1+1 or less LED companies face merger risk

[Source: Gaogong LED 's " LED Lighting Channel" magazine January issue / Zhang Wei]

Since last year, industry mergers and acquisitions have become more and more fierce. GuangGuang Optoelectronics has become a subsidiary of Jingyuan. Guangmingyuan has acquired two LED companies in Jiangmen and Xiamen. Dehao Runda has acquired NVC Lighting. This year, the market has also exported Taiwan LED packaging. Chip companies are interested in acquiring Chinese packaging and lighting application companies, and implementing vertical integration to open up the entire industry chain.

The completion of the M&A transaction does not mean the success of the merger, but instead enters the real key integration period. Shanghai Yaming and Dayou International Breakup, Foshan Lighting Dissolution of New Light Sources, etc. are all examples of industry cooperation failures, reflecting the difficulty of integration in culture after the cooperation of two different companies. Similarly, corporate mergers and acquisitions will face these problems.

According to Bain & Company's survey on merger failures, about 80% of global mergers and acquisitions failures are directly or indirectly derived from mergers after mergers and acquisitions, while only about 20% of failures Appeared in the pre-transaction stage of the merger.

In December 2012, Feile Audio announced the termination of cooperation with Taiwan's Dayou International Optoelectronics to surprise the industry.

In March 2012, Feiyar Audio's subsidiary Shanghai Yaming Lighting Co., Ltd. signed a contract with Taiwan's Dayou International Optoelectronics and Jingyuan Optoelectronics Co., Ltd. The contract indicated that Jingyuan was responsible for providing HV-LED chips, and Dayou was responsible for HV LED packaging technology, Yaming. Responsible for the finished lamp technology, the advantages of the joint venture parties complement each other to improve the overall competitiveness of the industry chain.

However, the actual situation is that Feile Audio announced that its wholly-owned subsidiary Shanghai Yaming Lighting and Dayou International Optoelectronics Co., Ltd. cooperation project has not made substantial progress. This shows that the cooperation between the two companies cannot be smoothly carried out due to differences in culture and values. M&A and cooperation in the industry will vary greatly from one another due to differences in geography, scale, ownership, management systems, leadership style, historical tradition, development stage, and member culture. If these problems are not handled well after the merger, the result will be unhappy.

In addition, in June last year, Foshan Lighting disbanded the new light source, which also reflected the problem of uncoordinated cooperation between the two companies. Foshan Lighting has verified the product quality of Lijia Kechuang. Under the same chip condition, the color rendering index can reach more than 90% through this technology; the LED light source with different color temperature has higher luminous efficiency than the similar LED light source at home and abroad by more than 25%. Searched and analyzed by the Shanghai Science and Technology New Consulting Center of the Chinese Academy of Sciences, the project has filled the domestic gap, and its comprehensive technology has reached the international advanced level, with important practical applications and market development value.

Although the Buddha’s evaluation of Rika’s is so high, it has been losing money in practice, eventually leading to “breakup”. Zhao Qingyu, a master of international accounting at the Research Institute of the Ministry of Finance, said, “There are reasons for any mergers and acquisitions and joint ventures. The key issue is that the two companies have not successfully integrated different cultures and personnel. China’s vast territory and uneven regional economic development are not only There are regional cultural differences between Taiwan and the mainland, Hong Kong and the mainland. There are also differences in concepts, values, work habits, etc. in coastal and inland areas, north and south, east and west."

1+1 or less than 1

Once the enterprise is in the process of mergers and acquisitions or joint ventures, because it can not be effectively integrated according to the pre-designed M&A plan, the personnel, the system and the culture will conflict with each other, resulting in internal friction, which will drag down the dominant enterprises.

Hong Yannan, chairman of Guangmingyuan Lighting, said, “Traditional lighting companies have acquired LED lighting companies. If successful mergers and acquisitions will be rapidly transformed into LED companies, LED lighting technology is more complicated than traditional lighting technology, and traditional in management system. The difference between lighting companies and LED companies is obvious, including enterprise process operations, factory regulations, economic responsibility system, assessment rewards and punishments, etc."

"Domestic mergers and acquisitions, can not blindly copy some of the new cultures used by the world's top enterprises. Some corporate cultures are superficial, but because they are not satisfied with the soil, they are not accepted by domestic employees and cannot solve the practical problems of enterprise development. Everyone’s confusion in thought.”

“Last year, after Guangmingyuan acquired two LED companies in Xiamen and Jiangmen, it took a lot of time to unify the company culture. In the end, it was only possible to extract some aspects of the better integration of the two companies. Everyone in the two companies has Their own values, these values ​​may contradict the values ​​of the company, so it is necessary to continue to work together, in places that cannot be managed by the system, rely on values ​​to manage themselves."

After the merger, the M&A companies often experience the loss of core talents. If the talents are lost, the consequences are even equal to the failure of the merger. Usually in mergers and acquisitions, even if the process progresses quickly, employees will become anxious or even extremely upset until they are completed. Therefore, the key to preventing brain drain is to let core employees understand their future and the company's prospects before the completion of the merger.

Zhao Qingyu said, "If you can do this before the M&A news is announced, it is ideal, but it is unlikely. So starting as early as possible will greatly increase the chances of doing this."

In addition, in the integration of values ​​and management models, two different corporate cultures will inevitably lead to conflicts in business ideas, values, work methods and habits, management systems and other aspects. Therefore, in the period after the merger, there will often be two new and old interest groups with different values. The root of this conflict is the conflict of corporate culture. ”

To this end, LED mergers and acquisitions how to absorb the essence of the corporate culture of the two companies and unified implementation, will be the key factor in determining the success or failure of mergers and acquisitions.

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