"You're here?"
"Yes, we're here!"
At 10 AM, the three giants of Gaode Maps, Cheng Congwu, Xiao Jun, and Hou Jun, were already waiting downstairs.
After getting out of the car, Chen Pingjiang quickly walked over and shook hands with the three.
"Welcome, Mr. Chen, you must have had a tiring journey."
"Let's go upstairs and rest first."
After a long exchange of pleasantries, the group went to Gaode Maps' meeting room.
After some small talk, Chen Pingjiang cut straight to the chase:
"To be frank, I'm here representing Renren.com to propose an acquisition offer for your company. The price is negotiable."
"Uh!"
As soon as he finished speaking, Cheng Congwu and the other two exchanged glances, looking a bit stunned.
They had initially thought Chen Pingjiang was coming to represent his three companies to discuss map licensing with Gaode, and no one expected him to propose an acquisition right away.
This matter was too significant.
For a moment, the three giants didn't know how to respond.
Chen Pingjiang smiled:
"Are you gentlemen surprised by this news? My apologies, I might have been too abrupt."
Cheng Congwu waved his hand:
"It's not your fault, Mr. Chen; we three were prejudiced. I'd like to ask, Mr. Chen, why do you want to acquire Gaode?"
Chen Pingjiang said:
"Because the map navigation business is very important to several of my companies; it's a link in the ecological chain. Baidu has a map business, and Tencent has SOSO. Whether it's Renrengou or Juzi Mobile, maps are an indispensable part."
Hou Jun frowned; he was clearly not very satisfied with this answer.
He already knew what Chen Pingjiang was saying:
"If that's all, we could just discuss licensing cooperation. There's no need to pursue an acquisition, is there?"
"Because only through acquisition can I feel at ease. As far as I know, Baidu has also extended an olive branch to you, right? If it's just a partnership, what if Gaode sells itself to someone else in a few years and doesn't renew the contract with me then?"
Chen Pingjiang spread his hands:
"Moreover, Gaode's current valuation isn't particularly high, so an acquisition is quite cost-effective."
What deep pockets.
The three giants mused, Gaode was quite short on cash at the moment.
Watching the three find an excuse to go to the next room for a private discussion, Chen Pingjiang smiled and exchanged a glance with Bu Housheng.
Bu Housheng found it amusing; it was indeed their boss's style to propose an acquisition at the drop of a hat, with no need for pleasantries, just getting straight to business.
Chen Pingjiang didn't have much time to delay on the acquisition of Gaode.
On one hand, Baidu had been flirting with Gaode; if Li Yanhong hadn't kept a low profile, Gaode might have already taken the surname Baidu.
On the other hand, if they delayed any longer, Gaode would go public.
Chen Pingjiang made up his mind: if Gaode didn't sell, he would turn to Sogou.
The first step in a typical acquisition is to send a letter of intent, expressing the sincerity of both parties.
To put it plainly, it's about whether you want to sell.
In the adjacent office, Cheng Congwu and the other two were having a meeting.
"This Chen Pingjiang, so mysterious, no rumors got out beforehand, and now he wants to acquire as soon as we meet, really doesn't follow any routine,"
Cheng Congwu complained a little, because he noticed that the other two partners seemed somewhat swayed.
Xiao Jun, who was in charge of technology, smiled:
"He is a young man after all, certainly different from old fellows like us. I've long heard that he acts decisively, and seeing him today, it's true to his reputation."
"So, what are your thoughts? A flat refusal, or can we sit down and talk if the price is good?"
Hou Jun asked.
Cheng Congwu shook his head first:
"I don't want to sell. Currently, our Gaode holds the top market share in the industry, both in maps and navigation. Going public is almost a sure thing. Most importantly, we've been building this company for so many years; it's like our own child. I can't bear to sell it now."
