Valuation Risk And Its Management In M&A

Merger and acquisition have been strong and western capital market has been through five far-reaching merger and acquisition activities with large scale since 1990 s.As economic globalization strengthening and open up reform deepening,China's economy has been firmly connected with world economy.Chinese companies are increasingly to enhance competitiveness in the form of acquisition,creativity and sustainable development.In 2016,CSRC's approval to complete 262 cases of the merger,acquisition and reorganization of listed companies and its transaction amount reaches 821.126 billion yuan.Despite the active m&a capital market demand,market,but there are many obvious problems.For example,the high ratio of listed company profit and high stock price,so issuing shares as payment will lead that the asset is overvalued and performance commitment can't be achieved.From 2013 to 2015,the performance of the compensation agreements between listed companies and reconstructing parties reaches 120,211 and 249 respectively,involved 194,297 and 46.6 billion yuan.The rate for not completion is 0%,20%,14%.High estimate evaluation and inability of completing performance causes listed companies facing the risk of goodwill impairments and huge losses.In July 2015,the GEM listed companies,Xinning logistics Ltd in Jiangsu province(referred to as: Xinning logistics,stock code: 300013.SZ)issued shares to specific objects through non-public way and acquires 100% equity of Guangzhou E-trans ltd with 720 billion yuan.Meanwhile,the two sides signed performance agreements.Xinning Logistic confirmed the goodwill of 491 million after m&a events.In April of 2016,Xinning logistics was disclosed for not fulfilling the performance.After the test for the goodwill value,it come out with 102 million yuan of goodwill reduction,the loss of net profit of 2015 and annual loss of the company.This thesis analyzes Xinning's acquisition disclosing the price that Xinning paid for it,potential risk that might existed during the acquisition and the stipulation of items to manage the risk efficiently.Then providing the suggestions to similar acquisition of listed companies.