On December 8th, Lenovo Group (0992.HK) jointly signed the transfer agreement for the 13-month-old transfer agreement with the US Commercial Giants IBM (Quotes Forum): Lenovo will spend $ 1.25 billion purchase IBM full PC (individual Computer) business. After the completion of the acquisition, the Ninth Lenovo of the Ninth Global PC Market has jumped to the third place, only to Dell and HP, and after the founding of the new company, the headquarters will move to New York.
One night, Zhongguan Village's local Lenovo Group (market forum) successfully landed in the United States, and did not date with huge international procurement, operations and sales platforms. Perhaps this contrast is too obvious, and the industry immediately appears highly opposite fierce evaluation. From the perspective of the reputation, his majesty is slightly, and the destruction is a laughing marriage.
"This is an opportunity for Chinese companies that are difficult to refuse, but at the same time, it is huge." Compared to the state of Lenovo, Liu Biao, said the essence of this transaction: a gamble coexisting with risks.
IBM marriage
"Three years ago IBM has this proposal, I and Liu also felt that it was a heaven." Yang Yuanqing, who has been promoted by Lenovo Group after the acquisition, is said in this interview with the media.
This "Mythical Story" is far from people's imagination. According to the "Finance", it is time for IBM, IBM has officially hired a buyer around the world. At around October 2003, Merlin took Lenovo to the first place of the target acquirer. Liu Erfeng, President, Mei Lin, and Liu Chuanzhi, Chairman of Lenovo Group, and Financial Director Ma Xuezheng private intersection, and Mei Lin headquarters and IBM relationships, with this relationship, Mei Lin began to arrange both parties.
"At the beginning, both sides are skeptical." Mei Lulian Securities is responsible for the Asia-Pacific region and the competent department of the acquisition department, Dai Kinging. IBM's fear is that for such a large-scale acquisition, Lenovo has sufficient financial resources; Lenovo's doubts are their own operational capabilities. At the end of 2003, Lenovo began a detailed due diligence, and hired McKinsey as a consultant to fully understand IBM's PC business and integration. After the Spring Festival in 2004, he hired Goldman Sachs as a financial adviser.
The intermediary lineup of this transaction is unprecedented. Goldman Sachs and Merrill's troops will send a lot of people, all over the previous Asia-Pacific region (except Japan), Goldman Sachs United States, MAYLAP, is also a handful of HP and Kangbia.
Lenovo decision makers are naturally the board of directors represented by the Chairman of the Board of Directors. The negotiary interior personnel involved more than 100 people.
"The most important thing in the process of the entire negotiation is to let Lenovo feel calm, let it have confident to operate this international business." A intermediator who participated in M & A claimed. Since IBM's PC service is an organic component of IBM's overall business, how to ensure that its stripped quality is a very difficult job.
The entire negotiations will eventually publish a 37-page agreement, including more than 40 service agreements such as brand, financing agreements, transitional service agreements. The main purpose is to confirm that Lenovo will continue to profit from the support and services of IBM other sectors after having this part of the business.
Negotiation is a long marathon process, "all personnel are in business trips for a long time, because the time is very long, negotiating places in exchange, sometimes in Beijing, sometimes in Hong Kong."
Due to the entire transaction negotiation period, the two sides confidential work secrets are not allowed to know the twists and turns between the negotiations. However, the facts show that it is indeed an association with IBM. It is alleged that before determining Lenovo's final negotiation object, there is a strong interest in the United States, and its prices are similar to Lenovo. In fact, if the transaction, its arrangement is far more simple than Lenovo, because there are many problems such as brand integration, asset stripping is much easier. However, IBM finally selected Lenovo.
Compared with the financial investors, the advantage of Lenovo is to provide an increase in rising space. Analysts believe that the combination of HP and Kangbia, IBM and associative advantages are more complementary, and even customers are very overlap. "For example, Toshiba is often mentioned in strategic buyers, but it is a more direct competitor of IBM. If business merges, Revenue Attrition will appear, because there are many products and customers. Overlapping. "In fact, for this" snake swallowing ", Lenovo has also discussed many objections, including the board of directors, and major shareholders have a lot of questioning. However, "Lenovo has been discussed internally, after two or three years of thought, finally determined". " Goldman Sachs Asia's vice-director, Joint Director of the Investment Bank, claimed.
In any case, on December 8, the two sides have officially announced the agreement, and the remaining shareholders will be adopted by both shareholders General Assemblies, and the approval of the relevant departments (such as tax exemption, the access to European and American markets), the entire transaction is expected to be completed in the second quarter of next year.
