The Risks And Countermeasures Of Valuation Adjustment Mechanism In The M&A Of SME Board Companies

In recent years,with the rapid development of China's economy,the mergers and acquisitions of China's Small and Medium Enterprise Board have shown a trend of increasing year by year.In order to solve the disputes between the two parties on the valuation of the target companies and the price of M&A transactions under the condition of information asymmetry,The‘valuation adjustment mechanism is more and more widely used in the mergers and acquisitions of SME Board enterprises,and the risk of exposure increases accordingly.The quality of the completion of the valuation adjustment mechanism is low.Most of the valuation adjustment mechanism are terminated after the signing,or The business performance of the acquired party did not meet the requirements of the agreement.How to rationally use the valuation adjustment mechanism in M&A has become an urgent problem to be solved.This paper adopts the literature research method and the case study method.Based on the existing academic research,combined with the case enterprise merger and acquisition,theses problems just like the preliminary investigation exposed by the valuation adjustment mechanism is not due diligence,the optimistic estimation of the purchaser leads to the distortion of the valuation,and the management of the target company is unintentional,neglecting the integration work after M&A,the failure of the target enterprises to fulfill the contract are exposed.Based on these problems,we summed up the risk of the valuation adjustment mechanism applied by the SME Board companies,valuation risk,goodwill impairment risk,risk of integration during the period,management moral hazard and litigation risk.According to the above risks,this paper believes that if we carefully select the target company and pay attention to the strategic plan before the merger;rationally determine the valuation price,avoid the blind optimism of the acquirer;do the due diligence beforehand;pay the installment price,introduce the performance incentive mechanism,diversified flexibility on valuation adjustment mechanism standards,set up perfect supervision and evaluation mechanism,strengthen the rational control of the target companies,we can effectively avoid these risks.The research in this paper can provide reference for case enterprises and SME Board enterprises that are using or will use mergers and acquisitions for valuation adjustment mechanism,so as to minimize the risk of M&A and transaction costs,and promote the smooth progress of M&A.It also provides the effective new ideas of SME Board enterprises in the practice of M&A.