Why have founders emerged in recent years? Death from overwork? What about the phenomenon? Do you know the helplessness and sadness behind gambling?
In the early morning of September 2015, Wu Bo, the 36-year-old CEO of the game company Hehe Network, died suddenly due to long and stressful work.
At that time, the incident shocked the gaming community and triggered a discussion about the health of the gaming community. Wang Feng, founder of Linekong Interactive Group, Liu Yong, CEO of Reku, and others expressed their remembrance of Wu Bo in WeChat Moments.
Now, Wu Bo’s death has brought about an arbitration case with a claim amount of 654.38 billion.
Recently, Phoenix Media, an A-share listed company, issued an announcement stating that because the performance of the previously acquired mobile game company Hehe Network in 2015 did not meet the standards, its subsidiary Phoenix Digital Media submitted a request to the Shanghai International Economic and Trade Arbitration Commission (Shanghai International Arbitration Commission). Center) initiated arbitration and claimed a total of 1.5 million yuan from the original shareholders of Harmony Network! Also participating are well-known investment institutions such as Matrix Partners China.
Two or three years ago, the A-share market set off a wave of mergers, acquisitions and reorganizations of cultural media assets. What now? The aftermath of mergers and acquisitions? What was the first thing to break out? Shows and Gambling. Although the Harmony Network is just one extreme case among many gambling failures, it also hints at the ubiquitous risks behind performance gambling.
In fact, behind the last wave of cultural media asset mergers and acquisitions, it is not uncommon for companies to buy back compensation due to failed performance bets. Even leading film and television companies such as Huayi Brothers and Enlight Media will inevitably encounter similar situations during mergers and acquisitions.
So, why do gambling agreements frequently appear in mergers and acquisitions in the film and television entertainment industry? What are the main risks involved in a gambling agreement? Behind the 65438 500 million claim, there are too many topics worth thinking about.
Founder? Death from overwork? Company performance plummeted.
On June 2, Phoenix Media, an A-share listed company, issued an announcement stating that its subsidiary Phoenix Digital Media was involved in two arbitration incidents. The roots of both arbitrations can be traced to a mobile gaming company called Harmony Networks, which was acquired by Phoenix Digital Media four years ago. Death from overwork? event.
In August 2013, Phoenix Media announced a capital increase of 320 million yuan. Subsequently, Phoenix Digital Media announced that it would purchase 64% of the shares of Harmony Network for 3.1 million yuan and become the controlling shareholder of Harmony Network. The remaining 36% will be held by one of the company’s founders. CEO Wu Bo holds it. Phoenix Media has high hopes for this acquisition and believes it is an important step for the company to enter the gaming field and realize its digital development strategy.
At that time, the Harmony Network was developing in full swing. Public information shows that Hehe Network was founded in 2009. When it was founded, it was engaged in the web game business. Later, it turned to mobile game development and launched many game products familiar to players, such as "Three Kingdoms in the Palm" and "Magic Card Fantasy". At the same time, the company is the first company in mainland China to obtain the right to distribute mobile games on the Xbox live game platform.
Like many other mergers and acquisitions, Hehe Network’s counterparties and shareholders Zhang Wei and Zhou Hao promised that Hehe Network’s audited net profit from 2013 to 2015 (consolidated net profit after deducting non-recurring gains and losses) ) shall be no less than 44.09 million yuan, 52.910 million yuan and 6344.05 yuan respectively.
In the first two years (2013 and 2014) after the acquisition was completed, Harmony Network successfully fulfilled its performance commitments. However, by 2015, the company's performance suffered a cliff-like decline: the non-net profit loss that year was 71,172,700 yuan, as high as 65438.
The performance of Hemu.com plummeted, mainly because of an accident? Founder and CEO Wu Bo passed away suddenly.
The importance of Wu Bo to Harmony Network is self-evident. After graduating from college, he devoted himself to the entrepreneurial wave. Later, Wu Bo and his two partners decided to join the gaming industry in 2010 because they were optimistic about the prospects of the gaming industry.
Thanks to Wu Bo's summary of past entrepreneurial failure experiences and excellent technology, the company received 100,000 yuan in financing from Matrix Partners less than a week after the first project was launched. Under Wu Bo's control, Hehe Network has grown from an early team of 20 people working on one game to a large game company with 400 people and 40 games in just a few years, with annual revenue of over 100 million.
After Wu Bo's sudden death, Phoenix Digital Media failed to fulfill the investment agreement as promised, and the subscription money for the next two phases of * * * has not yet been paid.
Based on the actual investment, Phoenix Digital Media’s final shareholding ratio in Harmony Network was only 565,438 0.2, not 64 as previously stated.
Phoenix Digital Media filed two consecutive arbitrations, demanding compensation of 65.438 billion yuan.
