Research On The Motivation And Risk Prevention Of Cross-industry M&A Of Traditional Manufacturing Enterprises

With the deepening of China’s supply-side structural reform and the country’s new requirements for high-quality economic development,some enterprises in traditional manufacturing industries have exposed problems such as extensive production processes and insufficient capacity utilization,and cannot meet the requirements of high-quality economic development,The transformation is required.In terms of the way of transformation,more and more enterprises choose the method of cross-industry M&A.Enterprises hope to break through industry barriers through cross-industry M&A,quickly gain competitive advantages in industries with good growth prospects,diversify business risks,realize diversified operations and drive the growth of business scale and profitability.However,some companies blindly pursue the short-term benefits of cross-industry M&A,and do not pay attention to the risk control at all stages of M&A,which ultimately leads to less than expected results of M&A,and even drags down the development of the original main business.This paper first summarizes the theoretical basis of M&A and domestic and foreign scholars’ research on cross-industry M&A.Based on the literature,this paper first summarizes the M&A motivations related to cross-industry M&A,such as M&A efficiency,diversification,gaining market power and gaining private interests.Then,this paper summarizes the research conclusions of cross-industry risk from the perspectives of strategy,operation,finance,etc.Through literature research,this paper realizes that the risk of M&A runs through all stages of M&A.Inspired by this,this paper divides M&A into pre-,mid-and late stages,and analyzes them separately in the risk analysis and risk control sections.In the analysis of motivation and risk,this paper selects the case of ST Rongtai’s cross-industry merger and acquisition of Senhua Yiteng.In the motivation analysis,this paper analyzes ST Rongtai’s cross-industry M&A motivations from four dimensions of ST Rongtai’s own advantages and disadvantages,as well as external opportunities and threats it faces.The use of mergers and acquisitions to obtain private interests is the main reason for ST Rongtai’s cross-industry mergers and acquisitions.In the risk analysis,this paper draws on the idea of M&A risk management theory,divides M&A into three stages: pre-,middle-and late-stage to carry out risk analysis respectively,in order to identify M&A risks as comprehensively as possible.Through analysis,this paper identifies three risks before mergers and acquisitions,namely,impure motives for mergers and acquisitions,the choice of target industry,and the defects of the target company;three risks in mergers and acquisitions are identified,namely high premium risk,stock issuance financing risk and performance.Commitment and compensation incentives to be improved risks;identified four risks after mergers and acquisitions,namely,lack of long-term incentives,lack of resource integration and coordination,goodwill impairment risk and differences in corporate culture.Finally,this paper puts forward risk control suggestions according to the risk analysis results of each stage.Before mergers and acquisitions,enterprises should fully understand the target industry and company,carefully choose the target of mergers and acquisitions suitable for their own development,and avoid using mergers and acquisitions to raise stock prices to obtain private interests;in mergers and acquisitions,pay attention to the impact of the agreement on the company’s interests,prudently accept high premiums,and strive to Reduce the initial measurement amount of goodwill,and use performance commitments to motivate the long-term development of subsidiaries;after the completion of mergers and acquisitions,focus on resource integration and synergy,reduce the risk of goodwill "storm thunder",and strive to reduce cultural differences to ensure that the company implements a long-term incentive system,so that The target of the acquired party is always consistent with the company’s and realizes the company’s long-term goals.This paper hopes to provide some reference and reference for cross-industry mergers and acquisitions of other traditional manufacturing industries.