The Study Of M&A Type Selection Based On Enterprise Life Cycle Theory

Mergers and acquisitions has been the research focus of economists and managementtheorists, and M&A has a special significance for the long-term development of an enterprise.Domestic and foreign scholars conducted on a lot of researches on the M&A performance andits reasons for the changes, and found that enterprise performance level differed when the typeof M&A varied, however, scholars have failed to explain the reason. Many domestic scholarstry to explain it by using the industry life cycle theory, but the results were not satisfactory.The fact begs the question: whether there are other factors that can explain the different typesof M&A leads to performance difference? Whether to put aside the industry factor or directlyapply corporate life cycle to study performances of the different M&A types?In this paper, the M&A events of154listed companies in2009was selected asthesample,we introduce the factors of corporate life cycle, and use the norms and empirical methods to study the factors that affecting the performance of a company’s mergers and acquisitions. Empirical research was the focus of this article, this paper firstly carried out the studydesign and the establishment of the M&A Performance Evaluation System followed by anM&A performance score model built up by factor analysis, and on the basis, calculatedperformance score of each sample of4years before and after the merger to evaluateperformances of different M&A types; finally, divided the sample according to the life cycleand tested performances of different M&A types in each life cycle stage. The results showedthat: in the growth stage of the business, the performance of the horizontal M&A is the best;in the mature stage, vertical and mixed M&A performances are better than horizontal M&A;in the recession phase, mixed M&A has optimal performance, largely confirming theeffectiveness of corporate life cycle on the interpretation of M&A type selection.Therefore, this paper proposes the following policy recommendations. From thegovernment’s point of view, it is necessary to further standardize China’s capital market,improve laws and regulations, reduce government intervention on mergers and acquisitions,lead mergers and acquisitions to correctly reflect the capital market orientation, and broadenthe financing channels for mergers and acquisitions. From a business perspective, theenterprises should consider the M&A strategy from the strategic development, choose theright type of M&A, and perfect plan ahead and post integration.