However, this is not the first entrepreneur who has come out of his own enterprise for many years.
A few years ago, He Boquan sold Robust to Danone, Huo handed over Uni-Petrochemical to Shell, and NetScreen, an overseas company founded by Deng Feng, was acquired by Zhanbo shortly after listing on Nasdaq. Equally impressive are the sales of Little Nurses, Dazhong Electric Appliances, Sunco and Yongle. Although it is still contrary to the mainstream concept, such cases abound.
Why are these private entrepreneurs willing to muddle through?
From selling products to selling enterprises
From selling products to selling enterprises, this has witnessed the maturity of entrepreneurs in China to some extent.
One day in 2006, in a restaurant in Beijing, Huo, the chairman of Uni-President Petrochemical Company, reviewed the development of Uni-President from 3 million sales to 16, the largest lubricant company in the world. A few hours ago, he signed a preliminary equity purchase agreement with Shell, and he cried halfway.
After signing the agreement, Zhu Xinli's mood was equally complicated. He left his mobile phone in the office and found a ravine to shut himself up. "These three days are very dull." "I saw mountains and trees in the distance, and I saw the blue sky in Beijing. I don't know what I am thinking. "
Obviously, it was difficult for the founders to sell their business, but they still decided to leave.
"This is a mature performance of the entrepreneurial class in China." Yan Xiaoping, general manager of Chen Da Venture Capital, told China Business News. In the traditional concept, aspiring entrepreneurs should make their own enterprises bigger and stronger in their own hands and make them a century-old enterprise. Entrepreneurs who regard enterprises as their sons are more willing to let them go to the end of their lives and pass them on to the next generation. Of course, this cannot be called a mistake, and this sense of mission is also very respectable. However, if all entrepreneurs agree with this idea, it can only be said that entrepreneurs in China are far from mature.
"Foreign companies want to quit at the beginning of their establishment, and China entrepreneurs rarely do so." Li Gang, a senior analyst at Samsung China Research Institute, told this reporter that this is related to the lack of exit channels for China entrepreneurs.
Sun Xun, senior project manager of Morit, said that many American entrepreneurs set up companies to sell, which is especially common among technology companies. They often set up companies with only twenty or thirty people to commercialize a technology with high market value and then sell it to large companies for tens of millions of dollars. This can even be called a business model.
China's increasingly developed capital market is also an important reason why more entrepreneurs get away with it. At the same time, looking back on previous cases, the entrepreneurs who quit mainly concentrated in the second generation enterprises after the reform and opening up. Cheung kong graduate school of business and Teng Binsheng, an associate professor of strategy at George Washington University, believe that these entrepreneurs who started their businesses in the 1990s are more willing to use the capital market to strengthen themselves, while entrepreneurs who started their businesses in the first decade of reform and opening up are more inclined to think that they have an inseparable "flesh-and-blood relationship" with enterprises.
Zhu Xinli, 1993, started a business, belonging to the "second generation entrepreneurs".
"Enterprises should be raised as sons and sold as pigs." Zhu Xinli's words were highly spread in the event of Coca-Cola's acquisition of Huiyuan. Zhu Xinli told reporters that he heard an idea in a training class at 1999. Many entrepreneurs always regard their enterprises as "sons", and keep them for a lifetime until they die. "I thought what he said was reasonable. Later, I heard from Li Ka-shing that if you invest in an enterprise, you should consider how to sell it in advance. I think Li Ka-shing is a great businessman. " So I think enterprises really need to be sons, but they need to be pigs. "
Li Jianhua, president of Zhejiang Wanshili Group, believes that the first round of Zheshang's development is centered on product operation, and this round of development may be to optimize and integrate resources with enterprises as buyers and sellers.
"In the past, we said that to be a century-old enterprise is to control this enterprise. But now we say that a century-old enterprise depends on whether the brand has been in power for a hundred years, not whether your chairman has been in power for a hundred years. "
Lack of qualified/valuable successors
Zeng Weimin, president of Oliver Wyman Greater China, a management consulting firm, found that medium-sized enterprises are more willing to be acquired in the process of helping customers find M&A targets.
He believes that compared with small enterprises to medium-sized enterprises, from medium-sized enterprises to large enterprises, and then from large enterprises to international companies, they need to experience more "growth pains", limited resources need to be expanded, capital operation ability needs to be improved, and management structure needs to be adjusted. Even so, in the process of growing from medium-sized enterprises to large enterprises, most enterprises are doomed to fail, which will mean that all the efforts of entrepreneurs will come to nothing.
