with Best Buy for the former IKEA site in Beijing, Gome did the same, rewriting the ending of the story at the last moment. After Gome issued the bidding announcement, Suning executives regretted it and called Zhang Dazhong to discuss the possibility of returning to negotiations.However, the deal is done, and Gome signed a formal agreement with Dazhong without even taking stock of its assets. On the afternoon of December 16, Gome held a press conference in Beijing, announcing that it would take over Dazhong in an all-round way and enjoy the exclusive right to operate, manage and purchase Dazhong.

On the second day, all Dazhong stores were closed for one day, and Gome entered the market and began inventory checks.Some home appliance manufacturers complained: "The people from Suning just finished the inventory two weeks ago, and now they are doing the inventory to the people from Gome." On December 18, some of the large and medium-sized stores that had been counted reopened, but the POS machines at the sales terminals had all been replaced with Gome logos. What is even more interesting about this M&A incident is that the quitters were calm, the beneficiaries were low-key, and even the successful acquirers uncharacteristically avoided publicity.When facing the media, the top executives of Suning, Gome, and Dazhong are all very graceful and tacit, and there is no complaint about competitors.It seems that this is a game with no losers.

After the hustle and bustle, the dust settled. On January 24, 2008, Sun Weimin, the president of Suning, accepted an exclusive interview with reporters in Beijing, detailing the reasons for Suning's withdrawal.Although the outside world is still inconclusive about who is the winner of this merger, Sun Weimin's point of view is very clear: "The biggest winners of this merger are Zhang Dazhong and Suning. Gome has eliminated an opponent for us!" For domestic home appliance chain enterprises, the cycle of "low price-high popularity-strong negotiation-low price" has created the status quo and pattern of "scale is profit".However, with the saturation of the primary market, the role played by the speed and scale of expansion has gradually weakened, and it is no longer invincible.

However, the giants are still unable to stop.Just like a person running down a mountain, if he wants to stop, he will fall easily. Only by continuing to run can he keep his feet steady.It is easy to gradually lose the right to speak in the industrial chain if it is not big, and it is impossible to avoid the sword of Damocles on the top of the head if it is big.Faced with a dilemma, no one can sit still. Restlessness is the fate of this industry.After Gome acquired Yongle, it clearly revealed its ambition to acquire Suning and dominate the world.When Huang Guangyu tactfully chose the word "integration", Zhang Jindong expressed his thoughts clearly: "Don't integrate, if you want to buy, just say so, if you don't want to buy me, I will buy you."

On December 20, the new Dazhong management team led by Gome Vice President Mou Guixian made an appearance, officially announcing the end of the era of "three-legged confrontation" in the home appliance chain market in Beijing, and the entry into the era of "the United States and the Soviet Union for hegemony". On the surface, the three mountains above Suning's head can be said to be heavy.At present, there are about 40 Suning stores in Beijing, 50 Gome stores, and more than 60 large and medium stores.With Dazhong, Gome officially won over 70% of the market share in the Beijing market, thereby surpassing Suning in all first-tier cities in the country except Nanjing.

Facing the rapid expansion of Gome, how can Suning maintain its confidence?Sun Weimin believes that the scale effect is nothing to fear, and efficiency is the core competitiveness of an enterprise. What Suning needs to do is to improve both internally and externally. Suning's ability to take the lead in the fierce competition is largely due to its meticulous and advanced strategy and supporting strategies that have been considered backwards and forwards. This makes Suning appear extremely stable in the noisy and lively home appliance chain industry.The long-term strategy formulated with a 5-year cycle has also become the action outline that Suning abides by, and will not be easily influenced by the external situation.

Sun Weimin disclosed to reporters the specific content of the fourth five-year plan: the combination of horizontal expansion and vertical penetration, gradually establishing a network layout in China from municipalities directly under the Central Government to provincial capitals, from prefecture-level cities to developed county-level cities, and building core business The regional layout system that organically combines the 3C+ flagship store in the business circle, the central store in the sub-business circle, and the community store in the new business circle will continue to maintain the current chain development speed. The chain network covers 30 first-tier cities and 200 prefecture-level cities across the country. And 300 county-level cities, accounting for more than 10% of the national market share.

In an interview, Sun Weimin responded to the concerns of the outside world about the rapid integration and development of the industry. "Suning's development in 2007 has proved that no matter how many changes have taken place in the industry, even the dazzling mergers and acquisitions in the industry in 2006 will not have much impact on Suning objectively." As for the integration at the end of 2007, he believes that the most worrying Yes, it is a question of whether the way of merger can achieve economies of scale and economies of scale. "Integration is a trend and a necessary form. However, the integration at this stage is not a mature integration, but a simple extensive integration."

