Research Of Managing “Zombie Enterprises” In Over Capacity Industries By Mergers And Acquisitions

Since 2015,China's economy has entered into a new stage,with many problems appearing,including,continuous declination of economic growth,unreasonable economic structure and low business profit ratio.Under the background,the concept of supply-side structural reform,as a current important strategy,is proposed by the central government.At present,over capacity is one of the three difficulties confronted by China's economy.As for how to solve this problem,General Secretary Xi Jinping makes a specific explanation.He points out that,since over capacity will cause resources waste,making economic growth confront huger downward pressure,therefore,we should eliminate zombie enterprises and promote industrial reorganization.Nowadays,the problem of “zombie enterprises” is increasingly striking,which has become a focused issue for government and media.The damage on economy caused by zombie enterprises is more and more serious.A large number of zombie enterprises in China exist in industries of over capacity,with low operation efficiency.They occupy plenty of social resources including land,raw materials and labor forces and need constant financial assistance from bank and government,which will increase financial pressure for local government and disturb financial market order.Therefore,clearing up zombie enterprises is a key work for China to solve the problem of over capacity.After 2000,the researches about “zombie enterprises” in international academic circle spring up,while in China,it is quite scarce.Through comprehensive research of relevant literature about “zombie enterprises” at home and abroad,this paper proposes an identification method confirming to China's reality and market system.This paper first quantizes the function of assistance to zombie enterprises by government and bank through financial index;then,excludes the influence of accidental factors on enterprise by adding time factor;finally,based on the nature of enterprise itself,judges whether over capacity,low efficiency and consumption of social precious resources in enterprises are key factors to influence the great objective of adjustment of industrial structure.Combining with the case research of Zhangze Power Co.,Ltd.merged by Datong Coal Mine Group,this paper makes detailed introduction aimed at both parties and analyzes the feature of zombie in merged enterprise—Zhangze Power Co.,Ltd.through above mentioned identification method.After making brief analysis on the process of merger and acquisition(abbreviated as M&A),taking the year of M&A as central point,the paper selects financial data respectively six years before and after the year as analysis basis.It not only analyzes the performance before and after M&A by applying traditional financial ratio,but also pointedly analyzes government subsidy and bank loan,with the hope to provide more research meaning.Through research,it is found out that M&A is one of important one-off measures to solve zombie enterprises problems.However,due to the particularity of the object of merging,we should notice the following points: as for acquirers,they should innovate ways of M&A and select more upstream and downstream enterprises in vertical chains when choosing merging target;as for zombie enterprises,they should improve operating efficiency after M&A and pay attention to integration in late period of M&A,preventing enterprise from being caught into zombie once again;finally,the paper suggests that,on the basis of respecting market rules,government should promote M&A of zombie enterprises,but can't just adopt the method of “arbitrarily arrangement” and instead,actively conduct cross-regional M&A.