Tech Giants: Starting from Bankrupt Companies

73: Chapter 73: Merger and Acquisition Plan**July 8, 2017, 9:00 AM, Top Floor Conference Room, Xingchen Heavy Industry**

Morning light filtered through the floor-to-ceiling windows of the conference room, casting neat spots of light onto the long table.

Eleven people sat around the oval table—all the directors and core executives of Xingchen Heavy Industry.

The air was so heavy it felt like it could be wrung out, and everyone’s expression was pulled tight.

Su Chen sat at the head of the table, with a 78-page document spread out before him.

The cover bore a striking title: ”Shenyang Machine Tool Phased Acquisition and Rebirth Plan V3.0.”

This was the result of his team pulling two all-nighters over the past 72 hours.

”Let’s begin,” Su Chen’s voice broke the silence.

He signaled for his assistant to turn on the projector, and the first page of the plan appeared on the big screen.

**Core Transaction Structure**—five bold, black characters.

”After multiple rounds of negotiations with the state, we have reached a compromise plan,” Su Chen picked up the laser pointer, and the red dot moved across the screen.

”Xingchen Heavy Industry will acquire 80% of the equity in Shenyang Machine Tool, while SASAC will retain 20%. This 20% is not common stock; it is special management stock. It will not participate in daily operations, but it holds veto power—limited only to matters involving national strategic security and technological secrets.”

He flipped to the next page: ”Regarding debt. Shenyang Machine Tool has a total debt of 58.2 billion. After assessment, 30 billion of this is invalid debt—including duplicate pledges, unauthorized guarantees, and debts that have exceeded the statute of limitations.

Of the remaining 28.2 billion, 12 billion is valid debt with collateral, which Xingchen will assume; 16.2 billion will be assumed by a newly established asset management company and disposed of in installments.”

Lin Wan nodded slightly.

This debt-splitting plan was much more reasonable than the initial full-takeover proposal.

”Regarding personnel,” Su Chen continued, ”Shenyang Machine Tool has 30,000 on-the-job employees. The state has promised to divert and resettle 15,000 through early retirement, job transfer training, and self-employment. Xingchen will take on the remaining 15,000. But please note—”

He emphasized his tone: ”It is not a one-time takeover. We have designed three stages.”

The screen switched to a timeline chart.

**Phase 1 (0-3 months): Risk Isolation Period**

- Establish the ”Shenyang Project Risk Isolation Division,” with Lin Wan serving as the head.

- Take over all materials in the technical archives, 37 classified military-industrial processes, and 824 patents.

- Take over repairable core equipment: that set of Germany five-axis gantry milling machines and 12 imported machining centers.

- Receive **800 core backbone staff**: including 78 people like Old Master Craftsman Liu Weiguo, 300 young and middle-aged technical backbones, and 422 key post operators.

- ”The core task of this stage is: preserve the spark, isolate the risks.”

**Phase 2 (4-9 months): Production Line Transformation Period**

- Transform Shenyang Machine Tool’s existing production lines and introduce Xingchen’s production management system.

- Transfer four of Xingchen’s mature products (Jingwei, Luban, Gongshu series, and one three-axis machining center) to Shenyang for production.

- Receive another **7,000 production personnel** based on production capacity needs.

- Launch the ”Master-Apprentice System” technology inheritance plan.

**Phase 3 (10-21 months): Full Integration Period**

- Complete the fusion of all technology, production, and management systems.

- The remaining **7,200 employees** will arrive in batches depending on the ramp-up of production capacity.

- Implement ”Xingchen-Shenyang” dual-brand operation.

- Goal: Achieve monthly break-even by the 24th month.

Su Chen put down the laser pointer and looked at everyone: ”The core logic of this plan is: **take it step by step, watch one step, move one step**.

We are not swallowing the entire Shenyang Machine Tool at once; instead, it’s like eating a crab—crack the shell first, take out the crab roe and meat, and throw away the useless parts like the shell and gills.”

A slight commotion stirred in the conference room. Some nodded, some frowned.

”Now for the most critical part,” Su Chen looked at Lin Wan. ”Director Lin, please explain the risk control plan.”

Lin Wan stood up.

She was wearing a dark gray suit dress today, her hair pulled back meticulously, and her whole demeanor exuded the precision of a professional manager.

”My plan is called ’Three Firewalls’,” she opened her PPT, and the screen switched to a diagram of a three-layer protection structure.

**The First Layer: Legal Entity Firewall**

”We will establish a new wholly-owned subsidiary, ’Xingchen Shenyang Machine Tool Co., Ltd.’, as the sole legal entity for this acquisition,” Lin Wan’s speaking pace was steady, and every word was clear and forceful.

”Between this subsidiary and the Xingchen Heavy Industry entity, strict ’Technology Licensing and Service Agreements’, ’Brand Usage Agreements’, and ’Management Output Agreements’ will be signed, with all transactions settled at fair market prices.”

