Study On The High Premium M&A Of The Internet Enterprises Based On Synergistic Effect

Recently,with the increasing improvements of the network infrastructure and the rapid developments of the online penetration,Internet enterprises have been evolving with favorable macro-conditions,and the competition between enterprises has become more and more drastic with plenty of Internet companies raising competitive power of enterprises through acquisitions and dominating the markets.M&A premium is a common phenomenon in M&A activity,and yet M&A transaction prices of the Internet companies are often too high in exceeding the market expectations;thus we find that it is worthy of studying about the reasons behind the high premium,how to achieve this motivation and how about it will be in the mergers and acquisitions.In 2013,Baidu bid 1.85 billion dollars for 91 Wireless,which became the largest case in the Internet industry.After choosing this case,along the idea of “Internet business characteristics---motivation of the high premium acquisition---the real effect of the synergy after acquisition”,this paper adopts case analyzing method and literature review method to deeply analyze the nature of the high M&A premium in the Internet companies,which is based on synergistic effect theory,scale economy theory,pioneer advantage theory and life-cycle theory and combines with the changes in financial and non-financial indicators before and after mergers.In the study of the high M&A premium of the Internet companies,this paper firstly analyzes the characteristics of Internet enterprises,which is that the value of Internet products depend on the traffic and users' stickiness;the effect of the first advantage in the development of Internet companies is obvious;the core technology determines the competitiveness of the enterprises;the marginal cost of Internet products approaches zero,all of which determine the unique growth mode of the Internet,and show that the effect of synergies on the development of Internet companies is more obvious.Combining with the characteristics of the Internet business,this paper analyzes the motivation and reasons why Baidu pays high premium to bid91 Wireless,mainly about the time premium,expected synergies premium and control premium;meanwhile,the fierce competitions in mobile Internet competition and the importance of Baidu establishing ecosystem in the mobile side and attracting traffic all determine the urgency of this acquisition,whichfurther determines the acquisition of the time premium;the synergies in technology,business,profit mode and other aspects between Baidu and 91 Wireless are the main reason of this high M&A premium;however,the way of the full acquisition can promote the integration of both sides after the merger so that the synergies can exert more fully and effectively.Simultaneously analyzing the aspects of finance,management,operation and intangible assets,and combining the stock market response after Baidu merger and changes in business performance,this article evaluates the synergistic effect of the acquisition.After acquisition,Baidu and 91 Wireless have achieved some synergies in the aspects of financial,management and intangible assets.What's more,M&A event stimulates Baidu's floundering stock,and gives Baidu the right to control the traffic entrance of the mobile side,which brings Baidu plenty of traffic.Furthermore,mobile revenue gradually increases in the proportion of the total revenue,and a large number of traffic bring the enterprises more operating case flow;moreover,the two sides improve the competitiveness of enterprises.This paper provides a complete case presentation and analysis of the high premium M&A of the Internet companies from the perspective of synergies for the Internet companies in the growing process,the nature of high-premium mergers and acquisitions is the strategic development of enterprises and the existence of synergies between the two sides.High premium contributes to the completion of the mergers and acquisitions and the realization of synergies after the merger enhances the competitiveness of enterprises.After this study,some inspiration can be drawn about the choice of the M&A objects in Internet enterprises,the determination of the M&A premium,resources' integration after the M&A,etc.Hope it should have the instruction to the future relevant cases.