On The Application Of Valuation Adjustment Mechanism In The Case Of B-Ray Media M&A Roaming Valley

With the strategic transformation of China's economy,mergers and acquisitions of cultural communication enterprises are in full swing.However,due to the asymmetry of market information,there are adverse selection and moral hazard in mergers and acquisitions.From the perspective of the acquiring company,its knowledge of the acquired company is not as good as that of the acquired company itself.In order to minimize this investment error caused by information asymmetry,the acquiring company and the acquired company generally reach a Valuation Adjustment Mechanism to further control and avoid risks.However,for the acquiring company,as the Valuation Adjustment Mechanism has been signed with the acquired company,some risks are reduced,but once the goal has not been reached,its original business plan would be disrupted and it will have a huge impact on its future business activities.In order to achieve fair and reasonable investment transactions,to protect the respective interests of the investing and financing sides,the Valuation Adjustment Mechanism came into being used.However,the failure rate of the Valuation Adjustment Mechanism has been relatively high up to now,and the Valuation Adjustment Mechanism does not fully play its role in dealing with the uncertainty of future earnings.Therefore,it is necessary and urgent to study the application of the Valuation Adjustment Mechanism in enterprise mergers and acquisitions and how to improve the Valuation Adjustment Mechanism.Through the application of the Valuation Adjustment Mechanism in the case of B-Ray Media M & A Roaming Valley,this paper first identifies the main problems of its mergers and acquisitions,then analyzes the main reasons for its problems,and put forward corresponding improvement suggestions to help enterprises optimize the design of Valuation Adjustment Mechanism,in order to promote the healthy development of enterprises and the sustainable development of the entire industry.This article is a case study using a case study approach.In addition to the introduction and conclusions,this paper is divided into four parts.The first part elaborates on the related theories of mergers and acquisitions and the Valuation Adjustment Mechanism,and introduces the motivation of selecting the Valuation Adjustment Mechanism and development process of the Valuation Adjustment Mechanism.In the second part,I introduced the background of the case of B-Ray Media M & A Roaming Valley,and then analyzes the main problems of the Valuation Adjustment Mechanism.In the third part,I deeply analyze the reasons for the problems in the process of the Valuation Adjustment Mechanism.The fourth part proposes a series of suggestions for the reasons.Through the study of the case,this paper gives some suggestions for the signing of the Valuation Adjustment Mechanism in the merger and acquisition: Firstly,before signing the Valuation Adjustment Mechanism,the acquiring company should choose the target enterprise reasonably.The target enterprise must not only conform to the strategic goal of the acquiring company,but also be able to cooperate with the target enterprise itself.The acquisition cost must be appropriate.The target company can be effectively integrated to achieve synergy.And the target company is better to be in the growth stage and have better profitability or its current profitability is poor but has good prospects.Secondly,the acquiring company and the acquired company should conduct due diligence before signing the Valuation Adjustment Mechanism to fully understand the external environment,and weigh the advantages and disadvantages of the Valuation Adjustment Mechanism.Thirdly,it is vital to design the terms of the Valuation Adjustment Mechanism rationally.The goal should be reasonable,and the acquiring company should properly participate in the operation of the acquired company.And it is recommended to select comprehensive performance goals,build re-adjustment system by setting phased goals and disclosing medium-term status.Adding repurchase terms is also good for the Valuation Adjustment Mechanism.Fourthly,after signing the Valuation Adjustment Mechanism,it is important to focus on the integration of M & A resources,to grasp the degree of mergers and acquisitions,and to ensure that the target enterprises can be effectively controlled while leaving sufficient space for the management of the target enterprises.