Research On The Motivation And Effect Of Continuous High Premium M&A Of The Listing Companies

In recent years,more and more traditional enterprises adjust their industrial structure and actively seek transformation through mergers and acquisitions of emerging enterprises.The frequency of M&A activities initiated by Listed Companies in China has increased significantly,and the M&A premium has gradually increased.According to the statistics of advertising M&A in wind database,since 2014,China’s advertising M&A has been frequent,and the number and amount of transactions have increased rapidly,reaching the peak in 2015.With the tightening of supervision,the era of arbitrage through continuous high premium M&A may have declined.More and more listed companies carry out continuous M&A and pay high premium for the realization of corporate strategy and the good expectation of the target company.Therefore,the realization of synergy effect after continuous M&A and the rationality of high premium M&A gradually attract people’s attention.Therefore,this paper selects Lecron Share,a new Internet advertising company,as a case study.On the one hand,it analyzes the motivation and effect of its continuous M&A and evaluates it;On the other hand,it explores the rationality of high premium in continuous M&A and its impact on Lecron’s continuous M&A.Lecron started its strategic transformation in 2014.It acquired four Internet marketing companies in succession,aiming at the layout of Internet marketing and related service industry,and through internal integration,it has built a "Lecron digital" business board with the leading domestic "all-round digital integrated marketing ability".After a series of high premium mergers and acquisitions,Lecron Share generated a high amount of goodwill of 3.270 billion yuan,and accrued goodwill impairment losses of 2.070 billion yuan and 1.2 billion yuan in 2018 and 2019 respectively,which led to the company’s financial performance turning from profit to loss in two years,and the disclosure of goodwill impairment information also led to the decline of stock price.Based on the introduction of the background of Lecron’s continuous high premium M&A,this paper uses the case analysis method to study the economic consequences of the selected enterprises’ strategy of M&A.the main research contents are as follows: firstly,this paper introduces the overall situation of Internet marketing industry and M&A,and analyzes the motivation of Lecron’s continuous M&A and the reasons for the formation of high premium.Secondly,this paper analyzes the process of continuous M&A based on the "Lecron digital" strategy,and analyzes the relative changes before and after the continuous M&A from the perspective of corporate performance,to explore whether Lecron improves the operating efficiency and financial performance through the integration of the industrial chain.Thirdly,using the event study method to analyze,to explore whether the continuous merger and acquisition events have brought excess returns to Lecron shares and improved the market value of the enterprise.Finally,it analyzes the factors that affect the effect of M&A.The research shows that the continuous M&A of Lecron shares has increased the short-term benefits of the enterprise to a certain extent at the initial stage,but due to several times of high premium M&A,neglecting the risk management of accounts receivable and other reasons,the cash flow of the company is not smooth,and the integration and development after M&A have not achieved the expected results.On the basis of comprehensive analysis,the overall conclusions and suggestions are given:first,the financial risk of the target company should be fully considered before M&A.Second,pay attention to the cash flow index after M&A.Third,both short-term and long-term benefits should be emphasized.Through the analysis and suggestions of this paper,we hope that the enterprise can develop healthily.I also hope that the conclusions of this paper can provide help and reference for other enterprises in the same industry.