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CoStone Partner Wang Qiwen: Mergers Excluding Entrepreneurs are Bleak

2016.12.17 Wang Qiwen Views:


 2016 sees ups and downs. Black swan events wait for deeper thoughts. In terms of mergers, two things in 2016 should be highlighted.

 2016 sees ups and downs. Black swan events wait for deeper thoughts. In terms of mergers, two things in 2016 should be highlighted.

 First, the conflict between capital and companies. More listed companies offered tender this year, an important event in the market. What I want to highlight is respect and support to entrepreneurs in mergers. An entrepreneur is the soul of a company. There is a certain link between a good entrepreneur and a good company, especially in China. That’s why they should be respected in mergers. Mergers without excellent entrepreneurs like Wang Shi, Dong Mingzhu, and Zeng Nan are at risk in my opinion.

 Mergers should be based on the real economy. Capital without a concrete company is unpractical and full of bubbles. Mergers are attractive because they can establish industrial ecology. This is also why we never cease doing that.

 Post-merger management and integration decide the new company. The governance system should be well-planned before the merger. Disorders in the governance system will bring the company critical setbacks. Operating teams should also be brought under effective mechnism such as the share incentive mechanism. CoStone carried out large-scale mergers in the healthcare and car industries. These mergers of several billion tell us one thing: the company’s governance and incentive mechanism for the management team should be both in place to secure a successful merger.


The above is an excerpt from a speech by Wang Qiwen on the seminar of “Capital in the Big Merger Era”. The seminar is part of the “2016 Asia Industry & Capital” held by 21st Century Business Herald on December 22 in Hilton Shenzhen Shekou Nanhai under the theme of “Global View: Reform in Corporates”


Rewritten by Chen Cong, Edited by Li Yunzhen, Du Zhixin

The year 2019 marks the fortieth anniversary of China’s Reform &Opening-Up, once again, we meet at the turning point of history. What’s the next step for the game, is there any clear guidance? The answer is affirmative.

Our country is enjoying a good momentum of development, which does not come from the Washington Consensus nor the Beijing Consensus. China’s experience has proved that both the visible hand and the invisible hand are crucial: the visible hand, stands for the government-led reform, and would yield benefits for reform and opening up; the invisible hand, stands for the Marginal Power represented by the private sector, and would improve economic efficiency and tax collection, create jobs and employment opportunities.

Provided that we want to protect and expand the benefits form reform, three simple but mandatory agreements are to be made and followed: No.1 Private ownership must be recognized, protected and treated equally with public ownership constitutionally, both ownerships are scared and inviolable;No.2 Make further clarification of the principal position of market economy, “deepen economic system reform by centering on the decisive role of the market in allocating resources”, as President Xi addressed in the third Plenary Session of the 18th CPC Central Committee;No.3 Implement the guiding principles of “comprehensively promoting law-based governance” of the fourth plenum. The rule of law is essential for economic growth, irreplaceable to protect private ownership, and necessary to encourage innovation and entrepreneurship.

Above are three rules for us to avoid falling into the Middle-income Trap. Assuming that we are breaking systematic barriers to private enterprises’ participation in market economy, and boosting innovation and entrepreneurship of our society, then we are heading towards a promoting direction. We are marching in the path of light, regardless of the ups and downs of Sino-US relationship, the drop in GDP growth rate, or the monetary policy.

These principals also apply on knowing how better to run a business: don’t be hedged by rules and regulations at the beginning, pay more attention to your survival, and you’ll learn more when you start your second business.

For many years, Huawei has been the only Chinese company on the list of the Top 50 R&D Spenders. Regardless of the economy and its income, what Huawei has been doing is investing in its future, dedicated to R&D, continuously and resolutely. This provisional work underscores Huawei’s accomplishments, making Huawei anindustry leader.

So, there are standard answers on how to run a company,which could be summarized as concentration and professional dedication, continuous investment on innovation and trying harder in R&D. Entrepreneurship is also important, every single company needs entrepreneurs to push aside all obstacles and difficulties, to implement strategies and ideas. We, as investors, are destined to look for such outstanding entrepreneurs and their companies, invest in them and partner with them.

At this key point of history, a country, a company, or asingle individual, will all need to find the right path. Four decades after the Reform and Opening-up, it’s time to learn from our experience and stop “wadding across


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