Security industry should calmly look at mergers and acquisitions frenzy

M&A is no longer a new word in the market. Recently, Hikvision purchased the nodes of Beijing Node Express Technology Development Co., Ltd. and its affiliates, as well as some shares of Beijing Banno Storage Technology Co., Ltd., again making M&A a hot word in the security industry. .

Industry insiders pondered that the continuous merger and acquisition behavior of companies in the past two years shows that mergers and acquisitions have gradually become an important means for corporate development and financing. How should we look at the wave of mergers and acquisitions? How should we respond?

On March 7, U.S. hard disk manufacturer Western Digital Corporation announced that it agreed to invest approximately USD 4.3 billion in cash and stocks to acquire Hitachi’s hard drive business. Western Digital Corporation issued a statement on the same day that the company will pay 3.5 billion U.S. dollars in cash and 25 million shares to Hitachi. After the transaction is completed, Hitachi will hold a 10% stake in Western Digital and will have two seats on the company's board of directors.

In the same month, the listed company Hangzhou Hikvision Digital Technology Co., Ltd. also announced that the board of directors passed a resolution to invest RMB 35 million to acquire 100% of the equity of Beijing Node Express Technology Development Co., Ltd. and its affiliates and to transfer its related parties. All intellectual property owned. Hikvision also plans to invest 5,585.35 million yuan to acquire a 53.31% stake in Beijing's leading professional network storage equipment supplier, Beijing Bangnuo Storage Technology Co., Ltd. After the acquisition is completed, the company will hold a total of more than 85% of Beijing Banno.

In the past mergers and acquisitions incidents in the security industry, it can be found that mergers and acquisitions generally present the following two modes: On the one hand, enterprises integrate resources according to their own development strategies, and quickly enter an emerging market or make them dominant in the market through mergers and acquisitions. This can be seen from several mergers and acquisitions by China Security Technology Co., Ltd. (CSST). The Hikvision M&A incident is a new case. Hikvision also explained in the announcement that the acquisition node will quickly rely on its deep experience accumulated in the electronic anti-theft alarm industry, and will focus on the application of video technology in the electronic anti-theft alarm industry to carry out research and development and production of related technology products. Hikvision's Hu Yangzhong pointed out sharply: "There is no need for 'integration' mergers and acquisitions because it does not add value to companies." However, in the homogenization of products in the security industry, the company's advantages in certain areas will not be met. To be successful, companies need to be strategically placed to consider the direction of the company's development. Otherwise, the merged company will not achieve optimal resource integration.

Another aspect is that in order to eliminate competitors and merge promising potential competitors to achieve monopoly status in the industry, the essence of M&A is to obtain more discourse power in the market segment through resource integration, ie to achieve “one of the best”. . Hitachi’s acquisition of Western Digital is in line with this feature. Industry sources said that this acquisition will be the largest merger and acquisition transaction in the computer storage industry in the past five years. It will bring together the world's largest and third largest hard disk manufacturers. This high-profile acquisition also directly threatens the dominant position of another storage giant Seagate in the security industry. Western Digital as a latecomer, the market share in the security industry is also trying to catch up, the current object of cooperation with Zhejiang Dahua, etc., is also a major threat to Seagate. WD's statement in the acquisition statement is "expanding production scale, enriching technology assets, and expanding product mix." Presumably, more efforts will be made in the development of new technologies and product promotion. Today, through the acquisition of Hitachi, it is trying to rely on a wide range of channel providers to flex its muscles in the security industry.

In the field of security, whether it is mergers and acquisitions or corporate listing, the ultimate goal is to expand the company's influence in the security industry in order to continuously expand market share. The merger of mergers and acquisitions into a corporate group is equivalent to a group company, and the group company management and resource allocation need a strong ability, and the company's managerial concept and the executive performance of the high and middle levels determines the future development of the company. For the acquisition companies of security companies, the company is well developed, has sufficient cash flow, has a good financing platform and channels, is familiar with the security market, has excellent management concepts, has a professional management team, these are Utilization of resources. However, how to fully integrate and utilize resources also requires in-depth planning and implementation based on the specific conditions and goals of both parties.

As a latecomer to the capital market, China’s security companies are also undergoing a little bit of change in their roles. We all know that this process of mergers and acquisitions is far from being as fashionable as it was when it was listed. It is not only capital, but also the integration of technology, innovation of products, and even the compatibility of corporate culture. Fortunately, mergers and acquisitions by domestic security companies are continuing to deepen, allowing us to see the expanding scale of China's security market and its determination to aggressively enter the international capitalist market.

Therefore, security companies should calmly consider the living environment, security market, and development prospects before they can accurately identify whether each acquisition will receive the maximum benefit. If blindly combined, it may cause the company to pay a huge price, and gradually with the initial expectations, and this is not what we want to see.

Security Door

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