Case Study On The Application Of VAM In Merger And Reorganization Of Century Huatong

In recent years,the rise of production cost and labor cost,the shortage of domestic and foreign market demand,and the fierce industry competition have led to the difficulties in the survival and development of China’s traditional manufacturing industry.The emergence of the fifth wave of mergers and acquisitions,mainly mixed mergers and acquisitions,and the strong support of national policies,provide a new way of thinking for China’s traditional manufacturing enterprises to solve the current development problems.Some traditional manufacturing enterprises choose to acquire new technology enterprises to achieve their own business transformation.However,due to the fact that enterprises in emerging technology industries are usually start-ups with great development potential and high growth,they are often faced with relatively large operational risks,which makes the acquirers have to consider the existing merger and acquisition risks.VAM can fully reduce the above risks and provide an effective solution for the acquirer to improve the success rate of M&A.However,throughout China’s capital market,many domestic enterprises,such as Jinli Technology,Yushun Electronics,and Zhongying Internet,have fallen into the dilemma of VAM in the process of M&A,resulting in a significant decline in the company’s performance rather than a synergistic effect after M & A.The failure of the VAM in the application of M&A happens frequently.The final reason is that the management of the enterprise fails to formulate and implement the vindication agreement well,and blindly signing the vindication agreement that is inconsistent with the expectation just to improve the short-term performance will increase the probability of the vindication failure.If the enterprise can seriously formulate the VAM and strictly implement its content,it can improve the success rate of M&A,accelerate the realization of the strategic objectives of the enterprise,and enhance the value of the enterprise.Therefore,through the case analysis of Century Huatong’s successful use of VAM in M&A and reorganization,it can provide experience for domestic enterprises to use M&A of VAM,which has certain practical significance.This paper aims at the case of Century Huatong’s merger and acquisition by using the agreement on gambling,it mainly discusses the following five aspects: the first part is the introduction,which introduces the research background and significance of this paper,and carries out literature review based on domestic and foreign research literature,including the application of merger and acquisition and reorganization,the implementation motivation of bet agreement and the risk of bet agreement.Then it describes the research ideas and methods of this paper,and constructs the framework of the whole paper.The second part is a theoretical overview,which summarizes the concept of merger and reorganization,the general situation of bet agreement and the implementation motivation,and gives a brief analysis and description of the application process of VAM in merger and reorganization.The third part is the case introduction of Century Huatong’s use of VAM in the process of acquire and merger DianDian Interactive.Firstly,it analyzes the current situation of different industries of the two companies in the merger.Then,it introduces the two companies,and analyzes the strategic motivation of the decision to use the VAM in the M&A,the content and completion of VAM.The fourth part is a case study,which is the focus of this paper.Based on the specific case of Century Huatong,this paper analyzes the process of setting the target and designing the content of the VAM,describes the risk control measures taken by the company to reduce the risk of VAM,and finally evaluates the implementation effect of Century Huatong’s use of VAM in the merger and reorganization.Based on the analysis of the fourth part,the fifth part summarizes the successful experience of the merger and acquisition of Century Huatong,and puts forward the problems that Century Huatong should still pay attention to after the success of VAM.This paper takes a single case as the analysis goal,and uses the method of combining theoretical analysis with case study to draw the following conclusions:(1)Reasonable valuation is the premise of the success of M&A and reorganization of the VAM;(2)Perfect and Complete terms are the key to the success of M&A and reorganization of VAM;(3)Sound risk control mechanism is the guarantee of the success of M & A and reorganization of VAM.If the enterprise can establish a set of perfect application system and perfect risk control mechanism when using the VAM for M & A,the success rate of the VAM will be improved.At the same time,according to the case of century Huatong’s VAM,two issues should be paid attention to:(1)The three-year VAM set up in the VAM is relatively short,so it is necessary to prevent the short-sightedness of performance in the VAM period;(2)The company management after the completion of the VAM should be strengthened,especially in talent management.Through this case,the author hopes to deepen the understanding of the VAM of Chinese enterprises,guide the company to make the right choice for the use of VAM and provide some reference value for their successful use of the VAM for M&A.