Case Study On Sunac Acquires Shares In LeTV

In recent years,the real estate in China has been developing rapidly,and the house price is rising constantly.Thus,the government has increased regulations and control of the real estate industry,not only tightening monetary policy,but also introducing a series of policies to restrict purchases,loans,sales,signs as well as prices,which can improve the threshold to promote the survival of the fittest.The real estate industry also begins to shift from a lucrative “golden era” to a “silver era” where profit margins have been compressed.Increasing industry barriers have made it so difficult for small developers to finance and acquire land that they gradually withdraw from the market.In the meantime,in order to expand market shares and obtain lower-cost land than the primary market,larger companies tend to merger small businesses for a "shortcut",which has created a boom of M&A in the real estate market.In addition,as the stock market becomes increasingly saturated,companies are also seeking new profit points,and some companies have chosen cross-industry mergers and acquisitions to expand into new areas.However,not every M&A gets satisfied outcome,a lot of elements such as whether the strategic plan and integration are appropriate,whether it chooses the right target company are directly related to the results.Unappropriated choice may result in short-term financial dilemma.What's more,it may cause break of the capital chain.Although the M&A market of real estate in China has reached a certain scale,while due to the short duration,the relevant studies is limited.Based on this situation,this article selects a typical and time-consuming M&A case between Sunac China and Le TV,and analyzes the four major motives for the acquisition including the diversification of development appeals,promotion of land reserves,optimism of Le TV's future development and the M&A premium.This article selects Even Research method to measure the short-term performance.The period of event window is selected as(-10,10)of the announcement date and(-90,-11)as the period of estimation for expected return.According to the set above,the effect was negative for this event.Through financial analysis,it concludes that profitability,operating ability,and debt repayment ability of Sunac China have decreased after the acquisition.Also,the brand effect,resource effect,agglomeration effect as well as talent effect have all failed to improve by qualitative analysis.All in all,this article concludes that the main reason for this dilemma are strategic mistakes,inadequate financial integration and poor selection of target companies,and some unluckiness as well.Finally,the results of this study can provide some suggestions on the merger and acquisition of real estate industries,which may guide acquisitions to become more rational in the future.