Financial Risk Research On Performance Commitment In M&A Of Listed Companies

As an emerging securities market,the main function of the GEM is to provide direct financing for high-tech and high-growth companies.Since the opening of the board in 2009,744 companies have been listed on the GEM.For most GEM listed companies with high growth attributes,M&A is an important means to achieve industrial upgrading and scale expansion in a short period of time.M&A activities of listed companies on the GEM are also increasing.In the mergers and acquisitions of listed companies,the parties involved in the merger have serious information asymmetry.The “M&A impulse” of the listed company management and the motivation of maximizing the owner’s own interests of the M&A target may lead to the overestimation of the value of the M&A target in the M&A.The interests of listed companies and investors are damaged.In order to solve the doubts about the future earnings forecasts made by the regulators and small and medium-sized shareholders on the owners of the M&A targets and the valuation of the assets of the M&A targets obtained by the income method,the merger and reorganization of listed companies in China has introduced the equity in the international solid wood.Valuation Adjustment Mechanism(VAM,a domestic translation for betting agreement)widely used in investment(PE).In addition to signing the equity transfer contract,the listed company will also sign a performance commitment compensation agreement,and the owner or other relevant parties of the purchase target will make a commitment to the future performance of the merger target,if the future performance does not meet the promised goal.The promised party will compensate the merger and acquisition party,which can reduce the risk of mergers and acquisitions to a certain extent and improve the fairness of the value of the acquired assets.However,since 2014,many listed companies have experienced unfulfilled performance commitments,promised maturity changes,delayed compensation or change commitments,refusal to perform or inability to perform,and many of them have developed into judicial disputes.Seriously harm the interests of listed companies and their investors.The research content of this paper is the application of the performance commitment agreement in the merger and acquisition of listed companies and its main financial risks.On the premise of systematically summarizing the research results in related fields,this paper analyzes the main roles and risks of performance commitment agreements in M&A based on information asymmetry theory,principal-agent theory and option theory.Then,combined with the background of China’s system,the application status of the agreement in the M&A practice of China’s GEM listed companies is summarized.Taking Liantronics,which has been listed in the GEM listed companies,as an example,analyzes the financial risks caused by the use of the performance commitment agreement and the performance commitment agreement in the multiple mergers and acquisitions of Liantronics to confirm the results of theoretical analysis.Through research,it is found that although the performance commitment agreement in M&A has the effect of alleviating information asymmetry,controlling the risk of merger and acquisition,and restraining and stimulating the management of the acquired party,it also faces the failure of performance commitment,the impairment of goodwill and the difficulty of performance compensation.Risks in the financial fraud of the promised party.On this basis,this paper combines case analysis and proposes measures and suggestions for prevention and control related risks from the aspects of strengthening due diligence,introducing non-financial indicators,rationally applying payment methods,and emphasizing post-merger integration.Finally,from the perspective of regulators,this paper puts forward policy recommendations from the aspects of information disclosure system construction and severe punishment of dishonesty.The expected contribution of this paper has two main points.First,most of the researches have focused on the interests transfer and the protection of minority shareholders’ rights,focusing on the consequences and impacts of related party mergers and acquisitions such as backdoor listing and major shareholder commitments in the overall listing.Based on the perspective of listed companies,this paper analyzes the role and risks of performance commitment agreements in listed companies’ mergers and acquisitions,and enriches relevant research.Second,in the current research on the performance commitment agreement of listed companies in mergers and acquisitions,most of them use a merger and acquisition event of a listed company as a case.In this paper,the multiple mergers and acquisitions of a listed company are used as a case to avoid the interference of sporadic factors in a single merger.Through the analysis of a company’s multiple mergers and acquisitions,the conclusions drawn are relatively more universal.