Research On Chinese Private Enterprise Financial Risk Of Cross-Border Mergers And Acquisitions

With the rapid development of economic globalization, Chinese private enterprises facedural competition from both foreign enterprises and domestic industries. In order to seekbetter development space and international resources, these enterprises select cross-bordermergers and acquisitions investment. Cross-border mergers and acquisitions is a shortcut forthese enterprises to accumulate capital rapidly, obtain resources quickly, as well as expand themarket fast. Affected by the financial crisis, many overseas stock market has shrunkdramatically, many asset prices decline substantially.To ride out this storm, some companiesselect the "fire sale" assets of the company or its controlling interest, which provide rarechance for Chinese private enterprises who have strong economic strength to do overseasinvestment and merge. But the risks and obstacles encountered in the process ofinternationalization of the private enterprises is very large. They have to face informationhazard, financial risk, political and legal risks, and post-merger integration risk, as well asmany other challenges. According to statistics, the failure rate of cross-border mergers andacquisitions, is extremely high, that is over50%on average. A large number of failed cases ofcross-border mergers and acquisitions indicates that financial risks is one of the mostimportant factors that affect the success or not of cross-border mergers and acquisitions. Thisarticle attempts to analysis the sources of financial risks of cross-border mergers andacquisitions of private enterprises, and proposed the corresponding preventive measures,which can provide theoretical guidance for the cross-border mergers and acquisitions ofprivate enterprises in China.This article use domestic and foreign scholars on cross-border mergers and acquisitionsof financial risks as the basic orientation, and pointed out the limitations of some relativestudy, which provide a theoretical basis for those private enterprises for the pricing risk,financing payment risk and financial integration risk after their cross-border merge andacquisitions. In order to test the financial risk in the mergers and acquisitions, We do somecomparisons and evaluations of domestic and foreign early warning research on financial risk.on the basis of the theory of financial risk and financial early warning research, we defines theconcept of financial risk of cross-border mergers and acquisitions of national privateenterprises, we carried out a detailed analysis of pricing risk, financing payment risks and post-merger financial integration risk of those Chinese private enterprises after theircross-border mergers and acquisitions. Through the establishment of financial risk earlywarning model to inspect financial risk in mergers and acquisitions, and meanwhile use thismodel to analyze the financial risk of Geely after its acquisition of Volvo. In the end, wepropose specific financial risk prevention and control measures. We hope this article can playlittle role in preventing and controlling the financial risk of cross-border mergers andacquisitions of private enterprises in China.