Research On Financial Performance Of Mergers And Acquisitions Of Iron And Steel Enterprises Under Supply-Side Structural Reform

The steel industry is one of the important pillars of China’s economic development,after more than 40 years of development after reform and opening up,both the variety of steel products and the number of steel products have increased significantly.However,with the continuous development,problems such as overcapacity,high costs and low industry concentration have gradually emerged,and the operating performance of steel companies has generally suffered losses,and the development of the entire industry has been seriously affected.Therefore,in 2015,the state put forward the reform task of "three to one reduction and one supplement" in the steel industry,and realized the optimization of resource allocation of steel enterprises through policy guidance to solve problems such as overcapacity and low industry concentration.In this context,steel companies actively achieve the goals proposed by supply-side reform through mergers and acquisitions,and how to take the road of mergers and acquisitions of enterprises in China’s steel industry is very important.This article selects the incident of CITIC Special Steel’s acquisition of Xingcheng Special Steel as an example.Firstly,the relevant concepts of M&A,the motives of M&A and the relevant theories of financial performance evaluation are stated,and the mechanism of M&A on financial performance is analyzed,mainly including affecting the capital market,improving financial indicators,expanding asset scale and increasing enterprise value,and M&A has an impact on financial performance through these aspects.After that,this paper sorts out the current situation of M&A in the steel industry,and summarizes the characteristics of M&A in the current steel industry from the three stages of M&A.Secondly,this paper briefly introduces the events of CITIC Special Steel’s acquisition of Xingcheng Special Steel from three aspects: company situation,M&A motivation and M&A plan,and analyzes the changes in financial performance before and after the M&A,mainly including three aspects: first,it analyzes the changes in profitability,solvency,operating ability and growth ability of enterprises before and after the M&A,and makes a horizontal comparison based on the industry average;Second,the introduction of economic added value,analyze the changes of enterprise EVA value before and after M&A,and compare the changes of enterprise value before and after M&A.Third,analysis of short-term market reactions and long-term market reactions to M&A events.Through the analysis of financial performance,it is concluded that the acquisition of CITIC Special Steel has generally brought about the improvement of financial performance and achieved positive effects,but at the same time,there are still some deficiencies in terms of operating capacity and capital structure.Finally,based on the effects and shortcomings of this M&A,this paper puts forward the following suggestions for steel enterprises to improve their financial performance in M&A from three aspects: the preparation stage,implementation stage and integration stage: first,to determine strategic objectives and reasonably select M&A targets before M&A;Second,it is necessary to choose payment methods and expand financing channels according to the situation of enterprises;Third,after the merger,we should pay attention to resource integration and financial integration.To sum up,this paper draws the following conclusions: first,on the basis of analyzing the current situation of mergers and acquisitions of steel enterprises,this paper summarizes the characteristics of current mergers and acquisitions from the three stages of the merger and acquisition process;Second,CITIC Special Steel’s financial performance after the merger was good,and synergies were achieved;Third,CITIC Special Steel’s acquisition of Xingcheng Special Steel has generally produced positive results,but there are still shortcomings;Fourth,it puts forward policy suggestions to improve the financial performance of mergers and acquisitions of steel enterprises,which provides certain reference value for mergers and acquisitions of other enterprises in the same industry.