Research On The Causes Of M&A Premium And Post-performance Of The M&A Of Shunrong And Sanqiwan

In recent years,there has been an upsurge of M&A in China.Attracted to the roaring development and bright future of internet industry,lots of manufacturing industry enterprises crowd into the internet industry through M&A,and some of them even pay very high M&A premiums in this upsurge.The high M&A premium phenomenon challenges the public's cognition and makes regulators alert.Most of them hold a negative attitude to the high M&A premium phenomenon.Are all these high M&A premiums irrational?To have a better understanding of this phenomenon,this paper chooses the the case of ShunRong merges and acquires San QiWan,which is an typical case of manufacturing industry enterprise merges and acquires internet company.This paper combines the analysis of premium's causes with the analysis of post-acquisition performance to discuss the rationality of the premium offered by ShunRong in this case.And this paper will point out the problems and offer some useful suggestions to the following M&A.Based on the existing theories and researches,this paper finds out that the primary cause of the M&A premium is that SanQiWan has lots of quality resources of online platform,products,and team,but the financial statement can not fairly evaluate the value of these resources.What's more,SanQiWan's good performance and resources,the promising future of game industry,the busy M&A in the game industry,and the performance compensation commitment offered by SanQiWan make ShunRong have a positive expectation of SanQiWan's profit and then increase the M&A premium or ShunRong's acceptance of premium.Besides,the poor performance of ShunRong,and the unchanged control of listed company also increase ShunRong's acceptance of the premium,and finally make ShunRong pay a high M&A premium to SanQiWan.Then,based on the data from ShunRong' s financial statements and other public information,this paper also analyses the post-acquisition performance.It finds out that SanQiWan has an outstanding performance after the M&A,and brings lots of income to ShunRong by its quality games,online platform and team resources.This M&A improves ShunRong's profitability greatly and SanQiWan proves its value in the post-acquisition performance.Besides,according to SanQiWan's achievements,the profit forecast of SanQiWan is basically reasonable.However,ShunRong does not cover the premium cost completely and it is a little difficulty for ShunRong to keep present profitability.Therefore,it is still uncertain whether ShunRong can cover the premium cost completely.In conclusion,judging from the causes of premium and the current performance,the M&A premium paid by ShunRong is rational until now,but it is still uncertain whether ShunRong can cover the premium cost completely.According to these analysis,this paper suggests that the high M&A premium is not always irrational,and the lack of quality target companies is the main reason why many of cross-industry M&As with premium lose in the end,and the internet industry changes rapidly,and the traditional companies should stay prudent when they make decisions.Finally,based on the analysis,this paper gives some advice.First,when it pays a high M&A premium,acquiring company should choose a flexible method of payment.Second,the methods of asset evaluation should be mended to have a better evaluation about the targets.