After the chip company's IPO failed, a founder made a dignified exit
Sell the company with dignity.
Author I Yue Xiaoxiao
Report I PEdaily
An impressive merger and acquisition case has surfaced.
Recently, GigaDevice, a listed leader in the field of memory chip design, announced that it plans to jointly acquire 70% of Suzhou Syschip's shares in cash with Stoney Brook Capital, Hefei State Investment, and Hefei Industrial Investment, with a total transaction amount of up to 581 million yuan.
This transaction quickly attracted the attention of the venture capital circle: on the one hand, the buyer, GigaDevice, is a chip leader with a market value of over 60 billion yuan, and the seller is also well-known in the analog chip field. The leaders of both parties are alumni of Tsinghua University; on the other hand, the premium rate of this merger and acquisition is close to 3 times, which is particularly enviable in the context of the prevalence of discounted mergers and acquisitions today.
In addition, there is another detail: Suzhou Syschip had a two-year IPO preparation process until it announced its termination in April last year. Now that it has chosen to "sell itself", this experience may bring some inspiration to startups.
Tsinghua alumni join forces
Creating a semiconductor merger
The announcement disclosed more details:
According to the valuation of 100% equity of Suzhou SyChip as of the base date by a professional institution, the valuation was RMB 831.1947 million; with reference to the valuation, the transaction price of 70% equity of Suzhou SyChip was determined to be RMB 581.00 million; among them, GigaDevice acquired approximately 38.07% of Suzhou SyChip's shares with RMB 316 million in cash, Stonebrook Capital acquired approximately 12.05% of Suzhou SyChip's shares with RMB 100 million in cash, Hefei State Investment acquired approximately 18.07% of Suzhou SyChip's shares with RMB 150 million in cash, and Hefei Industrial Investment acquired approximately 1.81% of Suzhou SyChip's shares with RMB 15 million in cash.
There is no doubt that GigaDevice is the main force in this acquisition. It is worth noting that GigaDevice's director Li Hong and supervisor Hu Jing both work at Stonebrook Capital; the two Hefei state-owned assets also have deep roots with GigaDevice. In this acquisition, Stonebrook Capital entrusted the voting rights of its Suzhou Syschip shares to GigaDevice, and Hefei State Investment and Hefei Industrial Investment also signed a "Concerted Action Agreement" with GigaDevice.
After the transaction is completed, GigaDevice will become the controlling shareholder of Suzhou SyChip, and Suzhou SyChip will become a holding subsidiary of GigaDevice and included in the company's consolidated financial statements. At the same time, GigaDevice will also provide Suzhou SyChip with a loan of 130 million yuan, which will be used exclusively for Suzhou SyChip to repay the loan, allowing the bank to release the mortgage on the Suzhou building owned by Suzhou SyChip.
We are no strangers to GigaDevice. Its founder, Zhu Yiming, was admitted to the Department of Physics at Tsinghua University in 1989 and went to the United States for further studies after graduating with a master's degree. While studying, he participated in the project development of many internationally renowned Internet companies. After returning to China, he keenly captured the backwardness of domestic chip design and founded GigaDevice in 2005 with the help of a group of Tsinghua alumni. In 2016, GigaDevice was listed on the Shanghai Stock Exchange, and its current market value exceeds 60 billion yuan.
GigaDevice has sufficient funds for this acquisition. As of the first three quarters of this year, GigaDevice had a cash balance of 9.266 billion yuan, while total current liabilities were only 1.969 billion yuan. At the same time, the company's third-quarter revenue reached 5.65 billion yuan, a year-on-year increase of 28.56%. Profitability has recovered, and net profit after deducting non-recurring gains and losses increased by 128.31% year-on-year.
With cash in hand, GigaDevice has also set its sights on a Tsinghua alumnus - Tan Jian, the founder of Suzhou SyChip. Tan Jian graduated from Tsinghua's Department of Automation and also went to the United States for a doctorate before founding Suzhou SyChip in 2009.