At present, most local enterprises can gain a foothold in the market, which is related to the positioning of low-end products. For FMCG enterprises, channels are also the foundation of their survival. In addition to occupying most high-end markets, international companies with strong brands are gradually developing low-end brands, gaining more and more advantages in channels and more localized operations, while the road from low to high for local enterprises is extremely difficult. In this process, difficulties also make some people exhausted. When the current road is difficult and dangerous, it is wise to cooperate with big companies to get a good income first.
This is the case with a private enterprise that Zeng Weimin recently contacted for 20 years. "Money can't last a lifetime, so why make money?" It's the idea of entrepreneurs. However, entrepreneurs are not prepared to sell all their shares, thus losing the possible value-added of the enterprise in the future. He chose to sell some shares, which is equivalent to buying an "insurance" first.
Embarrassment on the issue of successors is also an important reason why entrepreneurs choose to quit.
With the aging of the first generation of entrepreneurs, their successors are stepping onto the front desk. Tai Fang, Wanxiang and other enterprises have successfully solved this problem, but more private enterprises have not found the answer. Introducing professional managers is often not cost-effective for entrepreneurs.
Teng Binsheng told this reporter that it is not enough for managers to have no equity incentive, but entrepreneurs who let them get equity will not get a good price. On the whole, they chose to quit.
At the same time, there are still many "successors" who are not interested in their parents' industries. According to public information, only 13.4% of private enterprises in Zhejiang are ready to take over from their parents, and many children of private entrepreneurs are unwilling to accept their parents' enterprises. Teng Binsheng believes that the sale of Dazhong Electric Appliances is also a successor issue to a certain extent. Zhu Xinli also said that his son and daughter are not interested in buying Huiyuan.
There are no successors, which makes them more inclined to quit their own businesses.
Fatal temptation
In the past few days, Zeng Weimin visited several enterprises in China on behalf of a foreign company to discuss the acquisition. Surprisingly, they all received a more positive response. Zeng Weimin believes that their attitude is influenced by macroeconomic development.
Teng Binsheng told this reporter: "There are two peaks when entrepreneurs quit, one is when they develop well, and the other is when they develop badly."
In fact, from the perspective of return on investment, it is not the wisest decision to sell the company now, because the price-earnings ratio has dropped a lot from the peak period.
Our recent investigation found that compared with last year's transaction price of 12 times or even 15 times, this year's PE (private equity investment institution) offer has dropped to 10 times or even lower. But these companies obviously know this, but their willingness to sell is still very strong.
"Don't compare with the past. You should see that the prospects for the next three to five years are not very good. If you can't do it, you might as well sell it now. " Zeng Weimin analyzed their psychology like this. The cold macro-economy is making enterprises encounter unprecedented pressure. Wave after wave of macro-control measures make enterprises dare not have optimistic illusions, because their competitive strategy and viability based on the original relaxed environment have been fatally hit, and they begin to doubt whether they can survive the "cold winter".
Cheng, a macroeconomic analyst at BOC International, believes that it is difficult to see signs of economic growth in China within two years. The gap between CPI and PPI shows that the valuable profits of manufacturing enterprises are being swallowed up. Jin Zhiguo, chairman of Tsingtao Brewery, said: "The rising cost of raw materials has swallowed up Tsingtao Brewery's profits last year." .
The appreciation of the RMB exchange rate has caused the decline in exports, coupled with the surge in costs and the depreciation of the US dollar, which has caused many industries to suffer. Among them, manufacturing is the most painful. Compared with the same period of last year, the sales profit rate of 30 manufacturing sub-industries decreased in1-June 2008, and there were 17 sub-industries. According to the information obtained from Teng Binsheng's recent survey, in Zhejiang, the asset price of textile enterprises will drop in a few months.
"According to the cases I have contacted in the past, the most common M&A is manufacturing, especially some high value-added enterprises." Zeng Weimin told this reporter.
When enterprises are in trouble, the tight monetary policy has caused more enterprises to have a tight capital chain, especially small and medium-sized enterprises with weak anti-risk ability. Take Shandong as an example. In the first half of this year, the scale of new credit in Shandong was146.86 billion yuan, of which only 9% was used for small and medium-sized enterprises, with a serious imbalance. The financing cost is also 60% ~ 70% higher than last year. It is in this context that Shandong enterprises such as Shi Kefeng have contacted domestic and foreign funds and investment banks. "When the pressure increases, giving a reasonable purchase price is definitely a' fatal temptation' for many companies." Teng Binsheng said.
Now is the best time for foreign-funded enterprises and investment banks to "harvest" China enterprises.
Yan Xiaoping said that Chen Da Venture Capital invested more this year than last year, and completed last year's investment in the first half of this year. "Now is not the most difficult time for enterprises. By the first half of next year, it may be a good time to bargain-hunting." However, he also said that several of the more than 30 projects he has invested in have encountered difficulties due to macroeconomic impact.