Because Harmony Network’s 2015 performance was far from its promise, Phoenix Digital Media sued Zhang Wei, Zhou Wei, and Matrix Partners China, the original shareholders of Harmony Network, respectively, and all were accepted.
Specifically, because the performance was not up to standard, Phoenix Digital Media required Zhang Wei and Zhou Wei to compensate the company in cash: [6349-(-7117.27)]? 51.2 = 68.9473 million yuan, and the interest since the beginning of 2015 is 2.9992 million yuan.
Not only that, because Phoenix Digital Media lost assets in 2015? Goodwill impairment? One case cost 62.0697 million yuan. According to the provisions of the "Capital Increase Agreement" and the "Contract Law", Zhang Wei and Zhang Wei should compensate Phoenix Digital Media for its losses of 49.6558 million yuan during the performance of the "Capital Increase Agreement". In addition, due to Wu Bo's death, US$728,000 in overseas accounts could not be recovered (included in the scope of acquired assets). Phoenix Digital Media had paid the consideration at the time of acquisition, and Zhang Wei and Zhou Wei should also compensate the company for losses of US$372,800.
Because Matrix Partners China issued the aforementioned commitment letter regarding performance compensation terms, Phoenix Digital Media not only claimed compensation from the two original shareholders but also claimed RMB 22.4833 million from Matrix Partners China.
The total amount involved in the two arbitrations was 654.385 billion yuan.
Generally speaking, even if the acquisition target fails to fulfill its performance commitments, both parties will deal with it in a low-key manner. It seems rare for Phoenix Digital Media to initiate arbitration with such a high profile.
On June 5, Entertainment Capital contacted someone from Phoenix Media. What is the reason for arbitration? After many negotiations, everyone could not reach an agreement. There was only arbitration? .
As for the origin of the dispute, namely the huge performance loss of Hemu.com in 2015, the person said there were two main reasons: one was the sudden death of founder Wu Bo in 2015, which had a great impact on the company; There is a certain degree of volatility in the gaming industry. The high-traffic games of Hemu.com in 2013 and 2014 have begun to decline in the 2015 cycle.
? Although Wu Bo passed away, the company's entire team remained relatively stable. We have stabilized the team for more than a year, and also given the team some equity and provided good incentives. Now the business situation is also improving: in 2015, it lost more than 70 million yuan, and in 2016, it lost more than 20 million yuan. This year, we should be able to turn a profit. ? the person said.
? For investors, disputes arising from the performance of gambling agreements are basically concentrated in cases where equity/share repurchase or monetary compensation is triggered, and the other party to the agreement refuses to perform or does not fully perform, triggering litigation or arbitration proceedings. The acquisition of Harmony Network by a subsidiary of Phoenix Media is a case of performance compensation. ? Lawyer Zheng Xiaoqiang, a partner at Beijing Tianchi Juntai Law Firm, said.
Usually, arbitration institutions will focus on three aspects of the case:
First, whether the gambling agreement and its terms are legal and valid. This case should be judged based on the specific provisions of the gambling agreement in the case of the acquisition of Hemu Network by a subsidiary of Phoenix Media. Based on this complex agreement, which is basically signed with the participation of lawyers, it should not be invalid;
Second, whether the exercise conditions set in the gambling agreement have been realized. This must be demonstrated based on the specific content of the gambling agreement and the relevant evidence provided by the applicant;
Third, based on the agreement and the actual situation, the subject that should bear responsibility and the specific content.
This case also involves whether Matrix Partners China should bear corresponding responsibilities, which needs to be judged based on the specific content of the commitment letter and the facts of the case.
Even Wang He got it wrong. How does the film and television entertainment industry prevent gambling risks brought about by mergers and acquisitions?
"Entertainment Capital" noted that there are many cases where target companies in the cultural media industry are unable to complete performance bets, and some have triggered original mergers and acquisitions. Repurchase? terms.
1. Huayi Brothers
Huayi Brothers’ 2016 annual report showed that 3 of the 5 companies it had previously acquired failed to fulfill their performance commitments.
Among them, Guangzhou Hanyin achieved non-net profit of 65,438 065,438 07.8933 million yuan in 2065, 438 06, which was far lower than the promised 65,438 085, 438 065, 438 00,000 yuan. . The company stated that there were three reasons for the substandard performance: Guangzhou Hanyin was in the transition period between new and old game projects last year, resulting in a decline in revenue, and competition in the mobile game industry intensified. Guangzhou Hanyin increased RD investment to enhance its competitive advantage.
The other two companies hold shares for star directors or actors: Zhejiang Changsheng, owned by Zhang Guoli, achieved an after-tax net profit of 250.013 million yuan last year, which was far lower than the promised performance (37.795 million yuan); Feng Shaofeng, Li Chen, Dongyang Haohan, which is owned by celebrities such as AB, achieved a net profit of 101,415,200 yuan last year, which was lower than the promised 103,500 yuan.
