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Jiang Xipei: Far East’s Chariot of Merger and Acquisition

Date time:2016-04-22点击量:1085Origin:

      The original link:http://mt.sohu.com/20160422/n445478801.shtml

Chairman of the Board of Far East Holding Group Jiang Xipei has chosen a transformation after nearly 28-year engagement in wire and cable business, who established the company with RMB1.8 million through self-financing.

Before the transition, the cable business under Far East had ranked No.1 for consecutive 19 years in China’s cable industry in terms of sales revenue. But Jiang Xipei pays more attention to the Group’s layout in the Internet, Internet of Things, smarter energy and Intelligent city. To him, such layouts are identical to the five reforms in operational system that Far East experienced before, all of which need to be foresighted by putting the focus in the future.

"Innovation is the core of our competitiveness", said Jiang Xipei to the reporter of "Talents". In future, Far East Holding Group will continue to move forward and realize the transformation by relying on a dual-driving-force model featured by "investment + main business", striving to exceed RMB135 billion, the target for the annual operational revenue by 2020. 

 “The Internet+” strategy

"We were aware of gradually emerging limitations as early as in 2010, despite an existence of space for the main wire and cable business". Jiang Xipei has his own opinions about this industry, who established and developed Far East Holding Group. He believes the wire and cable industry could hardly survive in the fierce competition if it continued to adopt the market-oriented marketing model. Today, with the highly advanced mobile Internet technology, developing traditional industries through the Internet has been the overall trend.

From the industry point of view, although China’s wire and cable industry ranks No.1 in the capacity around the world, with an annual sales reaching about RMB1 trillion, it meets a challenge of painful structural adjustment, increasing difficulties for the enterprise production, and gradually emerging operational risks, with acerbating downward pressure in the domestic economy and continuing trend of a weak economic recovery internationally.

Especially in recent years, a large quantity of redundant construction has lead to seiously excess capacity in the cable industry. The utilization of common wire and cable production equipment is less than 40% in general.

According to industry insiders, the development of the domestic wire and cable enteriprises now faces not only the trouble caused by old problems, but also the challenges of new situations and issues, for example, insufficient innovative capability, inapproporiate industrial structure, optimization to be achieved, and increasingly heavy competition in the world’s market. The profitability for the domestic wire and cable industry averages at around only 2% to 3%.

"In the economic new normal, for many industries, if enterprises can not escape the trap, they will be eliminated as the final result", Jiang Xipei told the reporter of “Talents”.

Therefore, Far East Holding Group adopts the strategy of "Internet +", relying on the Internet to solve the problems of the wire and cable – lack of information on demand andsupply, product R&D - production - sales network, intelligent operation and channel distribution transition. In 2010, when the e-business enterprises were still studying how to explore B2Cand C2Cmarkets, Far East Holding Group started its layout in the vertical B2B in the electrician and electrical field andFar East’s material trading platform globally.

"It would be difficult for us to surpass those well-known electronic business platforms such as Alibaba and Tmall if we do the Internet", Jiang Xipei admitted. However, the accumulation of years in the original wire and cable industry offers favouable conditions forFar Eastto transform toward the Internet. Depending on the main business advantage,Far Eastuses its Internet strategy as a network platform to develop specialization, that is, creating a global electrical and electric machinery network platform and material trading platform.

According to this plan,Far Eastestablished Far East Trading Pay Network Technology Co., Ltd. in 2011, including cableabc.com, Trading Pay and China Material Exchange, to begin the layout of "one network and two platforms". The latest disclosed data show in 2015, Far East Trading Pay Network Technology Co., Ltd. continued to maintain a rapid and healthy development, realizing an annual revenue and net profit growth by more than 50%.

Money maker

"Far East Holding Group needs to do well in the following two things: one is the main business, and the other is investment, through which the business may extend to industries besides cable". Far East has invested in and established Harlyn Capital Investment Management (Beijing) Co., Ltd., with the asset under management exceeding RMB4 billion.

It is introduced that Far East has invested in 339 enterprises through the Group’s capital platforms, together with more than 20 funds. Those enterprises include over 70 listing companies or companies to be listed.

Based on Jiang Xipei’s plan, by 2020, Far East Holding Group will achieve the target of the annual operating revenues above RMB135 billion, which needs to largely depend on its subsidiary – Far East Smarter Energy – to provide growth momentum. For this reason, the Group has strategically positioned it as "a smarter energy expert and intelligent city system service provider".

Now,Chinahas been the world's leading power in energy saving, and new and renewable energy utilization; meanwhile, foreign giants including Volkswagen, Tesla and Apple have also begun a comprehensive layout in the new energy. ToughChinahas reached a considerable scale in some areas of the smarter energy industry, it is still far away from the developed countries in resource assessment, technological level, cost control and other sides.

In order to build a comprehensive advantages in the smarter energy sector,Far Eastbegan to advance the transformation pace through mergers and acquisitions.

In 2014, Far East Smarter Energy acquired Intelligence Power, a company owning electricity first qualification, distributed natural gas and engineering experiences in PV power plant; and other enterprises such as SEMEUREKA, a company mainly engaging in distribution automation. It also promotes cooperation with Tesla to access to the area of electricity for new energy vehicles’ charging station. In 2015,Far East acquired again Far East First New Energy Co., Ltd. and Far East Earn Electric Apparatus Co., Ltd., to complete a layout throughout all aspects of the power sector.

 Through a series of mergers and acquisitions, Far East Smarter Energy starts to see synergy effects arising from all subsidiaries on its industry chain, which is significant in the growth rate of the profit from the energy end to the industry chain. That performance contributed about 20% of the net profit attributable to the parent company in 2015. According to the latest financial data released by Far East Smarter Energy, it is expected to realize a net profit attributable to shareholders of listed companies at RMB410 million to RMB460 million in 2015, up 124% to152% compared with the last year.

“Doing an enterprise bigger and stronger is inseparable from merger and acquisition, which will grow largely in the future. But relative to merger and acquisition, it would be more difficult in integration. The successful merger and acquisition cases account for less than 50%, while the successful integration cases only accounting for about one-third, which is very risky".

Therefore, Jiang Xipei has set strict requirements for mergers and acquisitions, such as meeting the development direction of Smarter Energy, an industry leader, the original management team should have retained key staffs for 8 to10 years and made a commitment to the previous three-year performance, relatively reasonable price for merger and acquisition.

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