Case analysis of Alibaba's M&A:
1. Basic information of both parties to the M&A
1. Overview of the acquirer Alibaba Group
Alibaba Group was founded at the end of 2198, with its headquarters in Hangzhou, China, and overseas branches in Silicon Valley and London. Alibaba Group is a famous brand of B2B e-commerce and the largest e-commerce enterprise in China and the world.
Alibaba was officially listed on the new york Stock Exchange on September 9th, 2114. At the Alibaba Yunqi Conference in October 2116, Alibaba Ma Yun put forward the concept of "new retail" for the first time in his speech and announced the plan.
2. Overview of the acquired Shanghai ladas Information Technology Co., Ltd. (Hungry)
Hungry is a local life platform founded in 2118, mainly engaged in online take-out, new retail, instant delivery and catering supply chain. Hungry? We have an efficient and complete logistics distribution system and a digital catering system, and are committed to using technology to build an O2O platform for local life services. Hungry? In the aspect of take-away delivery, it has promoted the digitalization of catering in China, changed people's traditional way of eating, and greatly promoted the development of catering industry and logistics industry.
nationwide, Hungry has covered 2,111 cities, with 1.3 million restaurants, 261 million users and more than 3 million riders. On August 24, 2117, when I was hungry, I officially announced the merger of Baidu takeaway.
Second, the motivation of M&A
1. The need to launch a new retail plan
"The combination of online and offline and logistics will generate new retail." As a B2B e-commerce enterprise, Alibaba has rich online experience, but lacks offline experience. The offline area can be said to be a brand-new field and a blank field. If you start from scratch and build the whole offline system from scratch, it is an irrational business decision to lack relevant experience, technology and contacts.
Hungry just happens to have a perfect logistics distribution system, and it is a mature O2O enterprise, which just meets the needs of Alibaba to develop offline business. Hungry? There are millions of full-time and part-time riders. By cooperating with Alibaba, they can make their business no longer limited to the take-away industry, but can share resources and channels with Alibaba. Through the combination of offline distribution platform and Alibaba online shopping platform, such as Taobao and Alipay, the barrier between online and offline has been opened.
2. The need to bring synergy
If Alibaba is hungry, it can form synergy and help form "1+1 >; 2 "effect. Through the combination of internal and external cooperation, the two enterprises can reduce operating costs and increase profits, and the acquirer can provide funds for the acquired party to promote its development.
from the same perspective, Chloe Wang, vice president of Alibaba, and, former CEO of Alibaba Health, as CEO of Hungry, can realize the integration of technology, management and resources, complement each other's advantages and make up for their shortcomings. At the same time, it also achieves synergy in brand effect, technology and corporate culture, which brings economies of scale to the two and provides economic support for the development of new retail plans. On the basis of this merger, if you are hungry, you can also use Alibaba's financial support to make up for the huge subsidy loss at the beginning of the month.
3. The need to balance competitors
At present, the leading offline O2O enterprises are only hungry and Meituan is the only one. Tencent has given priority to Meituan. If Alibaba wants to expand its offline business, then Alibaba's choice is only hungry. From Alibaba's point of view, the competitors that Alibaba needs to check and balance are Baidu and Tencent.
The business of Hungry is just in line with the business development strategy of Alibaba Ant Financial. If Alibaba buys Hungry, perhaps the word-of-mouth in Alipay and Taobao can be directly connected with Hungry in the future, enabling Alibaba to use Ant Financial to re-sprint the field of local life service.
III. M&A Risk
1. Risk of enterprise integration
Generally speaking, the effect of post-merger integration plays a decisive role in the final success of enterprise mergers and acquisitions. Because Alibaba and Hungry belong to the network industry, but their businesses are completely different. The former is an online B2B e-commerce enterprise, and the latter is an offline O2O ordering platform. If the two are merged, there is bound to be a risk of enterprise integration.
The integration here is not only a unilateral process of resource arrangement, but also a process of cultural integration. Alibaba wants to further integrate the local life market. According to relevant news information, it is known that Alibaba local life service company will be composed of two major businesses: Hungry and Word of Mouth.
In the future, Alibaba has a vision that local life service companies will have greater synergy with the original sectors in Alibaba's ecology. However, there are two problems in the integration between the two enterprises: the first is the integration of hunger and word of mouth; The second is the integration of hungry and Alibaba.
2. Payment risk
Alibaba successfully acquired Hungry with a cash consideration of $9.5 billion, and completed a wholly-owned acquisition of Hungry. This acquisition is called the biggest cash acquisition case in the history of Internet.
Alibaba's previous acquisitions of Youku Tudou and WANDA CINEMAS were $4.5 billion and $4.68 billion respectively. Hualian shares disclosed relevant details. It valued Hungry, and the enterprise value was about 9.153 billion US dollars, which was lower than the total cash invested by Alibaba. Alibaba's acquisition is hungry in the form of huge all-cash consideration, and the consideration paid this time is more than twice that before.
Alibaba can quickly achieve the purpose of M&A by doing so, and the form of cash consideration is different from debt financing and equity financing, which has the advantage of preventing excessive dispersion of equity and avoiding the financial leverage risk of borrowing to some extent. But to a certain extent, it will affect the normal operation of the enterprise, because it needs to pay a large amount of money quickly in a short time, so the capital chain of the enterprise may also be broken. In addition, enterprises may have the adverse consequences of excessive trading.
3. Risk of independence
You may lose your independence if you are hungry. Alibaba is hungry through a wholly-owned acquisition. In fact, it is also wholly-owned and hungry, becoming an absolute major shareholder. And announced that Chloe Wang, vice president of Alibaba Group, was the CEO of Hungry. This is in contradiction with the principle that Alibaba insisted on independent operation when it was hungry at the time of merger and acquisition. If it is hungry, it will remain an independent brand and operate independently.
Hungry? Although it can get strong financial support after being acquired by Alibaba, the weakening of its independence means that it will become a pawn under Alibaba, a pawn to lay out the local life service market. Hungry and losing independence, the company's business and strategy will be subverted. Focusing on the original take-away distribution business may become an auxiliary tool for Alibaba to lay out the local life service market.
IV. Conclusion
The M&A behavior of Internet enterprises plays a vital role in the future development of their own enterprises. For the acquirer, we should consider the impact on the liquidity of the enterprise after the merger and whether it will have an adverse impact on the financial situation of the enterprise. Companies should make financial planning and forecasting in advance to prevent financial risks in this process in advance. The necessity and rationality of M&A should be considered in advance, and it should be remembered that M&A should serve the overall development goal of the company, and the purpose of M&A is to form synergy and achieve economies of scale, rather than blindly M&A simply to compete with competitors.
in the process of merger and acquisition, we should also consider whether the amount and form of consideration are optimal, formulate a reasonable capital structure, reduce financing risks, and ensure the liquidity and solvency of enterprises. After M&A, we should not ignore the risks of resource integration and cultural integration, and strengthen the synergy to achieve economies of scale.