Pooked
According to the asset purchase agreement signed by both December, Lenovo will pay $ 1250 million (HK $ 9.73 billion) to IBM. The cash payment is $ 650 million in cash, and the other 600 million US dollars take the Lenovo stock price, including the maximum 82,1234,569 shares (accounting for 8.9%), with 921636459 shares (accounting for 10%) with the release price of HK $ 2.675. No new voting share.
Lenovo purchased assets included all PC services of IBM, and the acquisition of assets was 680 million US dollars in the US GAAP. The agreement also referred to that the business book net worth under the IBM system was worth $ 976 million, including a total asset of $ 1534 million, with a total liability of 2.51 billion US dollars. The negative 680 million US dollars is because the intersection of the server is peeled off, and the equity of the Great Wall Computer (Information Forum), the Great Wall Computer (Information Forum).
Since the net asset rights of the acquisition are negative, the media is generally regarded as one of the payment costs of Lenovo. However, this does not mean that Lenovo needs to fill this book negative asset, and it is necessary to face more. Because the asset annual income tens of billions of dollars, in the case of net assets, if future cash flow is reduced, it will cause payment issues. In this regard, Goldman Sachs and McKinse have made different analyzes, such as whether the company's cash flow is sufficient, and these are the decision-making basis for the dedication and entry or not.
There are two factors as determined to the stock price. On the one hand, it is the cash of Lenovo, I hope to pay in a more conservative manner; on the other hand IBM also intends to hold Lenovo stock, one is to share its possible profits, the second is to maintain its influence in the PC business force. This has a great impact on its overall sales strategy. After all, a brand like "Think" is considered an IBM business card. In fact, IBM holds an interest in the share of shareholders in the proportion of 18.9%, close to the upper limit of the acquisition project equity transaction.
"More than 20% of investments must be parallel, that is not acquisition, but joint venture." A investment bank involved in negotiations.
According to IBM 2003, the PC business part loses $ 250 million. From the book, the King of the past PC has falter in this area, which is the most important reason for IBM's treatment. However, Goldman Sachs believes that there is a negative thing that has been negative in the past performance. In their view, IBM has an important factor in the last two and three years of over the past two or three years being a high quality preservation expenditure, and this factor has been partially removed in the protocol arrangement.
According to the agreement related content, due to the installation of problems in 2001 IBM's personal computer products, the quality insurance premiums after the next three years have exceeded the standard, and the relevant expenditure increases around 150 million US dollars per year. The agreement launched that IBM will compensate for Lenovo in the first two years after the transaction delivery, up to $ 100 million. Obviously this will make the annual loss of the acquisition of assets have decreased.
However, in any case, "Independence, IBM's PC part is still loss." Morgan Stanley issued a study report. Since IBM recognized losses business, Liu Chuanzhi demands from the beginning of the risk to ensure that it is a factor that causes the renemination from the beginning. "In terms of information on the valuation, the attitude of Lenovo has been very conservative rather than optimism." Investors participating in the negotiation said.
Beyond "acquisition"?
"If this is just an asset trading, I am not sure that Lenovo will be done." Song Xueren, a vice chairman of Goldman Sachs, emphasized that this is not a simple asset transaction, but a strategic cooperation. In his view, with the long-term cooperation of IBM and Lenovo, the former will be greatly strengthened by the advantages of the competitor occupied the Chinese market. In a satisfactory, Morgan's analysis report also supports this.
According to the agreement, Lenovo's stocks held by IBM, the ban is three years, but this does not mean that IBM will be sold three years later. Wu Yibing, General Manager of McKinsey Beijing Branch, pointed out that IBM does not have PC at all, otherwise it is likely to be demivating from Dell and HP in the core competitiveness of the company.
For example, to compete for a bank, it requires both IBM solutions, but also a laptop. If it is not available, it is equivalent to open this market to a competitor. Dell, HP can be step by step, from the laptop to the service. Obviously, it has become the Lenovo of the PC manufacturer in the Asia-Pacific region (except Japan), which is the best candidate for IBM adjustment PC strategy to achieve the goal of "let alien".
For Lenovo, dance with "elephants" and is of course not easy. But except this, is there more easier choices?
In April 2001, "Young Shuai" Yang Yuanqing officially implemented Lenovo Group, after three years, new business such as software, services, mobile phones, and digital products are only flowers. Regardless of internationalization or research and development, it is still in a difficult start stage, and more than 90% of the turnover is still from the mainland China, which is obviously not satisfied with investors.
Lenovo has been thinking, where is the growth from the growth. For Chinese companies at this stage, the possible answers in each industry come from the international market. Especially in the PC industry, any regional enterprise, it is actually an international competition. Lenovo has already occupied China's 30% of the market, and he can't go out, and you can't open the competition with foreign companies. You will come in sooner or later.
