Research On The Effect Of Absorption Merger To The Enterprise Performance

Along with the rapid development of economy, environmental problems becomeincreasingly highlighted. The occurrence of fog and the serious influence to the quality ofpeople’s lives make people realize the importance of protecting the environment. In order tostrengthen environmental protection, people begin to look to serious polluting energy industry.With China’s sustainable development strategy and environmental protection policy, theenergy industry is in a difficult situation. In response to market competition and the nationalpolicy, the majority of enterprises choose the way of business combination to achieveresources integration, cost reducing, and market share improving. Business combinationaccording to the legal form can be divided into three ways: consolidation merger, absorptionmerger, and holdings merger. The absorption merger as a capital operation pattern graduallyconsidered by international is one of the most common way of strategic merger. At the sametime, the absorption merger is also welcomed by domestic enterprises. The advantage ofsymbiosis and perfect information symmetry from absorption merger can’t be reachedthrough other ways. Whether absorption merger can help enterprises to improve performancehas attracted people’s concern.This paper takes the case of Henan Shenhuo Power and Henan Shenhuo Aluminummerger. The2010-2013four-year performance of Henan Shenhuo Power before and aftermerger case is analysis through the method of comparative analysis and factor analysis, andthe conclusion is: Shenhuo Power enterprise performance has not been improved in themerge year, its performance get minor upgrade in the second year, its financial indicators hasincreased and the industry ranking also improved in the third year. Absorption merger canimprove both business performance and the whole enterprise. Through the case analysis threeimplications are obtained: Firstly, the merger can help companies achieve symbiotic effect.The companies involved in the merger become a common legal entity, therefor, resources ofboth sides could be shared together. Secondly, absorption merger help companies reduce theintegration burden of staff and organization after the merger. The companies involved in themerger are subject to centralized control of the merging parties and completely symmetrical to each which helps to facilitate business management. Thirdly, impact of the merger on theabsorption firm performance should be evaluated from the perspective of a long-term. Since ittakes time for the company to "digest" to "absorb" all the assets from the merged party, theevaluation of merger impact on the enterprise performance should consider a continuousperiod of performance, not only the merger year.In this paper, it is concluded that absorption merger can help shenhuo Power raiseenterprise performance. But because of the knowledge limitation, this paper only evaluatesfrom the perspective of financial indicators, which might affect the comprehensiveness ofanalysis. This article is expected to provide reference to peer enterprises in the absorptionmerger.