She zoomed in on the key terms of the agreement: ”Most importantly, all historical debts, potential lawsuits, and legacy disputes of Shenyang Machine Tool will be locked within this subsidiary.

Even in the worst-case scenario—if the subsidiary goes bankrupt and is liquidated—it will not affect the main body of Xingchen Heavy Industry. This is the **thorough application of limited liability**.”

Zhao Tiezhu asked: ”But what if the subsidiary needs technical support from the parent company?”

”Purchase it at market price,” Lin Wan replied crisply. ”For example, if Xingchen’s five-axis machine tool technology is authorized for use by the Shenyang subsidiary, we will charge 5% of sales annually as a licensing fee. This ensures technology output while achieving risk isolation.”

**The Second Layer: Capital Firewall**

Lin Wan flipped to the next page, revealing a complex capital structure diagram.

”We are setting up a **5 billion risk reserve fund**. Sources of funds: 2 billion from Xingchen Heavy Industry, 1.5 billion from the Fengtian Provincial Government, and 1.5 billion from the National Manufacturing Transformation and Upgrading Fund.

This money will be deposited into a jointly managed account, specifically used for potential emergency risks of the Shenyang project.”

She paused and scanned the room: ”In addition, the Shenyang subsidiary will not pay dividends for the first three years; all profits will be used to repay debts and for technological upgrades. This ensures that blood is first delivered to the parts that need it most.”

Then, she said something that shocked everyone: ”There is one final insurance—Su Chen is voluntarily providing a **1 billion unlimited joint and several liability guarantee**.”

”What?!” Shen Nanpeng almost jumped out of his chair.

Zhao Tiezhu was also stunned.

The conference room exploded instantly.

”Mr. Su, this won’t do!” the CFO blurted out, ”Unlimited joint and several liability means that if the project fails, you personally will lose everything!”

”Yes, there is no need to go this far!”

Su Chen raised his hand to suppress the discussion. He looked at Lin Wan: ”This is my decision. Continue.”

Lin Wan took a deep breath. It was clear she also opposed this clause, but she respected Su Chen’s will: ”Mr. Su’s personal guarantee will serve as the last line of defense.

Its significance does not lie in the amount—1 billion is not much for the entire project—but in the **signal**. It sends a signal to the state, to the employees, and to the market: Su Chen has bet his entire personal fortune; he is serious.”

**The Third Layer: Operational Firewall**

”I will concurrently serve as the Chairman of the Shenyang subsidiary,” Lin Wan said, ”but daily operations will be handled by the team dispatched by General Manager Zhao Tiezhu.

We have designed a dual monitoring mechanism: the financial system is independent but connected to the headquarters in real-time; any single expenditure exceeding 5 million requires dual signatures—both Zhao Tiezhu and I must sign.”

She finally threw out a heavy statement: ”I possess **special disposal rights**.

If the Shenyang subsidiary has a cumulative loss of more than 3 billion within three years, or if there is a major labor dispute or production safety accident, I have the right to unilaterally initiate liquidation procedures and sever ties with the main body.”

This was said very heavily, but it was also very realistic.

Everyone understood: Lin Wan wanted to be the one holding the brake, ready to initiate an emergency stop before the train went out of control.

The explanation of the plan was finished.

The conference room fell into a long silence. Everyone was digesting this huge and precise plan.

The sunlight moved slowly across the table, moving from the east side to the center.

”Now, let’s vote,” Su Chen looked at his watch. ”It’s 10:30, let’s make a decision.”

The secretary distributed voting cards. A simple three-option choice: In favor, Against, Abstain.

Ten minutes later, the voting began.

”Shen Nanpeng.”

”Abstain.”

There was a murmur in the conference room. As CFO, Shen Nanpeng’s abstention was significant.

”Zhao Tiezhu.”

”In favor!”

The voice was loud, carrying the stubbornness of a technical person.

”Lin Wan.”

”In favor.”

Calm and firm.

One after another. The CFO voted against, the Chief Strategy Officer voted in favor, the Chief Legal Officer voted in favor, the Chief Production Officer voted against...

The eleven votes were tallied.

The secretary read the result: ”7 votes in favor, 3 against, 1 abstention. The plan is passed.”

Applause broke out, but it was not enthusiastic; it was more like a ritualistic confirmation.

At this moment, Shen Nanpeng stood up. This usually steady CFO looked grave.

”Let me explain why I abstained,” he looked at Su Chen, ”Mr. Su, your plan is perfect—from financial design, risk control, to implementation steps, it is textbook-level.

But the problem is, it is too perfect, so perfect that it looks like an ideal model in a laboratory.”

He took out a supplementary document from his briefcase: ”Over the past three days, I had my team conduct a survey. We contacted seventeen manufacturing executives who had worked in the Northeast and asked them the same question: ’What is the biggest difference between running a factory in the Northeast and in the Yangtze River Delta or Pearl River Delta?’”

