Research On The Financial Risk Of M&A In Automobile Industry

At present, compared with the matured automobile markets in America and Japan, the degree of concentration is very low in our automobile industry, thus, adjusting the industry structure by Merger& Acquisition (M& A) is a trend under this situation. However, there will be high risks during M&A, of which the primary risk is financial risk. To defend and control the financial risk is quite difficult. Therefore, to study the financial risk of M & A associated the characteristics of the automobile industry, is of positive theoretic and realistic significance.We mainly used qualitative and quantitative methods to analyze. One side, using the qualitative method to analyze the types of the financial risk and its cause in M&A, then, we found out the problems in financial risk defending and controlling in our automobile industry, besides, we advanced some measures to deal with them. On the other hand, using the quantitative method as blurred and integrated analysis method to analyze the financial risk of M&A, in order to elicit some estimation and results provided with persuasion.In this paper, firstly, the gentle situations of automobile industry in China were introduced. Secondly, the motivation and primary types of M & A in automobile industry were analyzed in detail. Thirdly, financial risk was defined and the types, and causes of which were discussed, here, the financial risk of M&A was divided into four broad types: the risk of evaluating enterprise's value, the risk of financing, the risk of sinking and the risk of finance integration. Fourthly, based on the characteristics of Chinese automobile industry, we established a evaluation system of financial risk of M&A. Then, we used integrated fuzzy evaluation model, which combines fuzzy set theory and AHP to analyze the financial risk quantitatively. We applied the model to the M&A case of Dongfeng and Nissan automobile company, which happened in domestic capital market. Finally, to the problems, which happened in the process of defending and controlling financial risk of M & A, we found out the essence of defending and controlling, then, we put forward some constructive advice for managers to improve the ability of defending and controlling the financial risk in M&A.Through theory research and empirical study, our results show that, on average, the internal and external factors will bring financial risk to automobile corporations in M&A. Thus, to better defend and control financial risk bitterly, we suggest that the corporations should better employ professional institution to investigate the target company, and choose right value evaluate method, and integrate the finance items as soon as possible, especially, they should emphasize the value evaluate risk and finance integrate risk.The innovations of this paper lie in:1. Analyzing financial risk deeply combining a specific industry.2.On the bases of the automobile industry's characteristic, establishing a evaluation system to characterize the financial risk of M& A, and quantitatively analyzing and evaluating financial risk with math model.3. Through the quality and quantity research, finding out some primary problems in defending and controlling financial risk of M&A, and putting forward some constructive advice for our automobile corporations.