Motivation And Performance Effect Of Midea's Stock Exchange Merger With Little Swan

Since the reform and opening up,China's home appliance market has experienced a rapid development,the concentration degree of home appliance market has been gradually strengthened,the industry integration has been intensified,and the competition is increasingly fierce.In the competitive environment of survival of the fittest,home appliance enterprises must improve their influence if they want to occupy one of the leading enterprises in the home appliance market for a long time.Mergers and acquisitions(M&A)is an important way to achieve scale expansion and market share expansion.Therefore,M&A has become a necessary way for home appliance enterprises to grow.Stock exchange merger is a creative method that the merger party can use to exchange equity with the target company with its newly issued shares which is usually at an appropriate proportion and price agreed by both parties,so that the merger party could absorb the target company.This kind of way has become a mature M&A method and has been widely used in market mergers and acquisitions.At the end of the third quarter of 2018,Midea Group's plan to issue A shares to exchange shares with Little Swan to absorb it and cancel the Little Swan corporate status caused widespread market concern.It is widely known that Midea has became the controlling shareholder of Little Swan as early as in 2008,but then took a lot of effort to acquire Little Swan further by exchanging shares a decade later.What is the motivation for the further merger by giving up the precious shell resources of Little Swan and how is the subsequent performance of this merger,it is worth further investigating.This paper analyzes and summarizes the process of stock exchange M&A which gives up the shell resources of listed companies,in order to provide reference for similar M&A in the future.This article took Midea Group's stock exchange and merges Little Swan as the research object,combined domestic and foreign scholars' research results on merger motivation and performance and used the method of case analysis,first described the background of this two enterprises and process of merger,secondly analyzed the rationality of the merger price and ratio,as well as the impact of abandoning shell resources,concluded the reasons for its absorption of mergers.And then analyzed the effects of the M&A through financial indicators and non-financial indicators,combined with performance research before and after the merger,to make evaluations and recommendations for the merger.According to the analysis,the reasons for Midea's merger are listed as follows: avoiding industry competition,optimizing resource allocation,improving capital utilization rate,pursuing economies of scale and enterprise development needs,acquiring key technologies and expanding market power.Based on the calculation and analysis of the performance indicators,on the one hand,the market is not optimistic about the merger,the wealth of Little Swan shareholders has been negatively affected;on the other hand,financial indicators have been improved to a certain extent,and the company's operating efficiency has been significantly improved.So the acquisition motivation of Midea group has been preliminarily verified.But the long-term effects after the M&A need to be further verified by timeAt the same time,according to the research,this paper puts forward the corresponding countermeasures and suggestions as follows: enterprises should reasonably choose the M&A method according to their own actual situation,and the merger plan should take the interests of minority shareholders into concern and realize the interests of both sides to share,and reasonably determining the consideration and proportion of stock share merger.The M&A of Midea group and Little Swan is successful in this moment,which can be a reference for the similar M&A of more enterprises in the future,and has a positive guiding significance especially for the integration of the household appliances industry.However,because of the short time window,the long-term effect of the merger remains to be tested by time.