He flipped to the survey summary: ”The answers were highly consistent. It’s not policy, not talent, not even the supporting industries—it is the **climate**.”

The conference room went quiet.

”In the Northeast winter, minus twenty-five degrees is the norm,” Shen Nanpeng’s voice was exceptionally clear in the quiet room.

”What happens at this temperature? Machine tool foundations will have precision drift due to micro-displacements of the permafrost, with an average drift of 0.005 millimeters per meter of length; changes in hydraulic oil viscosity will lead to unstable feed speeds; operators wrapped in heavy cotton clothes will have their dexterity reduced by 30%; even the wear rate of precision bearings during cold starts is 2.3 times higher than at room temperature.”

He looked at Zhao Tiezhu: ”General Manager Zhao, you said those Old Master Craftsman know how to get the machines running in that environment.

But the question is—**why do we have to run machines in that environment?** Why not build a modern factory with constant temperature and humidity in the South instead of taking over those old factories that need to fight against the natural environment?”

This question was very sharp, pointing directly to the core logic.

All eyes turned to Su Chen.

Su Chen was silent for a long time. He walked to the window, looking at the scorching July sun in Shenzhen outside.

The air conditioning kept the room temperature precisely at 22 degrees, with 45% humidity—this was the standard environment for precision manufacturing.

Then he turned around.

”Old Shen, you are right,” Su Chen’s voice was calm. ”If we only consider it from an efficiency perspective, the answer is clear: close the Shenyang factory and rebuild in the South.

The cost is lower, efficiency is higher, and management is easier.”

He walked back to the conference table: ”But there are some things that cannot be calculated solely by economic accounts.”

Su Chen opened the projector and pulled up a map of China. He used the laser pointer to circle the Northeast region: ”Here lies China’s most complete heavy industry supporting system.

Casting, forging, heat treatment, large-scale machining... these capabilities cannot be built in three or five years. The South has our speed, and the North has their depth.”

”You say the climate is a problem,” Su Chen looked at Shen Nanpeng, ”but from another perspective, isn’t this a kind of **capability**?

Being able to maintain machine tool precision at minus twenty-five degrees means our temperature compensation algorithms, material processes, and assembly techniques must reach a higher level.

Once this capability is mastered and applied back to Southern factories, it will be a dimensionality reduction strike.”

He paused: ”As for the Old Master Craftsman—Old Shen, have you ever thought about why Old Master Craftsman are treasures in century-old factories in Germany and Japan?

Because they have experienced the entire history of equipment evolution from mechanical to numerical control, from analog to digital.

They know the thread of technological evolution, they know what is flashy and what is real skill.”

Su Chen finally said: ”What does Xingchen lack the most? We lack history, we lack accumulation, we lack that kind of composure that comes from having seen great storms.

Shenyang Machine Tool can fill this gap—in the most painful way.”

Shen Nanpeng was silent for a long time. Finally, he slowly sat down: ”I reserve my opinion, but I respect the collective decision.”

The dust settled.

Su Chen stood at the head of the table again: ”Now I announce: First, Lin Wan will immediately form the ’Shenyang Project Risk Isolation Division’, you will be the head, and I want the organizational structure and launch plan within three days.

Second, Zhao Tiezhu, in 72 hours, I want to see a detailed plan for technical integration, especially how the ’Master-Apprentice System’ will be implemented.

Third—”

He looked at everyone: ”This acquisition is not an expansion of Xingchen Heavy Industry, but a **startup**.

We all need to return to the state we were in three years ago—put down the airs of a big company, be prepared to endure hardship, be prepared to fight.”

After the meeting, people left one by one.

Lin Wan stayed until the end. After everyone had left, she walked to Su Chen’s side: ”Are you really going to sign the personal unlimited guarantee?”

”I already signed it,” Su Chen took a notarized guarantee letter from the drawer, ”I signed it yesterday afternoon.”

Lin Wan looked at the document, and her eyes suddenly turned red—this was the first time Su Chen had seen her like this in the three years he had known her.

”Are you crazy?” her voice was trembling, ”If it fails, you will have nothing.”

”I won’t have nothing,” Su Chen smiled, ”I still have you, and I still have Spark. And I believe it won’t fail.”

”What makes you believe that?”

Su Chen walked to the map, his finger tracing the long distance from Shenzhen to Shenyang: ”Because this time, we are not going to give alms; we are going to learn.

Learning how to manufacture in a difficult environment, learning how to reconcile with history, learning how to make old trees sprout new shoots—”

He turned around, with light in his eyes: ”This kind of learning opportunity might only come once in a lifetime. I don’t want to miss it.”

Outside the window, an airplane streaked across the blue sky, flying north.

And thus, the most daring North-South integration experiment in the history of Chinese manufacturing began.