Cross-border M&A Performance Valuation Model And Empirical Research Of Chinese Enterprises

In recent years, the cross-border M&A activities of China’s enterprises are increasing frequently, and it has become the most important way for enterprises to go abroad. However, the high risk makes it uncertain to create value. Why is that some M&A could enhance competitiveness and bring new value to the companies while others couldn’t? What are the key factors that influence the performance of cross-border M&A? How to better evaluate the M&A performance? What’s the performance of our Chinese enterprises’cross-border M&A activities and how to improve? These questions are all what this paper is about to study.In this paper, Considering from the endogenous source of value creation, we put forward3key factors:Business Relevance, Culture Fitness and Ability of Integration. We first analyze the influencing mechanism of these three factors on the performance of cross-border M&A qualitatively, then the vector is used to reflect the force between M&A companies, thus a M&A Value Effect Model of Vector Analysis is built to reflect the effect of cross-border M&A on the enterprise value under an unified framework. This model stands by the following arguments: Business relevance decides the maximum gain M&A may achieve; then Culture Fitness will narrow the initial yield that Business Relevance decides, in the end, the Ability of Integration decides the final status. Non-relevant M&A can hardly influence the enterprise value, but related M&A may increase or damage enterprise value. So this model can explain the "Synergy Trap" to some extent. Next, Analytic Hierarchy Process (AHP) method is used to further decompose the3factors, thus a prior evaluation model is built to evaluate the performance of cross-border M&A, and accounting indexes are used for supplementary valuation and verification after M&A. Thereby, we overcome the hysteresis defects of the current accounting index evaluation method to some extent, enrich the cross-border M&A performance evaluation method, and provide guidance for enterprises to carry out advanced evaluation.As to the empirical research, this paper integrated application of the accounting method and case study method. First we use the general Accounting Index Evaluation Method to study40cross-border M&A undertaken by listed companies between2000and2010. Ten financial indicators were chosen and integrated into a comprehensive performance evaluation index by the Factor Analysis method, thus we get the4yeas’comprehensive score. The analysis was also sorted by the year, industry and investment target location. Next, we use the Performance Evaluation Model built in this paper to study the case of SAIC M&A SANGYONG and preliminary verify the applicability of the model.In the end of this paper, some strategy suggestions are put forward from the aspects of cross-border M&A target selection and integration in order to provide decision-making reference and practice guidance for enterprises’further cross-border M&A activities.