Financial Analysis Of Corporate Merger & Acquisition

M&A is the universal phenomenon, which exists in the modern economy. Fromthe micro-view, M&A is a way of the firm to pursue development; from the macro-view, M&A is an allocation way of the market resources. The function of allocatingresources of M&A ties in that resources will be re-allocated between the two firmswhen firm acquires another in order to pursue its development, and that resourceswill be reallocated at the firm level in the whole society when M&A is adopted bymany firm to pursue their development and has exerted its function fully. Thetheoretical and practical study on M&A is very necessary, for M&A plays animportant role in prompting firm to develop quickly and realizing resourcesallocation efficiently.Nowadays the scholars have carried out many studies on the problems inM&A, such as legal supervise-govern, accounting, share holders' rights andinterests, international M&A and medium institution (investment banking), Thepaper tries to study from the financial aspect.The financial problems in M&A mainly include: how to gather the moneyneeded by M&A, that is, "finance" problem; how to pay, how to evaluate theobject-firm's value in cash acquisition, how to calculate the exchange-stock ratioin exchange-stock acquisition, how to analyze and control the financial risk of post-M&A in LBO. The paper mainly studies the last three questions. The author hopes,through the study on these problems, it will benefit in bettering the theory of M&A,and guide the practice of M&A better.Clearing the motive of M&A is the pre-condition of studying other financialproblems in M&A. The choose of M&A payment way and evaluating the firm'svalue are connected with the M&A motive closely, therefore, the paper select"M&A motive" as the start-point of study.The first part analyzes the M&A motive mainly from the financial angle, andgeneralizes it into several aspects below: pursuing the financial co-ordination effect,acquiring the finance ability in capital market and acquiring the low-price asset.Besides, the paper has discussed the special motive of Chinese firm's M&A, such as,government motive instead of firm motive, Listed by buying "shell", creatingsubject matter to make money and pursue the arrangement's financial affairforms.The emphasis of cash acquisition's financial decision is to evaluate theacquisition price, and the object-firm's evaluation value is the base of theacquisition price. The second part discusses how to evaluate the object-firm'sevaluation value in cash acquisition. Firstly it discusses the application of cash flowdiscount model in evaluating the object-firm's value, and puts forward improvingmeasure according to the cash flow discount method its model's theoretical andoperational defect. Secondly it discusses the other two models in evaluating thefirm's value in M&A: re-evaluate every item model and market model. Finally itanalyzes the current condition of Chinese firm's vaslue-evaluation in M&A.Calculating exchange-stock ratio is the crux in exchange-stock M&A. The high or low of exchange-stock ratio directly influences the shares of the twoconsolidation parts' shareholder after consolidation. Which exchange-stock ratio ison earth most reasonable one? It's still a controversial question. The third partdiscusses the method of calculating the exchange-stock ratio, and analyzes whichmethod should be adopted in Chinese current situation when evaluating theexchange-stock ratio.LBO is to complete M&A through raising firm's financial level. Financial levelfunction is a "two-edge" sword in M&A: on the one hand it can raise shareholder'srights and interests of acquisition firm, on the other hand it may burden theacquisition firm with heavy debt. And after acquisition, firm will immediately facethe arrival of pay-debt climax. The pressure of big financial cost and cash paymentmay lead to the fall of revenue, return of every stock and stock price. How tocontrol...