"The regional dispersion of the home appliance chain industry in the United States and Japan is much greater than that in China, and multiple giants coexist and compete at the same time. However, the mergers and acquisitions of the domestic home appliance chain industry are in full swing, and it has completely entered the era of oligarchs in less than ten years." In Sun Weimin's view In the future, domestic scattered competition will still exist: "After all, the form of home appliance chain is still a new thing in China. New entrants mainly depend on foreign capital, and opportunities for domestic competitors exist in second-tier cities and certain blind spots in first-tier cities. .At present, there is a market share of about 700 billion yuan in China. Whether it is an oligarch or a prince, there are great opportunities and room for development.”

Sun Weimin revealed that Suning's plan for first-tier cities is to match a store with a population of 200,000 to 300,000. According to this parameter, the number of stores is still not enough. Five years from now, when the market capacity reaches 1 trillion yuan, Suning will have the appetite to hold a 15% to 20% share, which will be both challenging and itchy. Suning is not in a hurry to meet the challenge in terms of scale, but is more determined to transform the management model and business model.In fact, in this industry, there have been 14 or 5 years of integration of Gome, and the integration of rivals is no longer new to Suning, and their coping strategies have also achieved initial results. The first is the improvement of the quality of a single store.Sun Weimin gave an example of Xiamen to explain: Suning was the fifth to enter, and the first four were integrated by Gome. Any of them was bigger than Suning, and the gap was the biggest. However, Suning's profit was still very good and its position was very strong.In the case of disparity, what does Suning rely on?Suning relies on the quality and structure of the store.Where to open the store, how big it is, whether the area and business district are reasonable, these are the most important things. There is a good international reference for this issue.In the Japanese chain industry, Kojima used to have the largest sales volume, but now it is Yamada.Both Yamada and Kojima have more than 300 stores.But Yodobashi ranks second in the industry with only 21 stores.From a global perspective, its operating quality is also the best, and it can be regarded as a benchmark enterprise in the industry. Yodobashi's highest sales volume per store is 7.6 billion yuan, and the average single store output reaches 2.8 billion yuan.In China, Suning's single store is relatively high, at the level of more than 100 million. Secondly, Sun Weimin said that when the chain store expands, the basic management platform and the background construction must keep up, otherwise the front-end expansion is very dangerous.The hardware investment of the basic management platform is mainly talents, information, and logistics, and this part of the investment will be enlarged in the process of the past few years.At the same time, in the process of development, it is necessary to consider both inside and outside the industry, such as the development of the macro economy of the whole country, the technological change of the whole society, and the change of the way of life of the whole society. The horizontal expansion and vertical penetration in Suning's five-year plan, as well as the transformation from home appliance store to 3C store, rely more on the cultivation of "internal strength" to assist in the completion.Sun Weimin said frankly that the strategic development plan for the next five years will pose severe challenges to the company's overall management system and corresponding information systems.If time goes back and Suning acquires a company as big as Dazhong, Suning will not be able to do everything as it wishes. With the growth of Suning itself and the improvement of the overall Chinese market environment and competition level, Suning needs to plan and systematically design a set of background systems based on information technology, covering manpower, process, organization and performance.Suning's speed has been actively reduced, and the current increase is only 20 to 30% of the stock, in order to improve quality and efficiency. "The opponent should be concerned, but Suning will not do anything against the trend in order to defeat and surpass the opponent." The relationship with Suning was separated, and it has become a fact that Dazhong has fallen to Gome.During the entire process of discussing marriage, what is worth pondering is Suning's sentence that "the two parties have not been able to reach an agreement on the core terms."From turning his face to changing his face, Dazhong abandoned his former suspicions and was willing to invest 3.6 billion yuan in the arms of Gome, which had to arouse speculation and interpretation in the industry. At the beginning of 2007, Suning issued an announcement saying that it was entrusting a third-party financial consultant to contact Dazhong.After careful calculation, Suning has been negotiating the purchase of Dazhong for nearly a year.During this period of time, both Suning's employees and the hired intermediaries have devoted a lot of effort to this, and have carried out a series of complicated and arduous tasks including due diligence and business integration.This major event ended in this way, which may not have been expected by many people. The so-called core