Why Security Listed Companies Start the Road to Privatization

In the name of “privatization”, the “privatization” of listed companies is totally different from the concept of “privatization” of state-owned enterprises. The privatization of state-owned enterprises means that all or part of the government is withdrawn from the company; while the privatization of listed companies is a special type of merger and acquisition operation in the capital market; the biggest difference from other merger and acquisition operations is that its goal is to acquire listed companies. Delisting, from a public company to a private company. On April 21, 2011, China Security Technology Co., Ltd. (CSST) announced that the board of directors approved the privatization proposal of Chairman and CEO Tu Guoshen. The rumors of the privatization of security technology that began in early 2011 have finally settled.

Privatization is not rare in the capital market. Listed companies can open up the upstream and downstream industry chain through privatization. On the other hand, privatization also sends a message to the market. Large shareholders of the company are expected to have excellent operating income in the future. Corporate risks are lower than those estimated by the public. Conversely, privatization can also prevent subsidiary companies from diluting equity due to the operation of the capital market.

The merger and acquisition expansion before CSST continued to expand, improved the industry chain of CSST, and enhanced its comprehensive strength in many fields. With the continuous expansion of China’s security market, corporate M&A activities in the domestic security sector have occurred frequently in recent years. If foreign companies want to squeeze into the Chinese market, it is difficult for them to gain the recognition of Chinese consumers in a short period of time due to their own brand competition. Therefore, mergers and acquisitions have become a shortcut. The mergers and acquisitions of CSST did indeed make the company bigger and stronger. Due to its huge corporate system, on the other hand, CSST’s equity was constantly being decomposed, and in order to focus on the privatization of equity, it may be a better approach.

Fiery security corporate mergers and acquisitions for that?

From the privatization of CSST, we can also see that one of the reasons for its privatization is also the result of large-scale mergers and acquisitions of listed companies. However, corporate mergers and acquisitions have a close relationship with the entire security market environment. In China, security has fully penetrated into all areas of people's lives. In recent years, due to the comprehensive upgrade of video surveillance technology and the development of network technology, as well as the promotion of safe cities, intelligent traffic construction and the Olympics, Expo, and other activities, the security industry has shown the development of “blowout”, and the market demand makes the domestic security industry Entered a golden period of rapid development.

The industry agrees that security has a broad prospect of development in China, but it is still in its infancy, and the integration of security and capital is not enough. How large is the output value scale of China's security market? What are the market integration trends and competitive landscapes? Which areas will be the major markets for the development of the security industry in the future? What part of this industry will be the future "Blue Ocean"? Security industry will not be the next venture to attract gold?

The "12th Five-Year Development Plan for China's Security Industry" made the latest predictions for the security industry. The plan proposes that by the end of the "Twelfth Five-Year Plan", the overall goal of doubling the size of the security industry should be achieved, with an annual growth rate of about 20%. In 2015, the total output value reached 500 billion yuan, and the added value was 160 billion yuan. The annual export delivery value reached 60 billion yuan or more; the industrial structure adjustment achieved initial success, and the proportion of security operations and various service industries reached more than 20%.

According to the survey data of the China Security and Protection Industry Association, during the "11th Five-Year Plan" period, the scale of China's security industry has rapidly expanded. In 2010, security companies reached around 25,000 with about 1.2 million employees; the industry's total output value reached more than 250 billion yuan, of which the output value of security products was about 100 billion yuan, and the security engineering and service market was about 130 billion yuan.

In the face of such a large market size, with the increase of industrial concentration, the leading enterprise groups are much less capable of capital operation such as mergers and acquisitions and listings on the path of rapid development. Judging from the current M&A cases in the domestic security industry, it is mainly divided into mergers and acquisitions between domestic enterprises, mergers and acquisitions of foreign companies for domestic companies, and acquisition of other domestic counterparts by security companies directly to overseas listed financing. It is understood that there are not many cases of mergers and acquisitions among major domestic companies. The focus of the related merger and acquisition case is mainly on the integration of the advantages of the enterprise. In contrast, foreign giants have been among the Chinese security market through mergers and acquisitions of domestic-funded companies.

In the temptation of the Chinese market, concepts such as "Safe City," "Olympic Engineering," and "Science and Technology Expo" are naturally cakes that overseas security giants cannot afford to abandon. In a globalized industrial chain, they have acquired very much through mergers and acquisitions. High-quality manufacturing bases in China and localized R&D centers are key targets for giants. This may be the best entry point for capital to enter the security industry.

According to some experts, the security industry in China's security industry has evolved from the application of a few high-risk units more than 20 years ago to almost all industries today, but in terms of China's economic shape, the security industry The main market for development is the large-scale industry. Regarding mergers and acquisitions and partial integration that have occurred in recent years, experts believe that China's security industry started relatively late. Although there are a large number of professional enterprises, the general level is still relatively low. The reason for this state is mainly due to the fact that The rapid growth of market demand, the company's center of gravity tends to accumulate and ignore the consolidation of internal strength.

For the integration of the security industry and capital, the expert's point of view is that the fundamental purpose of the company's listing financing is to strengthen the comprehensive basic capabilities of the company and to use the power of capital to seek greater development and more standardized operations. Due to the weak foundation of enterprises in the security industry, the degree of integration with capital is currently low, but the emergence of the “small and medium board” and “GEM market” has attracted companies with certain achievements to work hard to market here, but this situation is For a healthy industry with a lower overall level, it is not necessarily a good thing. It mainly comes from the comprehensive foundation of the company and its understanding of the purpose of listing.

After many security companies are listed, most funds are invested in technical investment, and the investment is very high. R & D and investment in technology are also the basic conditions for future survival in this industry. While investing in R&D technology, many security companies will also invest capital in the development of corporate channels, expand the construction of domestic marketing networks, and strengthen the construction of overseas marketing channels. If a company wants to develop in the long term, it can attract more and better investors, and the company can continue to operate, mainly because there are products suitable for the market. Therefore, in the face of the boom in financing mergers and acquisitions, companies should also be rational, suitable for the enterprise and suitable for the market. The capital operation will enable the company to continue its development and its foundation will last forever.