GigaDevice said in the announcement that the acquisition of Suzhou Sychip is an important move to promote the company's analog chip strategy. Through this transaction, GigaDevice will be able to further enhance the strength of its analog team, improve its technology reserves and product line richness, and strengthen the synergy with the joint acquirer in technology, market, industrial chain, etc. This will not only help support the long-term development of GigaDevice's analog business in terms of sales scale, product depth and breadth, but will also significantly enhance the company's overall competitiveness.
After the IPO Failure
Founders sell their companies with dignity
What is the background of the acquired Suzhou Syschip?
Public information shows that Suzhou SyChip is mainly engaged in the research and development, design and sales of analog chips. Its main products include lithium battery protection chips, power management chips and other products, which are mainly used in mobile power supplies, smart wearables and other general fields. It has been used by many well-known end customers, including Xiaomi, OPPO, vivo, Honor, Edifier, Meizu, JBL, Anker, Belkin, McWel, Nanfu Battery and other well-known brands.
This has brought good performance to Suzhou Syschip: in 2023 and the first half of this year, the company achieved revenue of 251 million yuan and 134 million yuan, and net profit of 34.9458 million yuan and 34.921 million yuan, respectively. The transaction also set a performance commitment for it: Suzhou Syschip's audited net profit attributable to shareholders after deducting non-recurring items in 2024, 2025 and 2026 will not be less than 60 million yuan, 70 million yuan and 80 million yuan, respectively.
Previously, the company had already embarked on the IPO road: Suzhou SyChip filed for IPO guidance in 2020, and completed a Pre-IPO round of financing of 215 million yuan in early 2022, led by the National Integrated Circuit Industry Investment Fund Phase II, followed by Star Rui Investment, Goertek, and Guolian Group, for the research and development of the main product lithium battery protection chip technology and the development of new products. In June of that year, Suzhou SyChip's IPO application was accepted by the Science and Technology Innovation Board, and it entered the inquiry stage in less than a month, which was very fast.
The prospectus at that time showed that in August 2020, the company's shareholder Saixin Enterprise Management signed an equity transfer agreement with Wang Mingwang and Bifang No. 1, transferring its 0.84% equity in the company to Wang Mingwang for 8 million yuan and 1.05% equity to Bifang No. 1 for 10 million yuan. Among them, Wang Mingwang is one of the actual controllers of Xinwangda, a leading lithium battery company.
In September 2020, Xinwangda's subsidiary Qianhai Hongsheng and "Yuanhe" funds Yuanhe Puhua and Yuanhe Intellectual Property subscribed for 599,400 shares, 1,798,100 shares and 239,700 shares of the company respectively at a price of 16.68 yuan per share.
If the listing is successful, the above shareholders will receive a considerable profit. However, the dramatic thing is that after the first round of inquiries at the end of 2022, Suzhou Syschip's IPO entered a state of stagnation until it announced the withdrawal of the application in April last year, terminating the listing plan in the secondary market.
Until this transaction, a group of investors were finally able to withdraw——
According to the announcement, before the acquisition, the book value of all shareholders' equity of Suzhou Syschip on the valuation base date was approximately RMB 213 million, while the valuation was as high as RMB 831 million, with an added value of RMB 618 million - that is, the acquisition was at a premium of 289.48%. As stated in the announcement, this valuation result not only verifies GigaDevice's recognition of Suzhou Syschip's value, but also provides a solid guarantee for its future performance growth.
More importantly, this brings very considerable returns to the investors behind it: According to the disclosed data, after the completion of this transaction, Tan Jian, the original actual controller of Suzhou Saixin, will transfer 25.57% of the shares, with an intended transfer amount of approximately 14.7767 million yuan. The transaction price is 164 million yuan, which means a return of approximately 10 times.
At the same time, the two funds of Yuanhe Group planned to transfer capital contributions of 1.7981 million yuan and 239,700 yuan respectively, and the transaction consideration amounts were 43.5526 million yuan and 5.8034 million yuan respectively; the Xinwangda Group funds and its actual controller Wang Mingwang planned to transfer capital contributions of 599,400 yuan, 599,400 yuan and 479,500 yuan respectively, and the transaction consideration amounts were 14.6893 million yuan, 14.5175 million yuan and 11.7539 million yuan respectively, and the profits were successfully secured.
