A Comparative Study On Goodwill And Goodwill Impairment Reasons Of M&A In Enterprise's Strategic Transformation Between Talkweb And Kingsun Share

In recent years,under the macroeconomic background of industrial structure upgrading,strategic transformation is becoming the key choice for enterprises to consolidate their industry status and maintain competitive edge.Compared with mere connotative development,extensional M&A can greatly improve the efficiency of obtaining heterogeneous resources and extending or reconstructing the value chain,receiving the favor of the capital market.With the continuous heat of M&A market,some high quality target companies are rare and popular in market.High premium transactions lead to high goodwill in M&A.The risk of goodwill impairment has become the"sword of Damocles" of many listed companies.However,with the sharp operating performance decline of the target companies after M&A,the listed companies have to take on high goodwill impairment,which brings negative impact to business performance and can highly possibly lead to the failure of strategic transformation.This paper selects the cases of Talkweb and Kingsun Share respectively as the representative cases of progressive transformation and leapfrog transformation.Hoping to put forward the related measures to reduce goodwill impairment after sorting out the reasons of goodwill impairment based on the process of M&A,which can reduce the negative impact of goodwill impairment on strategic transformation.Through the literature research method,this paper sorts out the literature on the essence of goodwill,goodwill impairment and the related research between strategic transformation and M&A.According to relevant theories,this paper analyzes the reasons for high goodwill formation from the perspectives of the essence of goodwill,accounting measurement and management overconfidence.The transformation motivation is regarded as the start of goodwill impairment precaution.The incentives for goodwill impairment are sorted out according to the M&A process and then the analysis framework for the reasons for goodwill impairment of M&A regarding strategic transformation are formed.Subsequently,through the case study method,this paper takes Talkweb merging Changzheng Education and Kingsun Share merging Longwen Education as the examples to study the goodwill impairment precaution of M&A in the progressive transformation and the leapfrog transformation respectively,comparing the similarities and differences on transformation motivation,transformation direction,transformation method and goodwill impairment reasons between the two types of strategic transformation.By contrast,Talkweb performed totally better than Kingsun Share on goodwill impairment precaution.It's believed that Talkweb has carried out a certain degree of goodwill impairment prevention compared with Diligent Shares,but the effect is not significant.Kingsun Share lacks M&A experience and underestimates goodwill impairment risk prominently in the leapfrog transition process.However,both of the two enterprises ignored policy risks before M&A and made some unreasonable designs on performance commitments and transaction steps during M&A.And the two enterprises respectively have senior executive resignation and illegal shares pledge problems on talent integration after M&A.All the problems caused the two enterprises to suffer different goodwill impairment loss,influencing the effectiveness of strategic transformation.By theoretical analysis and case comparison research,this paper believes that goodwill impairment precautions under different strategic transformation methods should focus on each other.The paper proposes goodwill impairment precaution suggestions based on the whole process of M&A,targeting at enterprises that adopt strategic transformation by M&A.In the preparation phase before M&A,enterprises should consider the policy and market risk that may be faced with,conduct due diligence and feasibility studies and screen high quality targets from both strategic matching and resource capability matching dimensions.While in leapfrog transition,enterprises should also act well on industry selection and cross-industry M&A preparation work.In the implementation phase of M&A,the two type transformation enterprises should reasonably control the M&A premium and scientifically design performance commitment,payment methods and acquisition steps.Enterprises should focus on the noise reduction of M&A process and reduce information asymmetry in leapfrog transition.In the integration phase after M&A,the two type transformation enterprises should extend value chain or reconstruct core capability relying on their advantages,strengthen R&D,management and talent integration and enhance the monitoring ability of goodwill impairment risk,which can increase the continued profitability of the target company under synergistic effect.