Looking at the trend of lithium battery industry from several major M&A cases in capital market in 2016
In 2016, the investment in the lithium battery industry continued its hot state in 2015. The capital market investment and mergers and acquisitions cases continued to show a blowout situation, which was particularly prominent in the slowdown of investment in other industries. In 2017, Keda Jieeng and Aotejia successively announced that they are planning to acquire relevant targets for the lithium battery industry, indicating that the market is still positively optimistic about the industry.
2016 major capital market mergers and acquisitions case
From the case of several major M&A cases in the capital market in 2016, the following characteristics are mainly present:
1. The valuation is mainly distributed in 13-14 times PE (2016 performance commitment)
In addition to Oriental Seiko's acquisition of Pulaide and Yiwei Lithium Energy's acquisition of Wuhan Fuant, the remaining M&A cases are all within the range of 13-14 times. On the one hand, because the industry as a whole has experienced explosive growth since 2015, the price of the primary market has also risen. On the other hand, both parties to the merger and acquisition should consider their own expectations and consider market acceptance. Can the shareholders' meeting and supervision be successfully passed. Therefore, when designing the transaction structure and price, the valuation interval tends to be unified, which is also a balanced consideration for the interests of all parties.
2. The transaction structure design adopts the method of cash and issuing shares.
Since the transaction usually involves a large amount, the listed company mostly adopts the method of issuing shares to ease the cash pressure. At the same time, the issuance of shares can also achieve deep binding between the listed company and the target shareholders, which is conducive to the company's subsequent development.
3. In the transaction structure design, the acquired party will carry out the performance commitment for the next three years.
Since the power battery has shown rapid growth since the second half of 2015, the market is very optimistic about the industry prospects, but the historical performance of the relevant target is relatively common. The valuation based on historical performance does not reflect the development potential of the company well. The performance commitment is both a manifestation of the confidence of both parties in the industry's prospects, as well as a flexible way to boost investor confidence and increase market acceptance. In addition, in the case that the standard defaults to 13-14 times, the performance commitment has become an important adjustable parameter for the transaction consideration design.
It is worth noting that some M&A cases may be exaggerated in terms of performance commitments in order to obtain a higher valuation, and investors need to carefully screen them.
4. After the resumption of trading, the stock price will usher in a larger increase.
From the case data, after the resumption of trading, the relevant company stocks can usher in a wave of speculation in the secondary market, the increase is amazing, and the participants are profitable in the short term.
It is expected that the lithium battery industry will remain the focus of the capital market in 2017, and the M&A drama will continue to be staged. It contains good investment opportunities, but at the same time, we must also pay attention to avoiding risks.
1. The valuation of M&A transactions and the synergy after completion of mergers and acquisitions should be carefully observed and carefully screened.
On the one hand, it is necessary to examine the rationality of the valuation of the transaction. On the other hand, it is necessary to analyze the original business of the transaction parties and the future development plan after the merger, and the M&A case based on the market value management needs to be vigilant.
2. After the short-term stimulus to the stock price, the market may return to rationality, investors should not chase after high
After the completion of the M&A case, the stock price of the listed company often experiences a rapid rise. In the face of such investment opportunities, investors should maintain rationality. In the case of a good market environment, the stock price increase and sustainability are relatively good, but in the case of a good market environment, In the case of a weak market environment, the position of the word board is often the position where the stock price peaks.
Since the second half of 2016, due to the slower growth rate of the new energy vehicle market and the adjustment of the valuation of the small and medium-sized market, the listed companies of the lithium power industry have adjusted their share prices. For related companies that do not have substantial performance support, valuations will be difficult to return to the previous highs.
For the relevant companies that have completed the merger and acquisition, the company whose actual performance exceeds the performance commitment is worthy of attention in light of the 2016 performance commitment. Some companies whose performance is far from the standard should be avoided.
3. As time goes by, the scarcity relationship of high quality targets in the industry will be reversed.
Since the second half of 2015, with the rapid development of the lithium battery industry, there have been more and more cases in which companies in the industry have entered the capital market through direct IPOs, mergers and acquisitions, etc., the potential targets in the primary market have decreased, and the secondary market related targets have increased. From the perspective of valuation, as the primary market can find the reduction of high-quality targets and the increase of high-quality targets in the secondary market, the first-to-second market price spread will be converging. As the industry develops and matures gradually, this situation will become more and more obvious. 2017 investor investment will change from concept investment to performance investment and growth investment.
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