Research On The Influence Of Target Asset With Valuation Adjustment Mechanism In Mergers And Acquisitions Appraisal

With the capital market starting,the price of asset which is used to exchange was mainly based on the book value.With the development of the capital market and the general trend of economic globalization,Chinese economic was constantly changing,the M&A among companies were also increasing.In this case,the valuation and pricing of target assets in M&A has become an important issue.Chinese asset valuation industry grew with the economic diversification,from non-systematic to the establishment of legislation,from servicing country to enterprises.Chinese asset valuation industry also played an important role in promoting M&A.According to the data provided by CSMAR from 2015 to 2019,in the A-share stock market had 662 companies participated in M&A,of which 656 companies took appraisal value as the reason of pricing,accounting for 99%.It shows that the value of asset valuation greatly affected the pricing in M&A,and asset valuation had become an important part of M&A.Based on the data results,this paper finded out an important factor affecting the pricing of M&A.That is valuation adjustment mechanism.As a kind of valuation adjustment tool,the valuation adjustment mechanism is the product in the circumstance of information asymmetry,to protect the profits of both parties in the M&A.Its original purpose is to make the M&A target assets have a fair price.However,as a product of marketization,at present there are no laws and regulations on the valuation adjustment mechanism in China,so many enterprises used the valuation adjustment mechanism to increase the valuation and raise the stock price to damage the profits of minority shareholders.After 2018,the bad impacts of the high price merger gradually emerged,more and more enterprises began to make provision for large goodwill impairment,which reduced corporate profits."High commitment,high valuation" had also become a problem that cannot be ignored in the development of economy.In this context,the research on the target asset evaluation of M&A make for finding out the appraisal agencies’ problem and shortage in the work of M&A,and to give suggestions for the future development of the appraisal industry to promote stable development of Chinese capital market.In the process of research,based on the option pricing theory,asymmetric information theory and signal theory,organizing basic theory of valuation adjustment mechanism,and then through the data,analyzing the present situation and problems in M&A appraisal,introducing the situation of the premium rate in different years,different evaluation methods and whether there is valuation adjustment mechanism,using comparative method to find the premium rate is the main influence factors of appraisal.Then it summarizes the motivation and situation of the valuation adjustment mechanism,and finds that the valuation adjustment mechanism has become a tool for both investors to acquire profits at a high price,the asset appraisal agency is also responsible for this result.It also provided a research basis for the case studies in this paper.In the case study,this paper selected the M&A cases which had valuation adjustment mechanism.Firstly,by using expert advice,43 relevant factors were selected to construct the prediction model of whether the valuation adjustment mechanism could be satisfied,and calculate the probability of the profits.Secondly,according to the content of the valuation adjustment mechanism,evaluating appraisal system to assess the price of target assets.Finally,the new appraisal conclusion is compared with the original conclusion which is issued by asset appraisal agency to analyze their respective characteristics.The study found that:(1)the investor can through the way of signing reasonable and effective valuation adjustment mechanism to make mutual benefit,it is possible to ensure that M&A price fair,and also can solve the problem of different appraisal result.But at present,the participants of M&A interested in using valuation adjustment mechanism to raise the asset prices.(2)The application rate of the valuation adjustment mechanism is high,and the valuation premium rate of the M&A with the valuation adjustment mechanism is higher than that without the valuation adjustment mechanism.The application proportion of Income Approach is the highest in M&A events,and its appraisal results also show the highest premium rate.Therefore,through data comparison and literature analysis,it is found that the valuation adjustment mechanism and the assess method have a positive impacts on the valuation premium.(3)By studying the specific content of the valuation adjustment mechanism,the prediction model of the valuation adjustment mechanism can be built to judge the future expected revenue more accurately.This article adopted A purchase B as the research case,using new prediction model made the profits forecast is more accurate,not only reduce the premium rate,but also reduce the risk of the enterprises’ development.It has significance to the appraisal of similar industries.The significance of this paper is as follows: Firstly,the construction of prediction model improved and enriched the theoretical system of appraisal,to a certain extent.Secondly,expanding the perspective of valuation adjustment mechanism.Taking the evaluation of identifiable intangible assets as an example,this paper combined the theory of value evaluation with the content of valuation adjustment mechanism.Deeply explored the impacts on the content of valuation adjustment mechanism on the value of identifiable intangible assets.It is not only be limited to previous empirical studies on the relationship between valuation adjustment mechanism and valuation premium,but also committed to solving the problem.Thirdly,it provides new ideas and methods for appraisers to participate in the appraisal work of similar industries in the future,which is conducive to better service for the valuation work of companies’ M&A.Finally,the results of the study are helpful for regulators pay attention to valuation adjustment mechanism in M&A.To realize the important mission for investors.Its advantages in M&A should be retained,and the negative effects should be adjusted.So that Chinese transaction activities in M&A become more effective and reasonable.