Research On The Risk And Prevention Of High-premium Acquisition Of Listed Companies

With the continuous development of China’s market economy,it is difficult for enterprises to meet the requirements of rapid expansion by their own strength.More and more enterprises choose to enhance market competitiveness through mergers and acquisitions.M&A and restructuring have gradually become enterprises to expand their business scale and improve operational efficiency.An important means.With the increase in the number of M&A transactions,mergers and acquisitions characterized by high premiums have become the norm in market mergers and acquisitions.However,high-value acquisitions often bring great risks to enterprises,and the target companies will formulate higher performance commitments to support enterprises.Pricing,once the promised performance is not achieved in the future,M&A transactions will be subject to risks such as impairment of goodwill and difficulty in recovering funds.According to the survey,the failure rate of high-value mergers and acquisitions has gradually increased in recent years.The failure of mergers and acquisitions will seriously damage the interests of both parties,so the identification and prevention of high-purchase M&A risks is particularly important.In this case,the acquisition party Jiaozuo Wanfang hopes to achieve strategic transformation through mergers and acquisitions due to the overcapacity,high dependence on foreign countries and low industrial concentration of the main electrolytic aluminum.The target company of this acquisition,Wanji Energy,was newly established in the year of acquisition.The total assets are only 10 million.There is no operating income and profit,and there are no recurring gains and losses and contingent events.However,the appraisal agency’s evaluation rate for Wanji Energy is near.250 times,and finally completed the acquisition at a premium of 170 times.In the year of M&A,Wanji Energy still achieved its performance commitment.In the second year,it directly lost money.The final merger failed.Jiaozuo Wanfang returned all the shares of Wanji Energy.The premium rate of this case is much higher than the average premium level of the industry.It is a typical high-price acquisition case.Therefore,this paper analyzes the reasons for the formation of high premium and the reasons for the failure of M&A,and mergers and acquisitions through theanalysis of Wanfang’s acquisition of Wanji Energy’s M&A process.The risks of the process provide a reference for the high-value acquisitions that are prevalent in the market.This paper mainly divides risk into preparation stage,acquisition stage and integration stage.The risk in the M&A preparation stage is related to the decision-making risk.Jiaozuo Wanfang did not conduct a comprehensive investigation of Wanji Energy,and acquired a new enterprise in the absence of its own funds,which increased the debt cost of the enterprise and increased the difficulty of business operation;The existing risks are mainly the target company’s value assessment risk,financing payment risk,goodwill impairment risk and performance commitment cannot realize the risk;the integration stage is mainly the“non-coordination” risk of resource integration between the two parties after the merger.Therefore,before the merger,we should pay attention to the choice of the target enterprise,conduct sufficient due diligence,reasonably evaluate the value of the target enterprise,pay attention to the integration of resources after the merger,and strengthen the awareness of risk prevention to achieve the purpose of merger and acquisition.