Chapter 91. M&A (1)

In fact, such issues naturally vary depending on one's perspective.

We caused the stock price of Thomas Motors to plummet by 90% through our report.

To be precise, we brought the overvalued stock, inflated by false information, back to its proper value, but the small shareholders wouldn't see it that way.

Perhaps some of them even lost their entire savings. However, if I were to think about each and every one of them, I wouldn't be able to do anything.

There's only money in it. That's what investors do.

"To make a lot of money, you need the help of someone better than yourself. If David hadn't been there, I couldn't have done it alone."

His ability is desperately needed to properly grow the acquired companies.

"I appreciate your understanding."

He spoke as if lost in thought.

"I was quite surprised to receive an email out of the blue saying you wanted to hire me. I was even more surprised when we first met at the café."

"Speaking of which, I'm curious about my first impression."

"Can I be honest?"

"Go ahead."

"You gave me the impression of a new employee."

That's not entirely wrong, considering I was a new employee not long ago.

Thinking about it, it hasn't even been a year since I joined DA Securities. If you include the time before the regression, it's been over 10 years.

David asked me,

"How was it at the company?"

"I was just a low-level employee."

"You said you were an analyst, right?"

"It's a bit of a stretch to call me a formal analyst. I was still in the learning phase. Think of it as an RA."

RA stands for Research Assistant. It's like a trainee before becoming an analyst.

David chuckled.

"Who would believe that a low-level employee at a securities firm a few months ago could cause the Thomas Motors incident and now plans to acquire CoolCloud?"

"Actually, I find it hard to believe myself."

"At first, I didn't have high expectations. I only agreed to the contract for the money. But once I started working...?"

"It's fun, isn't it?"

David nodded.

"Yes. In fact, I regretted turning down Shark Management's offer for a while. Working at a private equity fund that manages a large investment fund is a dream for many."

"What about now?"

"I think coming to Continu Capital was the right choice. Thanks to this, I've had experiences I never thought I'd have in my life."

I smiled.

"Already saying that? The really fun stuff is just beginning."

He took a sip of beer.

"When I first heard about the plan to buy CoolCloud, I thought it was impossible, but you're making it happen."

I shook my head.

"Will we know that tomorrow? We don't know if Alex will participate in the negotiations or not."

"Once we secure a majority stake, taking control from him is just a matter of time."

"Even if he gives up control, he might still hold onto his shares."

David said firmly.

"No, he will have to sell."

"Why?"

"You know, don't you?"

He's right.

Alex will have no choice but to sell his shares to us.

"Still, it won't be easy. Alex isn't a fool like Rolf."

I nodded.

"We'll have to offer him a reasonable price."

The problem is that we don't have that much money. We'll have to find a way to solve it.

"Anyway, it will all be over tomorrow."

Then my long journey in the U.S. will come to an end.

"Let's finish this and go in."

We lightly clinked our beer bottles.

* * *

I looked at the man in front of me.

Standing at 195 cm tall with a rugged face, broad shoulders, and thick arms. He graduated top of his class from Harvard's Economics Department.

Moreover, he is from the Preston family, a financial tycoon in the U.S. In every way, he is different from me.

Under normal circumstances, we wouldn't even have a reason to speak to each other, but now we meet for negotiations.

"Nice to see you again."

Alex Preston sat down without shaking my hand.

David Rockheart and I sat down, and across from us were Alex Preston and two lawyers.

"The CEO of PrestigeA PE isn't here, I see."

Alex showed us a letter of authorization.

"I have been authorized."

"Then let's proceed with the negotiations."

The atmosphere is quite tense. After all, it's a hostile M&A, so we can't be smiling and laughing.

I spoke first.

"As I mentioned before, our goal is to acquire all of Alex Preston's and PrestigeA PE's shares."

Alex asked in a stiff tone.

"What if we refuse to negotiate?"

"Then we'll have to negotiate for compensation and future royalties for the unauthorized use of Mimir."

"The amount will be determined by Continu Capital, I suppose."

I didn't deny it.

Alex nodded.

"Fine. Let's talk about the sale. What amount do you have in mind?"

I presented the figure I had been thinking about.

"4 billion dollars, how about that?"

He said without much surprise.

"That's a billion dollars less."

"That's not the case. This is the amount for Mr. Preston's and PrestigeA PE's shares, excluding Mr. Rolf Butch's shares, so it's actually higher."

"Are you aware that Mr. Preston and the fund have invested 4.9 billion dollars so far?"

