Case Study On The Failure Of CKI’s Merger And Acquisition Of Power Assets With Exchanges

Affected by global financial crisis,the global economic development situation has been beyond optimism in recent years;Europe and Australia,etc.,in particular,are experiencing a difficult and arduous process of economic recovery.The economic development in mainland and Hong Kong has also slowed and when provided with potential market expansion opportunities,the enterprises in Hong Kong are confronted with the formidable challenge of shrinking market;therefore,they have to adjust the original development strategies.Affected by external environment,Li Ka-shing’s business empire has adjusted the development strategies and planed to accomplish the strategic task of moving the registration place outside through the stock-for-stock merger between the member enterprises.After a series of member enterprises have moved the registration place outside,the last step to accomplish the task is the stock-for-stock merger between the member enterprise(CKI)and Power Assets.The paper carries out a case study of CKI’s stock-for-stock merger to Power Assets and summarizes the reasons for the failure by means of case analysis method,documentary analysis method,summarizing method,qualitative analysis and quantitative analysis,aiming to provide a reference for the shareholders of the target enterprise and the merging enterprise in the stock-for-stock merger as well as the enterprises planning for stock-for-stock merger in mainland China.Firstly,the research background and significance are clarified;the domestic and foreign literatures and the theories involved are summarized.Secondly,a detailed introduction is provided about the basic information of the parties involved and the whole process of stock-for-stock merger.Thirdly,an in-depth analysis is carried out on the merger motives,reasons for merger failure and influences of merger failure;the merger motives are elaborated from two aspects,i.e.overall external environment and business empire’s strategic adjustment;The reasons for failure are intensively analyzed from the perspective of stock-for-stock proportion and communication,while the influences from failure are elaborated mainly through the effect on future development and fluctuation of stock price.Finally,the enlightenment of the case study to the shareholders of the target enterprise and the merging enterprise in the stock-for-stock merger as well as the enterprises planning for stock-for-stock merger in mainland China is summarized.Through the research herein,the conclusions are summarized: The fundamental reason for the failure of CKI-Power Assets merger lies in the fact that the minority shareholders of the target enterprise(Power Assets)have overestimated the value and the merging party(CKI)fails to conduct effective communication with the minority shareholders of Power Assets.In stock-for-stock merger,the merging enterprise shall not only confirm the appropriate exchange ratio and merger time,but also keep good communication with the shareholders of the target enterprise;the shareholders of the target enterprise shall not only obtain an accurate understanding of the characteristics of stock-for-stock merger and the alteration of identity,but also adopt proper methods to confirm the exchange ratio.