Research On The Application Of VAM In Equity Acquisition

With the acceleration of economic transformation,the traditional internal incremental growth model can no longer meet the needs of rapid development of enterprises.More enterprises tend to choose an endogenous and epitaxy model for external expansion.Merger and acquisition restructuring is the main means to rapidly expand the market value of companies.Although mergers and acquisitions can help companies achieve strategic objectives and rapidly enhance corporate value,the results of mergers and acquisitions are often highly uncertain due to information asymmetry and other reasons,which can easily bring greater risks to enterprises.Therefore,in order to reduce and prevent the risk of goodwill impairment caused by mergers and acquisitions at high premiums,VAM emerge as the times require.As a value adjustment mechanism,the VAM is an option signed by both the buyer and the buyee for estimating some possible future situation.It is used to divide the rights and obligations of both parties,and is a supplementary clause of merger and acquisition transactions.With the continuous optimization of the M&A environment in China,the enthusiasm of enterprises for M&A is rising,and the development of VAM is also in full swing.More and more enterprises introduce VAM in M&A transactions.However,can the VAM guarantee the success of M&A as enterprises hope? What is the expected goal of introducing the VAM? What is the actual impact of the VAM? What causes the difference between the two?Based on the above questions,this paper takes the acquisition of Boya Stem Cells by Xin Ri Hengli as an example,and uses case study method to analyze the application of VAM in enterprise merger and acquisition activities.Xinri Hengli belongs to the traditional metal manufacturing industry.Under the situation that the traditional industry has been seriously affected and the company’s profitability has declined sharply,Xinri Hengli actively seeks change.It intends to enter the biomedical industry company by acquiring Boya stem cells,adjusting its business structure and improving its profitability.In order to reduce the risk of mergers and acquisitions,the two sides signed a VAM as a supplementary agreement,but the VAM failed and the two sides went to court.Therefore,based on this case,this paper explores the motivation,actual effect and failure of the company’s introduction of the VAM.Firstly,according to the current situation of China’s economic transformation and supply-side structure reform,this paper elaborates the research background and significance of the VAM;secondly,it combs the relevant references of scholars at home and abroad,and on this basis,introduces the theories related to the equity acquisition and VAM,including information asymmetry theory,option theory,game theory and incentive theory,etc.,as case studies.It lays a theoretical foundation;then it introduces the process of the acquisition of Boya stem cells and the content of the design of the VAM;then it analyses the motivation of the signing of the VAM and the actual impact of the signing of the VAM.According to the differences between the two,it analyses the problems in the design of the VAM,and puts forward some suggestions on the optimization of the design of the VAM.Based on these research results,this paper chooses specific application cases of VAM to study,including the design motivation of VAM in cases and the practical application effect of VAM in M&A,comparing the gap between the expected effect and the actual effect,and aiming at the case of the application of VAM in M&A.This paper makes a detailed analysis of the problems and shortcomings in the design of VAM,and puts forward some optimization suggestions,which will provide some inspiration for the follow-up enterprises to use the VAM.The research results of this paper further enrich the application of the theory of VAM and improve the application mechanism of VAM in equity acquisition.