In addition, if during the performance commitment period, Suzhou SyChip's actual cumulative net profit reaches or exceeds 70% of the committed cumulative net profit, GigaDevice will initiate the acquisition of the remaining 30% equity held by all shareholders except the transferee after completing the 2026 special audit of Suzhou SyChip (no later than June 30, 2027).
Cherish the opportunity to be acquired
Everyone is looking forward to a real wave of mergers and acquisitions.
From the "New Nine Articles" that proposed supporting mergers and acquisitions of listed companies and industrial chain integration; to the "Eight Articles for the Science and Technology Innovation Board" that improved the valuation inclusiveness of mergers and acquisitions; to the "17 Articles for Venture Capital" that proposed broadening the exit channels for mergers and acquisitions; to the release of the "Six Articles on Mergers and Acquisitions" with unprecedented support... In just a few months, the M&A market has become visibly active.
Taking the semiconductor industry as an example, about 40 A-share semiconductor industry chain companies have disclosed major restructuring events or progress this year. Just one day before GigaDevice announced the acquisition, the Science and Technology Innovation Board company Xidi Micro also issued an announcement that it plans to buy 100% of the equity of chip company Chengxin Micro by issuing shares and paying cash. Looking forward, several A-share semiconductor companies such as Xinlian Integrated Circuit, Jinghua Micro, Dongxin Shares, and Fulide have found their favorite targets and promoted or completed major asset restructuring.
According to research data from Zero2IPO, among the existing PE funds, the total size of funds in the extension and exit stages is approximately RMB 19 trillion. Against the backdrop of a tightening IPO pace in the primary market, it seems increasingly natural for companies and investment institutions eager to exit to flock to mergers and acquisitions.
Previously, Wang Ranxu, partner of Xinchen Capital, said that the M&A industry has its own internal growth logic today, that is, as the economic growth rate slows down, there are fewer new opportunities in the market, and it will shift more to the game of existing markets.
How far is the era of mergers and acquisitions? A Beijing investor said that in a merger and acquisition discussion group with hundreds of people, information about buyers and sellers released by intermediaries was flying everywhere, covering everything from performance requirements to expected consideration, and the atmosphere was heated.
However, the reality is that the M&A "blowout" has not yet arrived. According to data from the Zero2IPO Research Center, in the first three quarters of 2024, there were 1,219 exit cases in China's equity investment market, a year-on-year decrease of 63%; among them, the number of M&A transactions was 129, a year-on-year decrease of 26.7%, and the transaction activity showed a downward trend.
One of the reasons is that many founders and investors are still looking forward to high returns after the company's IPO, and it is difficult for them to accept the outcome of selling at a lower price. Even if the conversations at the beginning of the transaction are harmonious, the valuation of the target was previously too high, and it is still easy for the two parties to fail to complete the transaction due to the huge difference in valuation expectations.
But changes are happening. As the IPO and financing situation becomes more severe, more and more founders have begun to change their attitudes and talk about appropriate valuations in the buyer's market. A Beijing VC shared that unlike the difficulty in reconciling prices between buyers and sellers at the beginning of the year, some founders he knows are actively reducing their valuations and lowering their postures with full sincerity.
When mergers and acquisitions are seen as a rare way out in the cold winter, those companies that can still sit at the negotiating table are already very lucky.
On the other hand, the market has seen a qualitative change due to quantitative changes, with benchmark cases emerging continuously and the market's proficiency in serving M&A transactions improving. For example, SiRuiPu previously issued convertible bonds and paid cash to purchase 100% of Chuangxinwei's equity, adopting a new approach of differentiated pricing and valuation schemes, which enabled all parties to balance their returns and exit the market successfully, allowing the M&A market to see the possibility of a win-win situation for all parties and room for innovative operations.
As the report of Zero2IPO Research Center pointed out, my country's M&A investment has entered the stage of industry integration, shifting from "opportunistic" transactions to "systemic" transactions, and the development of the M&A market has entered a historical turning point.
This scene is exciting.
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