terms are the purchase price.Some people questioned that Suning had talked with Dazhong for more than a year, but in the end, Gome took the lead. This is a manifestation of Suning's lack of experience in mergers and acquisitions.But Zhang Jindong believes that Suning's final abandonment is not because of money, but because Suning has never had the idea of ​​​​being sure to win.Suning is very clear about Zhang Dazhong's hole cards and the entire merger and acquisition plan, and has a strong initiative.Zhang Dazhong gave Suning priority and preferential purchase rights, and there is no problem of missing. Perhaps, it is precisely because Suning has been in contact with Dazhong for a long time and has enough understanding of Dazhong's family background that Suning is concerned about the price, and even thinks that there is room for further negotiation on the purchase price. Dazhong is definitely going to sell, the longer the delay, the lower the price may be.This is probably the reason why Suning and Gome have not been in a hurry to make a move.In addition, another card in the hands of Zhang Jindong, who has always attached great importance to friendship, is Zhang Dazhong's emotional factors.After the first failed relationship, Dazhong began to think about the character of the other party, thinking like most older young women: as long as they are nice.Under the guidance of this concept, Suning Appliance entered the eyes of Dazhong.Based on his admiration for Zhang Jindong himself, Zhang Dazhong threw himself into Suning's arms without hesitation.Suning also quoted a high price of 3 billion yuan without hesitation, in order to dispel Zhang Dazhong's whimsical thoughts.Dazhong happily accepted the offer, and the two parties began formal integration and negotiation. But obviously, Suning underestimated Gome's ability to operate in the capital market.The results proved once again: there are no eternal enemies, only eternal interests. It is conceivable that if Suning were allowed to acquire Dazhong, its market share in Beijing would surpass that of Gome and secure the No. ?According to insiders, at the last minute, Gome showed its determination to win: no matter how much Suning bid, Gome would increase the price by 20%.This price exceeded the minimum limit of 200-300 million yuan in the gentleman agreement between Suning and Dazhong, and also exceeded Suning's psychological expectations. It even made people think that this was a weight used by Dazhong to blackmail Suning, so Suning chose to withdraw. Sun Weimin said that they never followed the bidding method.If someone competes, Suning will not participate. "The price of 3 billion yuan is already very sincere. I will do it myself, and I can't spend 1/3 of the cost. Someone wants to offer a higher price, and I will definitely not participate." Zhang Dazhong's bargaining price and Suning's valuation are actually called brand bargaining, which is the value of goodwill.The goodwill value of the brand is important to Dazhong, but not to Suning.Therefore, what is most valuable to Zhang Dazhong is not necessarily worth that much to Zhang Jindong, because he has his own brand.However, this issue obviously cannot be held to one's own point of view. Valuation requires a third party with objective standards. In this regard, Sun Weimin also explained to reporters several ways to determine the purchase price: First, according to the cost of opening a store, based on Suning’s past single store opening cost of 10 million yuan, the price of 62 large and medium stores should be below 1 billion yuan ; Second, based on the calculation of the price-earnings ratio, according to the international practice of 7 to 15 times the price-earnings ratio, the purchase price of Dazhong should be 1.3 to 2 billion yuan; the third is to consider Dazhong's position in the Beijing market, and Zhang Dazhong's more than 20 years of experience With his entrepreneurial experience, the final price is about 3 billion yuan as rumored in the market. Suning has been in contact with Dazhong for nearly a year. The third-party organization entrusted by Suning has conducted a detailed investigation of the internal situation of Dazhong. Although the two parties have not signed a purchase contract, they have basically reached an oral "gentlemen's agreement" : When faced with multiple buyers, if the third party’s bid is only 200-300 million yuan higher than Suning, Suning has the right of first refusal; but if the third party’s bid exceeds this range, Dazhong naturally has the right to choose a new buyer . Sun Weimin believes that withdrawing from the mergers and acquisitions of Dazhong seems to be a matter of price on the surface, but it is not entirely a matter of price.From the starting point, Suning is not aimed at competitors.Suning's independent development can fully realize its own strategic goals. Perhaps as Suning said, "see the cards clearly", if the physical cost of opening all the more than 60 stores in Dazhong is only more than 1 billion yuan, it is really not worth Suning's increase in price. On the acquisition of Dazhong, Gome puts strategy first and price second, while Suning will consider the cost of mergers and acquisitions and the real value of Dazhong.The different styles of the two companies caused the dramatic ending of this merger.It can be said that it is only an inevitable choice for Gome to consolidate its own embankment by surpassing Suning in terms of face and obtaining Dazhong from the market.It is this inevitability that Dazhong gambled on, so he put a