A Case Study On The Failure Of Cendes’s Diversified Acquisition Of Shape Fitness

In recent years,the rapid development of market economy makes the economic activities among enterprises increasingly active,and at the same time intensifies the competition among industries.As a common economic behavior,enterprise merger and acquisition（M＆A）is presented in various forms,including horizontal M＆A mode,vertical M＆A mode and diversified M＆A mode,aiming at various problems in the process of enterprise operation.As early as the 20th century,foreign scholars have put forward the "diversified discount theory".On the contrary,in China,whether horizontal merger,vertical merger or diversified merger,the integration of resources,market expansion,risk avoidance and other aspects of the merger and acquisition of both parties bring huge benefits,the number of China’s merger and acquisition activities surge.As more and more cases show that diversified M＆A is more likely to fail than horizontal M＆A and vertical M＆A,China began to advocate the enterprise to carry out specialization rather than diversification business philosophy.Cendes is a listed company that provides architectural engineering design and related consulting services,making steady profits but its performance growth has stalled.Shape Fitness is a fitness training institution of the New Third Board.The current revenue and net profit of Shape Fitness before delisting are several times that of Cendes.In the case of completely different major business areas and a certain gap in business scale,Cendes ’s acquisition of Shape Fitness at a high premium in 2019 attracted wide attention from all parties,but it was terminated in just four months.The sudden death of the diversified merger led to the intensification of the management crisis of the acquiree,Cendes,and the delisting of Saip Fitness from the New Third Board as the acquiree.The case selected in this study is neither a traditional merger of large enterprises with small enterprises,nor a typical "backdoor listing",but a "curve listing",which has a certain research significance.This study will use case analysis,comparative analysis and financial analysis to sort out the motivations and risks of failed diversified M＆A cases,summarize the failure causes of "sudden death" diversified M＆A cases,and put forward suggestions and countermeasures for diversified M＆A.Finally,on the basis of explaining why diversified M＆A are more likely to fail,it verifies the correctness of encouraging scientific and technological innovation to promote enterprise listing in China,which means that the pure financial motivation and "curved-listing" mergers and acquisitions model will not bring long-term benefits to enterprises.