Financial Performance Evaluation Of M&A

Merger and acquisition is a kind of business along with high risk and high return. With economic development, many enterprises want to attain their certain goals by M&A. Some of them want to expand business scale, reduce transaction costs, and breakthrough entry barriers to a new industry and so on. However, not all mergers and acquisitions are efficient. So it’s necessary to analysis the performance of M & A.In this paper, traditional finance index analysis method will be used to analysis a case of M&A. These indexes are classified into 7 categories. They are condition of assets, capital structure, profitability, operating capacity, debt-paying ability, cash flow and development capability. By comparing these indexes before and after M & A, we can draw some conclusions.After M&A, Hebei Iron & Steel Company Limited’s current assets suddenly increase. But six months later, they return to pre-merger level. It shows that the company has the ability to integrate assets. The company’s non-current assets, especially fixed assets increased a lot. However, its capital structure was little affected. M&A did not significantly improve the company’s profitability. But its operations capability has improved slightly and the corporation’s short-term and long-term debt-paying ability has declined a little. After M&A. the company improved production and sales and expanded investment scale of fixed assets. Therefore, the amount of cash outflow from operating activities and investing activities have increased. Cash flow from financing activities was still relatively balanced. After M&A, the company’s development capacity has been improved a lot, not only in business scale, but also in the company’s profit level.From the evaluation of financial performance, we can come to a conclusion that the M&A is successful. Before and after the M&A, the company’s financial policies and financial risks keep stability. Meanwhile, the company improved operational capabilities and development capability through the M&A. The contribution of this paper is that it gives an evaluation of a recent M & A cases of an important state-owned enterprises. The goal of this paper is observing the efficiency and effectiveness of state-owned enterprises mergers and acquisitions during the transition period. We hope it do some help for the country’s industrial reforms.