Research On Tunneling In Related Party Mergers And Acquisitions

The Related party Mergers and Acquisitions refers to the Mergers and Acquisitions between companies and their controlling shareholder groups(including controlling shareholders and other companies under the control of controlling shareholders).It is an important way for benefit transmission,which includes the transactions of general operating assets and the mergers between related enterprises.It is a common factor for benefit transmission in related party Mergers and Acquisitions in China's Mergers and Acquisitions market.Based on the current situation of our country,the author started from the self-interest motivation of major shareholders and studied the phenomenon of major shareholders' interest transfer in related party Mergers and Acquisitions.The author took the acquisition of Sitong New Meral Material as an example,to analyze its two acquisitions' transaction process.In this case study,Tianjin lizhong co.,ltd.has had the hope to return to A share market after privatization in December 2015.In June 2016,the company began to plan its first mergers with Sitong New Meral Material,which was failed because of unsuccessfully submitting the supplementary materials requested by the CSRC on time.Then in May 2017,Tianjin lizhong co.,ltd applied for IPO,which broke off A share market again.Later in July 2018,Tianjin lizhong co.,ltd and Sitong New Meral Material were merged again and they passed the examination of the CSRC on November 8.Since then,the capital operation of Tianjin lizhong co.,ltd returning to the A share market has come to end.On the basis of introducing the two times of Mergers and Acquisitions of the two parties and the process of Mergers and Acquisitions transactions,the author made a comparative analysis of this two related party Mergers and Acquisitions and discussed the motivation of Mergers and Acquisitions,the methods and effects of benefit transmission in the two Mergers and Acquisitions under the relevant theoretical research results of Mergers and Acquisitions and tunneling.Through theories and data analysis,it was found that the Zang family,the actual controllers of the two parties to the Mergers and Acquisitions,did have a strong incentive to encroach on interests in the two related party Mergers and Acquisitions.Through a series of means of tunneling,such as inflated financial data to increase valuation,manipulated the pricing of additional shares and its transaction prices,increased of capital in advance of the target of Mergers and Acquisitions and so on,the Zang family,who was the major shareholder,raised its shareholding ratio and reduced the rest of small and medium shareholders.These behaviors of interest transmission eventually hurt the interests of small and medium shareholders,revealing the lack of laws and regulations and the loopholes in supervision for the protection of the rights and interests of small and medium shareholders in China's listed companies at present.Finally,this paper puts forward some policy suggestions to protect the interests of small and medium-sized shareholders based on the case.It holds that:(1)Strengthening the information disclosure of related party Mergers and Acquisitions,improving the detailed information disclosure rules,and strengthening the information disclosure of evaluation reports;(2)To further standardize the stock issue pricing mechanism in determining the purchase of assets by issuing shares,it's necessary to take into account the completeness of the determinants of the pricing of new shares,as well as the fundamental factors of the company;(3)To promote the organic combination of enterprise value assessment and transaction pricing.For Related party Mergers and Acquisitions,the leading role of mergers parties in transaction pricing can be reduced by setting the appropriate range of difference rate between transaction consideration and assessment value;(4)Strengthen the supervision of double pricing in related party Mergers and Acquisitions and consider the improvement of related pricing system from the additional shares and valuation of underlying assets.Through the analysis and conclusion of the related Mergers and Acquisitions of Sitong New Meral Material,the paper enriches the existing related research on related party Mergers and Acquisitions,and provides useful reference and suggestions for the capital operation of related party Mergers and Acquisitions in the future,which has certain practical significance.