weight of 600 million on Gome's balance.Perhaps, the 600 million is the last straw that broke the camel's back.However, it is still impossible to say who is the camel that was crushed to death. Gome acquired Dazhong in such a hasty manner that it did not even conduct an asset review and evaluation of Dazhong before signing the acquisition agreement. This shows that the main purpose of Gome's acquisition of Dazhong is to suppress Suning, and the price is a secondary consideration. In terms of market value, Suning and Dazhong are more complementary.Beijing Suning and Dazhong have only five stores that overlap closely, while Gome and Dazhong have as many as 20 stores.But how can Huang Guangyu, who is familiar with "Sun Tzu's Art of War", sit back and watch Suning surpass himself in Beijing? Gome, which also originated in Beijing, is very aware of the value of Beijing Dazhong: if it is not for mergers and acquisitions, it will be difficult to replicate Dazhong's intensive cultivation of the Beijing market for more than 20 years.Although Suning will not disregard the reality just because it wants to expand its scale, it insists on expanding the market at its own pace, and would rather not do it if there is no profit.But obviously, the failure of large and medium-sized mergers and acquisitions has lost a good opportunity for Suning to rapidly expand its scale.Because there are not many domestic appliance chain enterprises with many stores like Dazhong. According to Sun Weimin, the main impact of abandoning Dazhong on the Suning Beijing market is not after the merger, but before the merger.For a long time before that, Suning had laid out Dazhong as a unified system.Therefore, Suning's development strategy for self-built stores in Beijing is stopped. What should have been opened should not be opened, and how many large and medium stores should be closed. This will have an impact on Suning's development in 2007.But now that the dust has settled, there is no bondage.According to Suning's understanding of the Beijing market, to open 100 stores, any commercial district within the scope of the plan can be opened, and Suning headquarters will provide all-round support in terms of personnel, property and property. On the surface, Suning has become the biggest victim of this merger case, Gome has become the biggest winner, and Dazhong has reaped the biggest benefits for himself.However, is this really the case? Please look at a fact. On December 17, the day when Gome announced the successful acquisition of Dazhong, the share price of Suning Appliance closed at 68.35 yuan, up 5.72%, while the Shenzhen Component Index fell 2.21%.Obviously, investors do not think that Suning's acquisition of Dazhong is a failure. The scale and efficiency of the development of the home appliance chain industry are like the relationship between the left and right hands. At different development stages, the roles and positions of the two are different.In the rising period of industry development, scale dominates profits, but in the transition from large-scale expansion to refined management quality improvement stage, it is necessary to pay more attention to efficiency and form a pattern of equal emphasis on scale and efficiency. For Gome after the merger, success or failure depends not only on the scale, but also on the subsequent digestion of large and medium-sized companies. The improvement of efficiency is not only reflected in the internal management but also in the external operation.When the scale of the enterprise develops to a certain stage and human resources, management, capital, etc. begin to encounter "expansion bottlenecks", the improvement of internal management efficiency is the balance between "bigger" and "stronger" for the enterprise.External operating efficiency is the key way to integrate existing channel resources, optimize the combination of existing stores, and improve the quality of individual stores. Gome believes that what Gome values ​​is the resources of large and medium-sized stores.But the fact is that although dozens of stores in Dazhong have greatly expanded Gome's chain system, the redundant construction of stores on both sides has inherent defects.When the two were still competitors, they often "hand-to-hand" in terms of store location selection. The geographical layout of about 20 of Dazhong's more than 60 stores in Beijing seriously overlapped with Gome's network system, and the repetition rate was as high as 30%. .Even if Gome intends to operate in Beijing with dual brands and separate management by two teams, the integration or closure of some stores is inevitable.Gome's optimization of chain network in Beijing and improvement of management efficiency will play an important role in this acquisition and its subsequent operations. Gome also said that the dual-brand model of Gome and Dazhong will imitate the model of Shanghai Gome and Shanghai Paradise.But some suppliers said that even in Shanghai, Gome's integration of Paradise is hardly a success.According to the original plan, the number of stores in Shanghai after the merger of Gome and Paradise is three times that of Suning, occupying an absolute dominant position. However, Gome and Paradise have as many as 21 stores facing each other in Shanghai. During the integration, many stores in Paradise were closed. The current market share in Shanghai is far less than three times that of Suning. Now the integration of Dazhong is obviously facing the same situation.According to people familiar with the matter, many stores are close to