Case Analysis On Mergers And Acquisitions Of Baosteel And WISCO

The iron and steel industry is an important part of national economy in our country,it is the lifeblood of China’s manufacturing industry.As the vanguard of supply side reform,its significance is not limited to the industry itself,but about the direction and confidence of the entire manufacturing supply side reform.In china,steel production capacity is serious excess,industrial concentration is low,Disorderly competition is intense.Under this environment,mergers and acquisitions(M&A)has become an important way for Iron and steel enterprises to optimize resource allocation、achieve a high level of professional development and enhance comprehensive competitiveness.Primarily,this paper starts with the theory,briefly introduces the definition of M&A,and the essence and key factors of it,describes the forms of M&A by two dividing methods:industry and payment method.In the next place,this paper sketches the general situation of M&A of China’s iron and steel industry,focuses on the analysis of the problems existed in the M&A of China’s iron and steel industry in the previous round.Analysis shows that M&A of simple capacity superposition,which only pay attention to the scale expansion,will easily cause the problem of merger with incompatibility.Then,this paper analyzes the cause of the M&A of Baosteel and WISCO from two sides:internal motivation and external motivation.Internal motivation is mainly the poor operating performance of WISCO,external motivation is mainly China’s excess capacity of steel and low industry concentration.Secondly,the paper analyzes the rationality of the price of stock exchange in merger transaction by means of comparable firms approach、comparable transactions method and the comparison of historical transaction prices,and concludes that the convertible trading price is reasonable.After that,this paper makes a comparative analysis of the financial situation before and after the M&A of Baosteel.Analysis shows that solvency is basically stable with not too big fluctuation,profitability level declines but remains above the industry average.Finally,the paper analyzes the problems faced by the M&A and the impact of it on the current situation.the research suggests that the M&A of Baosteel and WISCO would play an exemplary role、release potential synergies、eliminate disorderly competition、strengthen bargaining capacity、promote the industry to remove excess capacity and enhance the international influence of China’s steel enterprises.But the problems of conflict between plan and market、merger with incompatibility and the absence of owner are existed in the M&A of Baosteel and WISCO.