Xiao Jun, however, said:
"I'm different from Lao Cheng. If Chen Pingjiang offers a good price, it's not impossible to talk. Of course, this price would need to be higher than our market capitalization after listing. Even if it were equal, I'd still consider listing to be a better option."
Hou Jun sighed and looked at Cheng Congwu:
"I'm the same as Lao Xiao."
Cheng Congwu's expression changed instantly.
Among the three shareholders, only he wanted to hold out, while the other two were taking a wait-and-see approach.
Seeing his old friend's troubled expression, Hou Jun continued to mediate:
"In my opinion, Lao Cheng, don't be so quick to refuse. There are more shareholders than just the three of us; we also need to inform other investment institutions."
Gaode Maps had raised capital once in 2006.
The investors were Sequoia Capital, KPCB, Legend Capital, and Walden International.
Acquiring a listed company might be simpler.
If the target company disagrees, Chen Pingjiang could entirely absorb shares in the secondary market; exceeding the 5% ownership disclosure threshold wouldn't matter.
It would be best if the major shareholders agreed to the acquisition offer.
If not, Chen Pingjiang could still persuade other minority shareholders and investment institutions to force the issue.
In the worst-case scenario, Chen Pingjiang could directly initiate a hostile takeover, also known as a malicious acquisition.
Of course, a hostile takeover is more difficult to execute; it requires high stock liquidity in the target company.
Faced with a hostile takeover, the target company can also seek a "white knight" with good relations to take over, or directly launch a poison pill plan or other anti-takeover strategies.
For a non-listed company, Chen Pingjiang cannot acquire shares in the secondary market.
If a major shareholder refuses, he can only proceed gradually, persuading minority shareholders and investment institutions.
If everyone disagrees, then an acquisition would be out of the question.
Therefore, Chen Pingjiang would have to change his approach, acquiring equity from a certain shareholder, no longer seeking a wholly-owned acquisition, but rather a seat on the board of directors.
If a shareholder transfers equity to Chen Pingjiang, it requires the consent of more than half of the other shareholders.
In such a situation, the transferring shareholder must notify other shareholders in writing and seek their consent.
If the other shareholders do not respond within thirty days of the notice, it is usually considered as consent to the transfer.
If more than half of the other shareholders disagree with the transfer, the dissenting shareholders should purchase the equity being transferred; otherwise, it is deemed as consent to the transfer.
Under equivalent conditions, other shareholders have pre-emptive rights.
In short, there are many intricacies involved, and the key lies in whether Gaode is a solid block.
As long as there's a slight crack, Chen Pingjiang will come sniffing like a bloodthirsty alligator.
Although Cheng Congwu didn't want to sell, he was at most a major shareholder; if all the other shareholders wanted to sell, he couldn't stop them.
Gaode's prospectus is publicly available, showing the shareholding percentage of each shareholder.
After making a few calls, Hou Jun returned to the office.
He was currently the chairman of Gaode Maps, responsible for liaising with other investment institutions.
"How was it?"
Seeing Hou Jun return, Cheng Congwu asked eagerly.
Hou Jun shook his head:
"It's clear that Chen Pingjiang came prepared. Sequoia and Legend Capital both indicated they would consider it. As for the other two, I didn't even bother; their shareholding is very low. If my estimation is correct, Chen Pingjiang had already persuaded Shen Nanpeng before coming, and Shen Nanpeng then helped him communicate with the various investors."
Xiao Jun clicked his tongue:
"This young man really doesn't play by the rules; it's clear that even if we disagree, he'll still acquire other shares."
Seeing this, Cheng Congwu had no choice but to say:
"Then let's first see their sincerity."
It seemed the positions of other shareholders, apart from him, were not that firm.
If it were another younger company, Chen Pingjiang might not have had a chance.
But while Gaode Maps was doing well, the people present were not young.
Cheng Congwu was born in '64, making him 46 this year.
Xiao Jun was over 50, and Hou Jun was around the same age.
Among them, Hou Jun had many other ventures outside and usually didn't have much energy to devote to Gaode.