According to the announcement issued by Huayi Brothers on April 26 this year, due to Guangzhou Han Yin’s performance failing to meet standards, the company will repurchase and cancel Liu Changju, Mochi Creative (Beijing) Technology Co., Ltd., and Shenzhen Tencent 65,438 065,438 080,500 shares of Computer Systems Co., Ltd.
2. Enlight Media
2065438 In June 2004, Enlight Media acquired Guangzhou Blue for 208 million yuan ARC 50.8 Equity. However, in June last year, Enlight Media suddenly announced the transfer of all its shares in Guangzhou Blue Arc for a total price of 244 million yuan. Enlight Media’s explanation is that improving the company’s asset liquidity, optimizing the company’s overall resource allocation, and improving the efficiency of capital use are in line with the company’s investment strategy and development strategy? .
There are many reasons behind this transfer, one of which is that Guangzhou Blue Arc’s performance failed to meet its commitments. The counterparty of the transaction has promised that Lan Arc Culture’s non-net profits from 2014 to 2016 will be no less than 26 million yuan, 33.8 million yuan, and 416,000 yuan respectively. Guangzhou Blue Arc’s net profit in 2015 was only 24.903 million yuan, and in the first nine months of 2016 it was only 333,000 yuan.
3. Wenhua Media
Three years ago, Wenhua Media acquired Zhangyitong and Youman Culture. In 2016, the two companies failed to deliver on their performance promises. Among them, Zhangyitong does not need compensation because its cumulative net profit from 2014 to 2016 has reached the standard; however, Youman Culture lost 400,000 yuan last year, which is far from the promised 42.805 million yuan, and the number of shares that need compensation is 5.0064 million shares.
4. Mosaic Culture
The Mengxing workshop acquired by the company in 2014 has failed to meet performance standards for three consecutive years. It promised to deduct non-net profits of 2 million yuan, 3 million yuan, and 4 million yuan respectively from 2014 to 20165438, but the result was an annual loss, with net profits of -281.165438.
Previously, Bel Canto Culture had received compensation of 9.7055 million yuan from Qin Huang and Zhou Zhongyun, shareholders of Meng Xing Gongfang Company, in 2065, 438 04 and 2065, 438 05, but still needed to compensate the company in 2065, 438 06 The amount is 7.5486 million yuan. In other words, the total compensation amount for three years is 1,725,438,000 yuan.
5. Wanjia Culture
In 2015, the company acquired the 100% stake in Xiangtong Animation held by Sichuan Lianer, Tianhou Dide and Xiangyun Tongda for a consideration of 1.2 billion. In 2016, Xiangtong Animation deducted non-net profit of 20127814300 yuan, which was nearly 30 million yuan less than the promised amount.
The reasons for substandard performance include: In May 2016, the State Administration of Press, Publication, Radio, Film and Television issued new regulations, and mobile games without its approval are not allowed to be published and operated online; mobile game research and development expenses, including H5 heavy games, were all reflected in 2016 ; China Mobile, the most important customer, continued to promote strategic adjustments in 2016.
According to Wanjia Culture’s calculations, Sichuan Lianer and Tianhou Diide need to compensate Wanjia Culture for 3.5709 million shares and 3.4308 million shares respectively, for a total of 7,001.700 shares. However, the two companies said that due to arbitration, their shares in Wanjia Culture have been frozen by the court and they are temporarily unable to compensate. It is worth mentioning that this incident also attracted the attention of the Shanghai Stock Exchange.
For the film and television industry, cases of failed mergers and acquisitions gambling continue to emerge. Lawyer Zheng Xiaoqiang, a partner at Beijing Tianchi Juntai Law Firm, believes that there are three main reasons: first, unrealistic standards for exercising rights in VAM agreements; second, abuse of VAM agreements; third, the intangible, priceless, and subjective nature of the core assets of the film and television industry characteristics make gambling risks more uncontrollable.
Faced with endless gambling failure cases, how do film and television entertainment companies prevent gambling-related risks?
Zheng Xiaoqiang said that first of all, both parties should fully negotiate and formulate exercise standards that are operable and consistent with the actual conditions of both parties.
Secondly, rationally analyze the development potential of film and television companies and the capabilities of managers. Fully understand the company's development potential and the manager's capabilities, make possible plans for prior goals and strictly abide by them. Don't be too ambitious and blindly confident.
Thirdly, when adverse circumstances arise, both parties can adjust the gambling agreement to make it enforceable with the times. For both parties, the success or failure of the gambling agreement directly affects the vital interests of each party, can it be said? Honor, disgrace and * * *? Therefore, once an unpredictable crisis occurs in cooperation, both parties must stick together to provide warmth and must not make the situation worse.
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