"I am."

"Are you also aware that CoolCloud has been valued at 100 billion dollars by BluePearl?"

If we value CoolCloud at 100 billion, his shares are worth about 4.9 billion dollars.

David countered.

"CoolCloud's enterprise value also reflects the capabilities of the CEO. If the two CEOs sell their shares and leave, the company's value will inevitably drop significantly."

As the title suggests, the importance of a CEO is self-evident.

A company can thrive or fail depending on who sits in the CEO's chair.

NS, for example, saw its stock price more than double after the CEO changed from Steven Hayden to Satya Samaran.

If a large IT company can be affected this way, how much more so for a startup?

Given their smaller scale, startups are even more heavily influenced by the CEO's capabilities. How many companies have fallen apart after their CEO left?

Of course, Seed Lucas will handle things well at CoolCloud, so there's no need to worry.

"That means you want us to step down from management at the same time as the sale."

"Although it's partly due to the unauthorized use of Mimir, we will fully acknowledge the efforts you've made to grow the company. Let's avoid going to the worst-case scenario."

"Then we need to propose a realistic amount."

That's true.

Unlike Rolf, who is practically a fraudster, Alex has done nothing wrong. In a sense, he's losing a well-run company to me.

Moreover, he has poured everything into CoolCloud. To avoid leaving the impression of a failed investment, he needs to secure his share.

"10 billion dollars, how about that?"

"If you're serious, there's no need for further negotiation."

"Then what amount do you have in mind?"

Alex said in a cold voice.

"25 billion dollars."

I slightly frowned.

"That's a tough amount."

"I've halved the original 100 billion valuation. I think this is a significant concession. There's no reason to sell for less than this amount."

"25 billion dollars is unrealistic."

"Then what amount do you have in mind?"

"15 billion dollars, how about that?"

Alex slightly smiled.

"Let's be honest. Why do you want to acquire my shares? If your goal is control, there's no need to acquire them. Acquiring my shares suggests you want to make CoolCloud a subsidiary and increase its value. If Continu Capital acquires it, the risks related to intellectual property will also be eliminated. Even if the two CEOs step down, Seed Lucas will ensure the company runs smoothly. Why would I sell my shares at a low price?"

"Because all the profits will go to royalties, making it pointless."

"Isn't that a secondary option? If you had planned this from the beginning, there would be no need for such negotiations, right?"

"..."

What I want is to acquire CoolCloud as intact as possible. And Alex knows this well.

If we hadn't secured 51.16%, we wouldn't have even entered negotiations.

I told him,

"Mr. Preston, you know. This is a time of rapid industrial change, with various companies emerging. There are many companies to invest in if you have the money."

"What are you trying to say?"

"It's better to avoid a pointless battle. You can make money by selling the company and investing elsewhere, can't you?"

"Doesn't that apply to Continu Capital as well?"

That's true.

I don't have the luxury to drag this out. I need to wrap up the acquisition and move on to the next task.

Alex nodded.

"Fine. Let's sell everything for 20 billion dollars."

"20 billion dollars?"

"I won't budge a penny below that."

"..."

From his expression, it doesn't seem like he's just saying it.

Considering the money he has invested, securing 15 billion dollars is a fairly successful exit, given the investment period.

Of course, it would have been a huge success if the company had gone public without this happening.

Alex added,

"If you accept this amount, I will fully cooperate with the acquisition process."

A friendly M&A involves various due diligence to understand the company's current state before the acquisition, but a hostile M&A is done without due diligence.

Therefore, it often leads to difficulties in controlling the company after the acquisition.

Unlike Rolf, who sat in the CEO's chair without doing much, Alex has been involved in all financial and business matters of the company.

To run the company smoothly after the acquisition, his cooperation is necessary.

Think about it.

I must buy his shares, and he can only sell them to me. It's essentially a one-to-one situation between the seller and the buyer.

20 billion dollars is a huge amount, but his shares were originally worth about 4.9 billion dollars. He's being forced to sell for less than half that amount.

What will happen if he rejects this offer?

Alex Preston is the CEO.

To remove him from the company, we need the board's approval. However, the board is effectively under his control.

Of course, with our majority stake, we can win a shareholder meeting, but even if we remove him, problems will remain.

He will still hold 48.84% of CoolCloud's shares under his and the fund's names.

He won't give up these shares easily.

He will participate in any rights issue and file various lawsuits to block a third-party rights issue.

To prevent such antics, we need to acquire all his shares right here and now.