Research On M&A Risk Of Listed Companies In The Industrial Fund Model

From 2013,China’s M & A market has been relatively active.Many companies expand their scale,seize market share,and enhance their core competitiveness by beginning conducting outbound mergers and acquisitions.However,traditional outbound merger and acquisition has higher capital requirement for enterprises,making them face the higher M & A risk,and then the emergence of industrial funds has provided companies with new M & A model.Many listed companies set up industrial funds through joint private equity institutions,and use the professional investment capabilities of private equity institutions to screen target companies.Under the investment and operation of private equity institutions,industrial funds makes the target companies appreciate in several years,when their profitability reach the listed company is standard,the listed company conducts a second repurchase to complete the merger.Listed companies have less capital pressure and higher M & A success rates under this M & A model.But at the same time they will ignore the risk of some industrial funds,and problems which will also cause M & A of listed companies failed.Therefore,identifying the M & A risk of listed companies’ industrial funds and adopting certain control measures are very important to the stability of the current M & A market.This article adopts the literature research method and case study method.Aier Eye Hospital Group Co.,Ltd.the first medical company listed in China as the case study object.Through the analysis of the Aier Eye industry funds’ s merger and acquisition process to identifythe possible risk.During the establishment of the industrial funds,it was found that Aier is facing the risk of selection of PE institutions,the choice of PE institutions will affect the subsequent risk of Aier financing and double-layer agency;During the operation phase of the industry funds,it was found that Aier has to face the risk of conflicts of interest and the screening risk of the target hospital due to non-coordinated goals with the PE institution;During the exit phase of the industry funds,it was found that Aier should guard against the selection risk and payment risk of the exit timing and the valuation method of the target hospital,and after the second repurchase is completed,it should also pay attention to controlling the integration risk of the target hospital.After identifying the risk of Aier’s M & A process,this article summarizes the control measures that Aier has taken in the face of these risk,and supplements the deficiencies.Firstly,Aier should choose PE institutions with state-owned background or rich investment experience in the medical industry,which can control subsequent financing risk and entrusted agency risk;Secondly,Aier should establish a certain reward and punishment mechanism to bundle the benefits between PE institutions and limit the investment of PE institutions to control the M & A risk generated during the operation phase;Finally,Aier should formulate policies in line with the company’s long-term development strategy,choose appropriate exit timings,standardize the valuation method of the target company and adopt segmentation payment methods to control the M & A faced risk during the exit phase.Due to the short development time of industrial funds and the inadequate theory and practice system in China,this article summarizes the methods to control the risk of merger and acquisition through the risk identification of the merger and acquisition process of the Ayer Eye Hospital industrial funds.Providing a reference for listed companies that set up the industrial funds to conduct merger and acquisition.