A Case Study On The Motive And Performance Of Mergers And Acquisitions By LETV

With the development of smart phones,tablet PCs,smart TVs and 4G network,as well as the rapid rise of new media and the Internet industry,the profit pattern of Internet video industry is gradually changing.Represented by LETV,this industry is as a young emerging industry,which has high investment,high risk and high return makes the M & A become the most efficient way for an enterprise to achieve risk reduction,multi-point profitability development.This paper selected LETV's a merger and acquisition business of H company and L company in 2013 as a case study.As the company which has the highest market value in China second board market,its market value growth is closely related to the capital operation of LETV.As this case is representative and a disputed in the Internet industry,the author hopes that through the study of this case,to analyze the motivation and performance of enterprises' M & A activities based on the M&a synergy effect theory,and to reveal the competitive advantages and effects out of the chain of vertical merger.First of all,this paper analyzes LETV whose operation mode is different from the conventional mode of “pay + free”,and pay attention to create content and channels to build a ecosystem of "platform + terminal + application" and cover the software and hardware.This paper also reveals the LETV will face the risk of expiration of a large number of copyrighted works next year,and homemade network drama will face great market risk and policy risk,which makes adding the copyright stock has become the most critical elements of healthy development of LETV.On the basis of synergy effect theory,the development trend of the industry and present situation of LETV,this paper argues that LETV carries out this M&A business which aims at achieving strategic synergy,financial synergy,market synergy and human synergy.And through the empirical analysis,the paper figured out the short-term market performance of the CAR reached 3%,and also verified LETV improved its profitability,operating capacity and growth capacity.Finally,based on the analysis of LETV M&A strategic objectives,it is concluded that inthe process of M&A,it is necessary to pay attention to due diligence on target companies,and strictly control the legal risk and market risk which may be faced during the deal,to protect the legitimate rights and interests of investors and promote M&A activity to go smoothly,and to realize the maximization of the value of the company.Above all,M&A is one of the ways for enterprises to obtain more competitive advantage.Through the vertical mergers and acquisitions,it can make the enterprise more healthy and sustainable.