<strong>Chapter 1301 – Smaller Company Acquiring Bigger Companies</strong>


    “Dear, I will be having dinner at Old Zhang’s ce. Tell Mum and Dad not to wait for me.”


    “Ok. You are so capable. Even our Provincial Mayor asks you for help.” Li Na proudly said.


    Feng Yu kissed Li Na’s forehead and left after changing.


    Feng Yu carried a roast duck he bought from Quanjude into Zhang Ruiqiang’s apartment.


    “Why did you bring gifts every time youe over?” Zhang Ruiqiang’s wife grumbled with a smile.


    “I cannot here empty-handed, and Quanjude is mine too. The duck is packed in a thermal bag, and we can eat itter.”


    Zhang Ruiqiang’s wife knew Feng Yu will being over and has started preparing dinner.


    When Feng Yu entered the apartment, he noticed there is another guest. He remembered this man as Xu Changyou’s former secretary. He is currently Bing City Government’s No. 2 official.


    After Xu Changyou retires, all of his subordinates went under Zhang Ruiqiang. Zhang Ruiqiang and Zhao Guoliang stood up when Feng Yu enters.


    “Come and wash your hands before dinner.”


    Zhang Ruiqiang’s wife ate very fast and finished her dinner within ten minutes. She says the drama series she is following is starting soon, and she will be in the room to watch TV. Before she leaves, she prepared a pot of tea.


    “Feng Yu, tell us how we can develop Bing City Beer stronger and faster? Guoliang is currently overseeing the City’s economy, and he will be executing the orders.”


    Zhao Guoliang looks at Feng Yu. “Manager Feng, I look forward to your guidance.”


    “This is only a discussion. I will be sharing how a smallerpany acquire a biggerpany from a businessman’s perspective.”


    Smallerpany acquiring a biggerpany? Zhang Ruiqiang and Zhao Guoliang exchanged looks. Howe this sounds simr to the proverb, ‘a snake tries to swallow an elephant?’


    “It is very easy for a listedpany to expand. When they require funds, they can just issue shares to raise funds. They can also exchange shares for having the controlling stake in the otherpany. When I was in the US, apany had used this strategy. It grew from apany worth a few hundred million USD into a conglomerate worth almost 20 billion USD within a few years.”


    “What happens next?” Zhang Ruiqiang asked.


    “Next? Thatpany bes bankrupt.” Feng Yu shrugged his shoulders.


    Zhang Ruiqiang: “.......”


    Zhao Guoliang is confused. The solution you are telling us is from a bankruptpany?!


    “There are several reasons why thatpany went bust. Firstly, they want to be the world’s biggestpany using this strategy. Before that, they are already one of the top threepanies internationally. It is a miracle for them to achieve this result within a few years. The second reason is their management had made a mistake. They tried toplete it in one step and expanded beyond their abilities. They wasted their resources and did not receive the returns they should have gotten, resulting in cash flow issues. The third reason is they fabricated their financial report, and I got my men to expose them. Investors start to dump their shares, and their shares crashed.”


    Zhao Guoliang thought to himself. You are using apany that went bankrupt because of you as an example?! Manager Feng doesn’t seem reliable.


    “Putting these three main reasons aside, thispany’s expansion model can be considered a ssic because they didn’t spend any cash every time they expand. They either issue new shares or exchange shares for expansion. They did not buy out otherpaniespletely. They only get the controlling stake of thosepanies, and it’s enough.”


    “One thing we must take note of is we are not going to take over or monopolize the entire market. That’s why we will not face suppression, and we must not fabricate our ounts and financial reports. This is taboo for listedpanies, and thepany might bankrupt if anyone finds out.”


    “Manager Feng, why can’t we think of taking over the entire market? I heard from the Leader that we would not acquire Qingdao Beer, Beijing Beer, etc. Why?”


    “This is because these twopanies are the best-selling beers in China previously. They are not only doing well in China, but they are also selling well overseas. Also, many State-level investmentpanies had invested in these twopanies. Simply put it. These twopanies don’tck money, and they will ask for a ridiculous amount of money if we are going to acquire them. Even if we exchange shares, they will demand an astronomical number of shares from us. They will never allow us to owe the controlling stake. Most importantly, the higher-ups will interfere.”


    Zhao Guoliang thought about it and nodded. If Qingdao Beer wants to merge with Bing City Beer, he will also stop them.


    “There is another important reason. Such expansion will increase thepany’s debts. It is not good for apany to have a high debt ratio, as thepany might be bankrupt if they encounter cashflow issues.”


    WorldCom has borrowed money to invest and borrow again to continue with their expansion. They might have expanded, but they don’t any cash in hand.


    Although cash might not be necessary for apany’s growth, it is impossible to grow without cash.


    “Then how should we expand? Start acquiring from the South to the North, and increase our issued shares?” Zhang Ruiqiang asked for more details.


    “Why should we expand from the south to the North? We should target those bigger breweries and acquire them. Beidacang can continue to inject funds into Bing City Beer, and you all can get loans. Of course, issuing shares is the easiest way to raise funds, but you all should not issue shares blindly.”


    “When you all are going to issue shares, let me have some private cement, or I can help you all find buyers. I believe many people will be interested in Bing City Beer’s expansion. You all must remember to be fast when you are acquiring other breweries, and don’t give them time to negotiate with otherpanies. This will raise the prices.”


    “Try to buy out the brewery entirely if possible. If not, get the controlling stake. Even if you all cannot get the controlling stake, some shares will be fine, but they must agree to produce Bing City Beer. This way, Bing City Beer will be avable in all provinces, and we will be the most famous beer with the most distribution channels.”


    “Talking about sales distribution channels, you all can speak to Zhong Qingxian. I think if you allow Tai Hua Holdings to invest in Bing City Beer, Tai Hua Holdings will not mind sharing their beverage sales channels with you all. We have the best beverage sales channel in China, and no otherpanies canpete with us. With TV and online advertisements, Bing City Beer will be the most well-known beer brand in China.”


    Zhang Ruiqiang looks at Zhao Guoliang. They could see the decision in each other’s eyes. They must write a detailed proposal and start Bing City Beer’s expansion as soon as possible.