A Study Of The Motivation And Effect Of The Application Of Gambling Agreements In Corporate Mergers And Acquisitions

In recent years,with the continuous improvement of China's economic level,enterprises have increasingly increased merger and acquisition(M&A)activities in pursuit of diversification and scale.In corporate M&A,both parties have M&A risks due to asymmetric information.Especially for the entertainment industry,high valuations and high premium M&A are frequently.This increase the risk of M&A failure.In this context,a gambling agreement came into being.The gambling agreement is a valuation adjustment mechanism(VAM)that first stipulates future uncertain matters,It can effectively ease the valuation difference between the two parties,improve the efficiency of M&A,reduce the risk of integration failure,and jointly encourage the management of the merged party.To a certain extent,it plays the role of protecting the interests of the M&A,and promote "win-win".However,the gambling agreement is a double-edged sword.Poor application will lead to short-sighted management behavior,financial fraud and other risks,and eventually form a "double-loss" situation,damaging the interests of both parties.The "Administrative Measures on Major Asset Restructuring of Listed Companies" promulgated by the China Securities Regulatory Commission,clearly requires that listed companies that use the income method to conduct M&A valuation must sign a gambling agreement with the counterparty of the transaction,Therefore,more and more gambling agreement are applied and become rules.According to statistics,the success rate of gambling in the M&A of the film and television industry has continued to decline in recent years,which has adversely affected corporate performance and hidden uncertain risks.Based on this,the thesis first sorts out the existing theories and literature.Selects Huayi Brothers M&A Yinhan Technology and Dongyang Merah to sign a gambling agreement as a case,analyzes its implementation and investigates the motivation for signing the gambling agreement from the perspective of both parties of the M&A.After analysis the design of the gambling agreement from the valuation,performance commitment and compensation clauses,Analyze the risk points that may lead to the failure of Huayi Brothers' gambling agreement mergers and acquisitions: industrial policy risks,risks of design with a single commitment and unreasonable compensation mechanism,and management short-sighted risks;The thrsisfocuses on the evaluation of the economic effects of signing a gambling agreement from three aspects of goodwill,market effects,and whether to obtain synergies.Finally the thesis provides suggestions for avoiding risks and optimizing the terms of the gambling agreement.Huayi Brothers' two failures in gambling provided experience and lessons for how other companies in the industry should sign a gambling agreement to achieve a " win-win " situation for both parties to the M&A.The case is of great significance for companies to improve the success rate of agreement implementation and promote industrial development.