lease, and some are not well managed. Dazhong has only more than 30 effective stores in Beijing. In addition, some stores will be closed, which is equivalent to increasing Gome’s single store acquisition cost. "Even if the store expires, Gome still has the right to renew the lease first." A Gome spokesperson responded.However, Gome should also see that the cost of renewing the lease is obviously not the same as that of Zhang Dazhong.It remains to be seen whether Gome's acquisition can achieve the effect of one plus one greater than two. Against the backdrop of frequent mergers and acquisitions in the home appliance chain industry, voices have begun to spread in the industry: "The key to competition in the home appliance chain industry is no longer operating capabilities, but financing capabilities. The competition in the product market will eventually be in the capital market. The winners and losers will be determined by the ups and downs." In fact, such arguments have dominated the mainstream.Whether it is the expansion of self-built stores or the expansion of mergers and acquisitions, strong financial support is required, so the role of financing has been raised to an unprecedented height. It is undeniable that Gome's intention to bring benefits through scale is very obvious.Gome has long planned to return to A-shares, and the large and medium-sized companies acquired this time will most likely be included in listed companies.This is undoubtedly another new opportunity for Gome, which is proficient in the capital market.But there is one fact that Gome may have to face, that is, after Gome acquired Paradise, it claimed that it would "until Suning merges."But the result is just the opposite. Suning's development is faster than before. Especially in the Shanghai market, Suning has made big moves one after another, rapidly expanding its share of home appliance chains in the Shanghai market. Compared with Gome, who is good at "hands-on-hand combat", Suning has always expressed an attitude of neither rejection nor enthusiasm for the capital market. In the dialogue with the reporter, Sun Weimin constantly reiterated the value of the channel and the value of the industry, and repeatedly revealed the mentality of being a home appliance retail industry, emphasizing the value of the "distribution platform". Capital has magnification benefits, and the capital market has an interactive relationship with the operation of enterprises.Capital invests in companies and focuses on results, such as earnings per share, sales growth, and profit growth.Industry can obtain financing through the expansion of capital benefits, so it is interactive.But everything has a logic: the operation of the enterprise must bring benefits to investors, and the capital market will recognize it and give you a higher valuation. Most of the top ten tradable shareholders of Suning Appliance are local funds, which are typical domestic-funded enterprises.Zhang Jindong also does not shy away from saying that he wants to build Suning into a national home appliance chain enterprise with a pure "pedigree".However, in order to go public in Hong Kong, Gome and Paradise had registered foreign-funded enterprises in Bermuda and Cayman Islands.In addition, Gome and Paradise have also introduced foreign investors like Morgan and Warburg Pincus.According to Sun Weimin, the president of Suning, going public in Hong Kong may provide Suning with a lot of gimmicks, but "Suning is unwilling to spend too much energy on capital operation. We are in the industry. If we do a good job in the industry, we will be worthy of investors. Now, maybe Suning is not fashionable enough, but too traditional.” The involvement of foreign investors, to a certain extent, is suspected of reducing the distribution platform created by local entrepreneurs into a tool for making money. However, in the process of making money and cashing out of such investment institutions, the development of the industry itself is not obvious.After all, this group of generous investors has been dubbed "financial investors." After Gome's acquisition of Dazhong, analysts agreed that it was a rational choice for Suning Appliance to terminate the acquisition, expressing great confidence in Suning's future development. However, Gome's approach is quite radical. By raising the purchase price, it blocked Suning's acquisition of Dazhong Electric Appliances, which also reflected the peers' fear of Suning to a certain extent.In this imminent irrational price competition, Suning chose the steady strategy of "giving up voluntarily". If Suning acquires Dazhong Electric at a higher price, then due to the excessive use of limited resources of the enterprise, there will be a "winning" strategy. Partial damage to the overall situation". On the contrary, allowing competitors to acquire Dazhong Electric Appliances at a high price will have a certain negative impact on Suning's local development, but it will also greatly consume the limited resources of competitors and restrict the rapid development of competitors in other regions. Conducive to the rapid development of Suning in the country. This is not the first time Suning has encountered this dilemma.After Gome’s acquisition of Paradise, Suning responded calmly and actively promoted its flagship store strategy through a reasonable store layout. Instead, it took advantage of the rival’s lack of acquisition and integration space to drive the rapid development of the entire Shanghai Suning in terms of flagship store and single-store revenue increase.