Research On Diversification Merger And Acquisition Performance Of Zhongnan Heavy Industries Based On The Strategic Shift View

Diversification of mergers and acquisitions is one of the important measures of decentralizing enterprise risk,but also isthe path of the implementation of the strategic transformation.But the free cash flow theory suggests that when the enterprise has accumulated too much free cash flow,the management will tend to inefficient cross-industry mergers and acquisitions.Zhongnan Heavy Industry Co.,Ltd.(hereinafter referred to as “Zhongnan Heavy Indstry”)is the domestic listed company of operating mental pipes and pressure vessel.In 2014,the company acquired the Datang brilliant media Co.,Ltd to implement diversified strategic transformation.Then the company joined other companies' stocks and signed strategic agreement to improve the industrial chain continually.The study found that the company's total free cash flow reached 604,350,886.45 yuan by the end of 31 December 2014.This paper focus on the change of M & A Performance by using free cash flow based on the strategic transformation of diversified mergers and acquisitions of Zhongnan Heavy Industry.Through collecting and collating the relevant background information of the enterprise,and combined with the SWOT analysis method and the calculated free cash flow,the paper analyzes the motivation of strategic transformation of Zhong Nan Heavy Industry.The performance of the company before and after M & A is calculated by using the event research method and the comprehensive evaluation score and the economic value added.The event research method indicates that the short-term performance after the acquisition is better,and investors have stronger expectations for the company's future improvement of performance.Based on the disclosure statements from 2012 to 2016,the paper evaluates the company's long-term performance.From the standpoint of the six shareholders,including shareholders,creditors,customers,employees,government,suppliers,and by using the comprehensive evaluation of the scoring method,and the results show that the company's comprehensive score has a significant downward trend,and is 0.4933 points,0.4676 points,0.2789 points respectively from the end of June 2012 to the end of June 2014.So it indicates that the behavior of M & A of the enterprise has brought a more positive effect to its performance.But corporate performance fell sharply in 2016.The EVA results of the company shows that EVA is-13,976,960.89 yuan,-8,206,313.37 yuan,-8,169,475.91 yuan and 23,710,193.45 yuan respectively at the end of 2012 to the end of 2015.According to the 2016 semi-annual report,the EVA is-131,924,983.33 yuan.The research conclusion of EVA and comprehensive evaluation is same,the possible explanation is that due to the early stages of transition and industrial integration stage,the new cultural industry involved in the industry did not bring benefits to the Central and South Industries.The study of this paper tests the theory of free cash flow,and hopes to draw inspiration to diversified M & A decisions of other similar enterprises.From the perspective of protecting stakeholder,the paper provides the analysis ideas and methods for the company's performance change before and after M & A and value creation.