The pain of industrial integration
With the appreciation of RMB, the sharp increase of cost and the tightening of monetary policy, the competition intensity of many industries has never declined under the condition of further deterioration of external environment.
The beer industry used to have only a few competitive markets, but now it is "fully blossoming"; From the fourth quarter of last year to the first quarter of this year, the dairy industry encountered unprecedented pressure of rising raw material prices, but in the second quarter when the situation just improved, the price reduction and promotion war was ignited again.
This is just a microcosm of industrial competition in China. Many industries are still in the process of industrial integration. The difficult external environment is often a good opportunity for capital-rich international companies and industry leaders to carry out industrial integration. Provoking fierce competition can accelerate the "death" of some enterprises.
Zeng Weimin told this reporter that every industry has its own business cycle, and the most active period of M&A will be when industrial integration reaches a certain stage. However, for most enterprises, industrial integration is a threat, not an opportunity.
In the beer industry, more than 400 brands have recently been reduced to more than 200, and half of them have been acquired or eliminated. In 2007, the most difficult year for the beer industry, all the giants entered the year of capacity expansion, and the capacity released after one or two years will make more small and medium-sized brands disappear. In the cosmetics industry, according to the data held by Cai Yanping, chairman of Natural Beauty International Business Group, 80% of cosmetics manufacturers survived the price war for one year, and only 20% survived the next year. For many entrepreneurs, active exit is much more respectable than passive exit. This is also the root cause of the merger of Little Nurse and Bao Si.
Over the past 30 years of reform and opening up, many enterprises have never lost in the competition with international companies. However, the fierce market integration makes them face great challenges. "We are a private enterprise. Without a strong resource background (base oil supply), we cannot support it. " In 2006, Li Jia, general manager of Uni-President Petrochemical Company, publicly stated that he finally chose to be acquired by Shell. According to public information, Bao Si once focused its sales on the secondary and tertiary markets, and took the road of encircling cities from rural areas. However, P&G soon followed suit and began to enter the rural market through the "market project of thousands of villages and towns" in cooperation with the Ministry of Commerce.
Huiyuan is also under great pressure in the market competition. For Zhu Xinli, it is a relief to be an integrator in industrial integration.
"In the fast-moving consumer goods industry, many integrations have just begun." Li Gang told this reporter.
Become an investor
It is the wish of many people to transform from a tired and profitable entrepreneur to a relatively relaxed and profitable investor.
He Boquan, who sold Robust to Danone a few years ago, was questioned, especially Robust lost money in the end. However, the dispute over Dawa, which started last year, gave people a new understanding of what He Boquan did at that time. Many projects invested by He Boquan, which established today's capital, began to enter the harvest period.
Now more and more entrepreneurs are becoming investors.
Deng Feng, who sold his screen, founded Northern Lights in 2005. Zheshang Liu Xiaoren, who has been engaged in handicrafts for more than 20 years, initiated Hongding Venture Capital; Zhu Min, who sells Netcom overseas, specializes in China investment company.
Hu Caihe, a venture capital analyst, told this newspaper that in the United States, many people who become angel investors are transformed from successful entrepreneurs. But in China's venture capital industry, there are few investors with entrepreneurial experience.
Personal entrepreneurial experience and business management experience make it easy for entrepreneurs to become investors.
Yan Xiaoping told this reporter that they have gone through all stages of the enterprise from small to large, knowing the problems encountered in each stage, knowing how to solve the problems, and knowing what kind of managers to choose in each stage. But for many investors with financial background, these are blank. Entrepreneurs often have strong connections and a mature team around them. For entrepreneurs, these are much more important than simple investment. Zhou Hong, founder of Qihoo? T believes that they give enterprises not only money, but also management experience, contacts, keen understanding of products and markets, business awareness and so on.
Entrepreneurs also have an incomparable advantage over financial investors: more accurate business judgment and greater investment courage. Investors with financial background are often more willing to judge by numbers. When the financial figures are not beautiful, most of them will choose to leave, which ignores a group of enterprises that have just started their businesses and have not yet made good profits. They often need more money than those with beautiful financial data.
Entrepreneurs' accurate business judgment can make them further see the future of the industry and the development potential of enterprises, and it is easier to invest in those "small enterprises", as Zhu Xinli said before selling Huiyuan: "I want to be optimistic about an enterprise. I dare not say that 100% is successful, but it is almost 80%. " At the same time, due to the difficulties in the start-up period, entrepreneurs seem to have more "love" for entrepreneurs and are more willing to help them, while investors with financial background are more "cold".
In a sense, they are the real VC, and investors with financial background can only be called "PE".