In addition to loss, IBM's PC business is almost all elements of lack of Lenovo. At the same time, the brand, channel, sales personnel, management team, after-sales service, etc., Lenovo can actually engage in business on the platform of IBM, which is difficult to use money.
But the capital market always believes that the numbers are better than imagined space. After the announcement, December 9, Lenovo's share price in Hong Kong was held in HK $ 2.74 compared to the previous trading day. The previous November 15th, its share price once rushed to HK $ 3. The interesting thing is that the stock price of IBM has risen by 0.57%, and Dell's share price rose by 1.33%, and only HP's share price fell 0.28%.
Integrated road
After Lenovo's PC business of IBM, how big is the difference between the win-win situation?
A research report of Morgan Stanley said that after the completion of the transaction, IBM's pre-tax profit margin is expected to achieve 1% growth, and its direct income will be 900 million US $ 120 million.
The first step is to integrate the supply chain according to the design of Yang Yuanqing, the new chairman of Lenovo Group. This is easy to understand because the integration of things is easy to do. Analysts pointed out that only the cost of purchasing costs is a small number. Because of the annual output of 400,000 laptops, it is clear that 4 million units cannot be synonymous. According to Lenovo, the gross profit margin of IBM is 22%, while Lenovo is less than 15%. In the case where the procurement cost is further declining, as long as it can effectively reduce management and other costs, the IBM PC business is lost, and the losses of Lenovo's net profit will not be too far.
The second phase is that the integration of the entire market and sales channel is started after a year or a half, which will be the real test of the management of the new Lenovo. An estimation believes that by 2007, a synergistic effect of up to $ 200 million per year can be produced. Of course, the goal of Lenovo is obviously more than these, and the most important vision is fully integrated, and it will open up in terms of international scope.
In fact, Lenovo and IBM integrates how to integrate in the negotiation process, and almost 90% of the energy is spent on detail. Even the cooperation strategy has continued to negotiate for four or five months. The transitional agreement between the brands and services reached by both parties is also very meticulous.
However, the road to integration is still not a tank. Deborah Nelson, Vice President, HP Personal System, said that the main challenge for Lenovo is expanding to its current Chinese market, and the performance on the world-class stage is not just channels and supply chains. In addition, Lenovo will also face a lack of brand awareness outside China, to meet the fierce price competition and cultural conflicts caused by the global computer market and the cultural conflict caused by the combination.
Dell's founder Dell was in an interview with the Financial Times, and did not ask: "When is the computer industry, when is the last success?" Although Yang Yuanqing also gave a commemoration, Lenovo must really form The trend of Dell's decisive battle is not easy. Even after the merger, the new Lenovo's global market share is also half of Dell, let alone, Dell's expansion has not terminated signs.
The transitional agreement signed with IBM is just a necessary protection, but it is not a guarantee. How to stabilize overseas management, especially in the US market, is still a challenge. Once a large number of people lose, it is clear that the gold content of the transaction will be greatly reduced. Because of the challenge of internationalization, the first is the problem, followed by the problem of money.
IBM China's PC department's employees pointed out about "Finance", in IBM China, many times of working languages are English, or mixed with a lot of English, and there is a larger management culture in a multinational company. Lenovo also started training employees, but should be non-short-term work. And in some people's view, Lenovo culture also has a stronger state-owned enterprise color, the integration between it, even if there is a rigorous rule guide, it is inevitable.
In terms of salary system, IBM and Lenovo differences are also more obvious. Since IBM implements a high prize policy to execute a high prize policy, its per capita salary expenditure is almost 2-2.5 times of Lenovo. Although IBM represents employee remuneration, many people still suspect that this policy can be truly implemented in Lenovo that reduces the first goal.
More importantly, Lenovo's high-level management has also rarely operates experience in international operation, which is the most headache of Liu Chuanzhi, the original chairman of Lenovo Group. If there is a lack of good communication skills between the two, even if there is a will, it is likely to have the situation of the South, which makes the integrated efforts to face the danger of time.
To create a global brand, even with the original "Think" series of "Think" series, the five-year transition period is long or short? It is said that the Lime printer completes the brand switching process for three years. However, desktops and notebooks obviously compete much more fierce, but also more complicated. One analysis stands that although IBM signs a lot of supplementary agreements, it will be used to maintain the influence of IBM brands in Lenovo. However, IBM's PC business is not like its software and microelectronics business, once it is separated from the mother, will lose 50% -75% of the original customers. If this is, this will be a serious challenge for Lenovo.
If the entire transaction can be completed in the second quarter of 2005, the 2008 Olympic Games is just in the middle of the transition period, which should not be a coincidence. Lenovo's Olympic partnership plan will also become a rare "trial stone" in the integrated process. ■
