Classic Case Analysis Of Focus Media'S Successful Financing

Focus Media, a leading digital media company in China, successfully completed the first round of private equity investment in Japan's Softbank and other companies in 2003, and successfully completed the second round of private equity financing in April this year.

It is reported that Focus Media will soon introduce the third round of equity financing of the US Goldman Sachs and the European 3I nearly $thirty million.

In less than two years, Focus Media has successfully operated three private equity financing before and after, and has introduced several top international institutional investors. It is undoubtedly a rare classic case of private equity financing in China's local companies in recent years.

By analyzing the reasons for its successful financing, it is not hard to see three key elements of success: first, the reasonable valuation, and how to position the Finance Companies accurately, which is a headache for all participants.

Is it high or low?

What company should be taken as a reference and what financial data should be taken as a parameter?

The company's pre investment valuation is closely related to the company's financing and the proportion of new shares issued.

In the case of a young company with a short history and innovative business models, such as Focus Media, if the company has certain financial data (such as half a year or a year's financial record), it is possible to consider using the financial data of 12 months (financial year or calendar year) and calculate the net profit based on the US generally accepted accounting principles (GAAP) or the international accounting standards (IAS).

In this way, we can reasonably reflect the growth space that the company can anticipate and achieve in the future in the pre investment valuation of the company. At the same time, we should consider the private equity earnings ratio accepted by the international capital market, so as to create a situation that allows the company and investors to win a win-win situation.

The first step is to establish a cooperative relationship between the financial advisor and other financial advisors, including the financial advisor, and the company's financial forecast and the purpose of raising funds. Then, the financial advisor will introduce the company to potential investors and make preliminary due diligence by potential investors. If both parties are willing to go further, both parties will participate in the negotiation and conclude the investment clause with the participation of "financial advisers". Finally, the financial advisor will preside and join the lawyers and accountants to enter into the drafting, negotiation and finalization of the investment agreement. After the investor completes his due diligence, the parties can sign investment legal documents. (two) to grasp the overall situation and take advantage of the situation, the financing activities are generally divided into four.

Within one to four weeks after that, investors will remit investment funds into the company's bank account, and the company will issue additional shares to investors so that the entire paction is completed.

In these four stages, the two sides of investment and financing will have different ideas and opinions on many issues, especially in major issues such as company valuation, investment ratio, investor priority protection clause, corporate governance and ownership of management. Therefore, the role of "financial advisor" plays an important role.

On the one hand, the "financial adviser" can provide professional advice for the company to maximize the company's interests.

On the other hand, "financial adviser" can play its third party's advantageous position, mediate, coordinate the two sides or parties, control the pace of negotiations, become a buffer between negotiation opponents, make difficult and tense negotiations more smoothly, and greatly enhance the success rate of negotiations.

CEO and founder of Focus Media, in the talks with investors, are able to grasp the overall situation and take advantage of the situation, and give full play to the role of "financial advisers", so that they can make small matters equal to principles and flexibility, so as to bring the enthusiasm of investors into full play.

On the other hand, with the full cooperation of international investment funds and the subtle interaction pressure between the funds, the second round of private financing of Focus Media has been successfully completed in less than four months, and there has been a situation of oversubscription by institutional investors.

This is extremely rare in China's private equity financing and venture capital investment in recent years.

The advertising media industry is a new advertising media industry, which combines outdoor media, digital entertainment and IT technology. There is no commercial model for reference in foreign countries.

The founder and team of Focus Media have pioneered a new business model and profit model suited to China's national conditions and development according to its industry experience of nearly ten years.

In the intricate investment and financing business negotiations, Focus Media's young team showed the qualities of courageous, capable and calm.

Their passionate statements always let potential investors feel the passion of entrepreneurship.

Excellent teams and their leaders are always the first elements of successful investment and financing.