In reality, Gaode's founder structure destined it for acquisition.
No one's stance was particularly firm; as long as the price was acceptable, they could all sell.
After about half an hour, Cheng Congwu and the others returned to the meeting room.
"Mr. Chen, quite the tactic,"
Cheng Congwu said, somewhat annoyed.
Chen Pingjiang, however, played dumb:
"Huh? What do you mean, Mr. Cheng?"
"Never mind."
Since Chen Pingjiang wouldn't admit to having communicated with the investment institutions beforehand, Cheng Congwu had no recourse.
As chairman, Hou Jun needed to make a statement:
"In principle, we agree to your company's acquisition intent. Mr. Chen can arrange for people to conduct a special investigation."
"Excellent!"
Chen Pingjiang grinned:
"Then I'll add one more thing: even if the merger is ultimately successful, I hope all directors can remain in their positions, and I promise that as long as Gaode exists, this name will not change. Because I also started from scratch, I fully understand how deeply founders feel about their companies."
After hearing this, Cheng Congwu's expression improved somewhat.
After the intent meeting concluded, Chen Pingjiang toured the Gaode premises, accompanied by the three.
"Mr. Cheng, I know you might feel a bit uncomfortable. But frankly speaking, Gaode needs a strong backer. Although Gaode's market share is good right now, your competitors are even stronger. Not to mention Baidu, even Tencent is bound to make a big splash in the map sector, and the resources and capital behind you can't compare to theirs."
"The in-car navigation systems you've collaborated on with various car manufacturers are already products of a bygone era; it's not an exaggeration to call it a sunset industry. Once the 4G era arrives, and navigation features are embedded in mobile maps, Baidu and Tencent will leverage their powerful channels for aggressive promotion. Can you still be as stable as you are now?"
"Only Renren.com doesn't have its own map navigation. If the acquisition is successful, I can promise that Mr. Cheng can join Renren.com's board of directors, and Renren.com will also invest substantial resources and capital into Gaode, helping Gaode grow."
"Juzi Mobile can pre-install the Gaode Maps application directly onto phones, which is a very attractive point. And my WeChat can also help promote Gaode."
At the dinner table, Chen Pingjiang spoke frankly and revealed his thoughts, causing Cheng Congwu's inner resolve to waver as well.
Perhaps?
Aligning with Renren might not be a bad choice after all?
The first step in the acquisition process is to express the intentions of both parties: whether to sell or not, and whether there's a genuine desire to buy.
This was what Chen Pingjiang came to Gaode to do today.
Once confirmed, Chen Pingjiang would assemble a special investigation team consisting of accountants and lawyers to examine Gaode's financial, business, and administrative affairs.
All ledgers, qualifications, original contracts, guarantees, and licenses would need to be thoroughly investigated.
The purpose was to ensure there was no internal corruption at Gaode, that it wasn't insolvent, how much money was in its accounts, if there were any legal disputes, and so on.
The third step would be for Gaode to convene a board meeting where everyone would vote by show of hands on whether to approve the acquisition.
Only then would the acquisition plan be submitted to government departments for approval.
All countries have anti-monopoly laws, and large acquisitions require government approval.
Furthermore, if the company also operates in other countries and regions, the consent of those governments would also be needed; if they disagree, the issue would need to be resolved locally.
This is also why Microsoft's acquisition of Blizzard, even with Blizzard's own agreement, often gets stalled in many countries.
Once all of this was settled, both parties would begin negotiating the transaction method, compensation method, and specific amount.
There's a significant difference between a stock swap and an all-cash acquisition.
Subsequently, the boards of directors of both companies would need to approve the acquisition plan, sign the contract, hold a press conference to disclose it to the public, and, if necessary, convene a shareholder meeting and reorganize the board of directors.
Only then would the entire acquisition process be considered complete.
The fastest it could take was three months; if slow, half a year or even a year.
(End of Chapter)