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Baidu’s acquisition of YY Live for $3.6 billion has been a series of twists and turns. In order to refute the doubts raised by the Muddy Waters Report on the authenticity of the company’s business, YY Group (YY) said that it can provide cash balances and bank deposit statements at home and abroad, which can be confirmed and investigated by a competent third-party institution. Whether Baidu has done detailed due diligence on YY and whether it will continue to acquire YY Live has become the focus of industry discussions for a while.

In an interview not long ago, Carson Block, founder of Muddy Waters, even shouted at Baidu: If they (Baidu team) have not conducted due diligence, they should do so as soon as possible. If they had done their due diligence, it should have been easy to spot the issues we noticed with Gathering.

On the morning of November 27, a person close to the transaction disclosed exclusively to Yicai that Baidu had earlier commissioned a number of third-party institutions, including PricewaterhouseCoopers, to do detailed work on Baidu’s acquisition of YY. Due diligence, the scope of due diligence includes financial, legal and other fields.

The above-mentioned person stated that it is common knowledge in the industry for companies to conduct due diligence on the income health of the acquisition target. Judging from the content of the report disclosed by Muddy Waters, PricewaterhouseCoopers and other institutions have previously conducted due diligence on the acquisition target in more detail.

According to the final binding agreement signed by Huanju Group and Baidu, Baidu will acquire Huanju’s domestic video entertainment live broadcast business (ie YY live broadcast), including but not limited to YY mobile application, YY.com website and YY PC, etc. The transaction is expected to be completed in the first half of 2021. In this transaction, Baidu values ​​YY’s mature live broadcast system, and YY’s live broadcast business accesses Baidu’s huge traffic pool to accelerate business growth and release greater value. But at this time, Muddy Waters publicly stated on social media that it was shorting the US-listed company Huanju Times, claiming that 90% of the income of Huanju’s live broadcast business was fake, and that 80% of the income of the overseas version of Huanju Times, Bigo Live, was fake. Huanju Group’s stock price fell by more than 20% at one point.

After being shorted by Muddy Waters, will Baidu’s acquisition of YY press the pause button?

“The acquisition is a very serious legal issue, and the acquisition agreement will fully protect the rights and interests of the buyer. If YY’s finances are fraudulent, Baidu has every right to terminate the acquisition.” A person in the investment circle told reporters, “In this situation, for Baidu, If it is acquired, there will be further bargaining chips with YY; if data fraud is found in further verification, you can leave at any time.”

Today, You Yunting, a senior partner of Shanghai Dabang Law Firm, said in an interview with a reporter from China Business News that the previous signing of a binding agreement between Baidu and Huanju does not mean that the transaction is done. Because there are many delivery conditions stipulated in the agreement, if the acquiree has no way to meet these delivery conditions, for example, after the financial audit finds that the data is not true, the transaction will not be delivered. Generally speaking, after the Muddy Waters report is exposed, Baidu will definitely increase its due diligence efforts, including data investigation and financial data investigation.

“If Baidu’s investment decision was made after an in-depth investigation, I think it is very likely to continue this transaction, but I do not rule out asking for a lower transaction price based on the severity reflected in the Muddy Waters report. If problems are found, Baidu will The shareholders of YY Company can be asked to make a reasonable explanation. If the explanation is unreasonable, the contract terms can be cited to determine that the delivery conditions are not fulfilled, and the transaction may be terminated.” You Yunting told reporters.