M&A Motivation And Performance Of Media Taking Over Little Swan Company

Merger and Acquisition has become an important way to expand business scale and enhance their competitiveness. China’s enterprises merger and acquisition activities increasingly frequent since2001, continued growth in the number of M&A events and transactions amount. There are2771cases just in2010, the chain increased by13.80%; the transaction amount is＄1772.1billion, increase of35.87%. But whether it can produce significant performance increase corporate value, it is not defined. As one of the top10merger cases in2008, the M&A between Midea and Little Swan has been concluded. But how it performances, whether it could provide lessons for future appliance industry mergers and acquisitions, and even the country’s M&A, we need to go into details.The article first analyzes the theoretical and practical study of the motivation and performance for current mergers and acquisitions.The action theory includes synergistic effect theory, market forces theory, transaction cost theory, technology, decision theory, and so on. There is no unified conclusion in academia for mergers and acquisitions whether it can improve the performance of the M&A parties. The case for analysis of the theoretical is based on this.Secondly, the article takes the Little Swan, and Midea Electric as a case study, combined with the practice to study the impact of the performance for Midea. Based on the introduction of merger-related background, this article analysis the motivation. Today’s white goods industry is highly competitive, industry consolidation intensifies, oligopoly basically formed. Based on its M&A action, the motivations are:operating synergies, financial synergies, technical decision, enterprise development needs and to expand market forces.Thirdly, the article analyzes the performance of the M&A financial and non-financial performance. At first, it builds a financial performance evaluation system based on comprehensive, real objectivity, comparability, availability principle, including the solvency aspects of operating capacity, profitability, growth capacity and business development. The solvency select the current ratio, quick ratio and cash ratio of three indicators to measure; operational ability to select the accounts receivable turnover ratio four indicators to measure the total asset turnover, inventory turnover and liquidity asset turnover; profitability select the earnings per share, the four indicators to measure the rate of return on net assets, sales, profit margin and gross margin; growth ability to select the net asset growth, the growth rate of total assets, net profit growth and revenue growth of4indicators; business development selection of overall business, washing machine business, the main income of the refrigerator business, costs, gross margin for comparative analysis.Thirdly, after the evaluation of the financial performance of the M&A, it also focus on non-financial performance evaluation. The main non-financial factors are: synergies, technical level, market forces, management integration. It’s divided into four parts:First, the synergies appears, a downward trend in the proportion of operating income in the two years after the merger. Second, the technology level improves, after the merger, the company made great breakthrough increase technology investment and cooperation with the relevant technical level. Then, enhanced market power after the merger is completed, the Midea utilities in the washing machine market share rose sharply improve the overall ranking of the industry. At last, the risk management integration, the conflict events after the merger, integration needs to be improved. Overall, the mergers and acquisitions in the M&A implementation when a certain negative impact on Midea, but with the subsequent completion of the integration, the M&A performance upgrades.Finally, several suggestions and countermeasures was made based on the previous performance evaluation results. One is it should not only be limited to the cash payment, but flexibility to use a variety of payment. The second is well prepared, make reasonable assurance as to the payment of the price, to avoid the risk of acquisition premium. The third is strengthen the post-merger integration, including cultural integration, human integration of resources and organizational integration.